April 13, 2010
ELLIOT S. KERVEN AND GERALYN B. KERVEN, PLAINTIFFS-RESPONDENTS,
LAWRENCE H. SMITH AND TONI L. SMITH, DEFENDANTS/THIRD PARTY PLAINTIFFS-APPELLANTS,
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, THIRD PARTY DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1419-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 24, 2010
Before Judges Stern and Newman.
Defendants-third party plaintiffs, Lawrence and Toni Smith, appeal from a judgment of March 20, 2009, and specifically from an interlocutory order of August 28, 2008, granting summary judgment to third party defendant, New Jersey Manufacturers Insurance Company (NJM). The trial judge determined that NJM had "no obligation to provide a defense and/or indemnification to" the Smiths in an action regarding the condominium they sold to plaintiffs. The Smiths ultimately prevailed on the merits resulting in the order of March 20, 2009, which dismissed the complaint and constituted the judgment.
The Smiths argue the trial judge improperly dismissed the declaratory judgment action against NJM because: (1) "the policy covered two of the three claims asserted in the complaint," "negligent misrepresentation" and breach of contract giving rise to the duty to defend,*fn2 (2) "the lower court improperly rejected the argument that the real estate contract in issue was covered by the policy," and (3) summary judgment was premature as discovery was incomplete. NJM disclaimed and declined to defend the complaint based on the alleged failure to disclose because the Smiths actually "knew or should have known" of a latent defect in the "exterior insulated finishing surface" which resulted in an assessment against plaintiffs for repairs by the condominium association.
Plaintiffs alleged defendants failed to disclose relevant and material facts before closing in May 2002. The assessment of $47,026.85 against plaintiffs was based on an assessment imposed in 2004, two years after the unit was sold, but plaintiffs' theory was based on Smiths' knowledge before the closing. NJM's policy covered an "occurrence" which is defined in the policy as "an accident, including continuous or repeated exposure to substantially the same harmful conditions" which cause "bodily injury or property damage" "during the policy period." Defendants Smith contend that (a) "the breach of contract claim is covered by the exception to the contract exclusion provision [because the action related] "directly" "to the ownership, maintenance or use of the insured location" . . ., (b) "the negligent misrepresentation asserted in the third count" of the complaint comes within the definition of "occurrence," and (c) "discovery had not been completed when the court decided the motion."
We affirm the judgment substantially for the reasons expressed by Judge Dennis F. Carey, III in his oral opinion of August 20, 2008. We add only the following:
In McClellan v. Feit, 376 N.J. Super. 305, 314-21 (App. Div. 2005), a case on which the Smiths rely, we noted that the governing policy in question "did not require that the property damage be 'caused by an occurrence.'" Id. at 320. In this case, however, the coverage was specifically related to "property damage" caused by an "occurrence" during the policy period.
At argument before us, defendants claimed the condition of the premises deteriorated after the closing and that the deterioration constituted an "occurrence" within the meaning of the policy. The allegations of the complaint control as to the issue of coverage, and we are liberal in terms of assuring the reasonable expectations of the insured. See, e.g., Voorhees v. Preferred Mutual Ins. Co., 128 N.J. 165, 175 (1992); McClellan, supra, 376 N.J. Super. at 319; Hayman, Inc. v. Acme Carriers, 303 N.J. Super. 355, 357-58 (App. Div. 1997).
Here, the complaint alleged defendants knew of the condition of the building and the reasonably anticipated assessment before the closing. It alleged nothing about an ongoing or reasonably anticipated deteriorating condition after the closing. Thus, the complaint did not allege that the property damage was the result of an "occurrence" as defined in the policy.
Defendants argue, however, that the judge should have permitted them to amend their complaint to refer to a post-closing "occurrence." They complain that they were not present when the opinion was rendered by the trial judge and they had no opportunity to amend the third-party complaint. However, even if plaintiffs' complaint can be read to allege liability based on an anticipated or reasonably foreseen post-closing deterioration, defendants did not seek reconsideration or move to amend the third-party complaint after the decision was rendered.