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Abouzaid v. Mansard Gardens Associates


May 14, 2010


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2722-08.

Per curiam.


Argued April 21, 2010

Before Judges Graves, J. N. Harris, and Newman.

In this appeal we address whether a commercial general liability insurance policy requires a litigation defense to be provided to an insured facing a Portee*fn1 claim that does not assert either physical injury or manifestation of such to the bystander-victim. The Law Division held that because the allegations in the putative victims' inelegantly worded complaint provided adequate notice of the nature of a covered claim, a defense was required to be provided to the insured parties. We disagree and reverse.


The underlying personal injury action giving rise to this appeal arises from an August 22, 2007 apartment fire. At that time, plaintiffs Magdy and Manal Abouzaid,*fn2 along with their minor son plaintiff Moustafa, were tenants in a second-floor unit of an apartment building owned by defendants-insureds Jack and Sally Pomeranc, doing business as Mansard Gardens Associates, LLC (collectively Mansard). Plaintiff Eman Kandil was also present in the apartment at the time of the fire, along with her own minor sons, plaintiffs Omar and Tarek Osman.

In their initial complaint, plaintiffs jointly asserted that a kitchen fire started when a stove pilot light ignited the vapor from a flammable liquid paint thinner, which had been applied to the floor of the apartment by Jonathan Chaviano, a worker who was either directed or controlled by Mansard. This complaint asserted that the three minor plaintiffs were all engulfed in and injured by the flames; that plaintiff "Manal Abouzaid heard an explosion and ran toward [the] kitchen [where] she saw her son engulfed by a fireball;" and that plaintiff "Eman Kandil saw the fire and the injuries to her sons."

Count one specifically addressed the claims of the minor children only. It asserted a conventional theory of negligence against defendants, which alleged that in addition to physical injuries along with the resultant pain and suffering, the children suffered "emotional injury." Count two incorporated the allegations of the first count and also added a negligence claim under the theory of res ipsa loquitor. In count three, which is the subject of this appeal, the adult plaintiffs asserted that "[s]olely as a result of defendants' negligent conduct, plaintiffs Manal Abouzeid and Eman Kandil have been forced to endure emotional distress and suffering resulting from watching . . . their sons becoming engulfed by flames."

At the time of the fire, defendants were insured by a commercial general liability insurance policy issued by third-party defendant Greater New York Mutual Insurance Company (GNYMIC), which provided, in pertinent part, the following:


1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and

(2) The "bodily injury" or "property damage" occurs during the policy period.


3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

After being served with plaintiffs' three-count complaint, Mansard notified GNYMIC of the claims and provided the insurer with a copy of the pleading. On August 18, 2008, GNYMIC issued a six-page "Notice of Reservation of Rights and Partial Disclaimer," which agreed to undertake a limited defense of Mansard in the litigation, at the same time denying coverage and a defense for the claims asserted in count three, explaining that plaintiffs' allegations of emotional distress did not qualify as bodily injury and therefore did not fall under the insurance policy's coverage. The insurer also reserved its right to deny coverage for the claims of emotional injury asserted in count one, in the event that the minor plaintiffs' emotional injuries did not manifest physically. Finally, it made known that Mansard would need to retain independent counsel to defend itself against the allegations in count three, at Mansard's expense.

On November 24, 2008, Mansard's privately-retained attorney*fn3 filed an answer to plaintiffs' third count of the complaint together with a third-party declaratory judgment complaint asserting that GNYMIC was contractually obligated to defend against the emotional distress claim asserted in the third count. Upon GNYMIC's entry into the case as a third-party defendant, it moved for a dismissal of the third-party complaint for failure to state a claim upon which relief can be granted pursuant to Rule 4:6-2(e). Mansard subsequently moved for summary judgment against all of the adult plaintiffs. Both of these motions were denied in separate orders issued on February 27, 2009. The motion judge deemed it premature to dismiss the third-party complaint, and found that both the adult plaintiffs and Mansard had asserted viable claims to prevent dismissal at that time.

Shortly thereafter, Mansard moved for summary judgment against GNYMIC, as well as for the award of attorneys' fees and costs pursuant to Rule 4:42-9(a)(6). GNYMIC cross-moved for reconsideration of the court's order issued on February 27, 2009.

In an order dated April 9, 2009, the Law Division permitted plaintiffs to file an amended complaint, which expressly claimed in the third count--for the first time--that the plaintiff mothers "have had to incur the cost of medical treatment for the physical impact caused by their emotional distress and suffering."

By May 1, 2009, the return date for Mansard's and GNYMIC's still-pending motions, the insurer agreed to undertake Mansard's defense for the amended emotional distress claim in the third count on a going-forward basis. The motion judge granted Mansard's motion for summary judgment and at the same time denied GNYMIC's motion to reconsider. GNYMIC's counsel requested a plenary hearing on the issue of the total amount of past attorneys' fees, to which the court acceded.

At the July 2, 2009 plenary hearing, attorney Bernstein testified; his supplemental certification, dated June 25, 2009, was also entered into evidence. Attached to the certification were Brach Eichler's billing invoices from October 2008 to May 2009. Mansard sought $37,612.50 in attorneys' fees and $1,819.75 in costs, for a total of $39,432.25.

On July 30, 2009, the Law Division judge approved Mansard's application for attorneys' fees and costs in the total adjusted amount of $38,345.75. The court found that Bernstein's hourly rate was reasonable and that the time devoted to the matter was appropriate under the circumstances. An order awarding judgment in favor of Mansard was entered on July 31, 2009.*fn4 This appeal followed.


This court's interpretation of an insurance contract is a determination of law. Sealed Air Corp. v. Royal Indemn. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008). We therefore owe no special deference to a trial court's interpretation of the law and the legal consequences that flow from the established facts. Zabilowicz v. Kelsey, 200 N.J. 507, 513-14 (2009). Accordingly, we are to review the Law Division's analysis of the insurance policy de novo. Homesite Ins. Co. v. Hindman, ___ N.J. Super. ___, ___ (App. Div. 2010) (slip op. at 5).

Insurance policies are contracts of adhesion, Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990), and as such they should be "construed liberally in [the insured's] favor." Kievet v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961). However, [l]iberal rules of construction of insurance policies do not sanction . . . emasculation of the clear language of the policy. Unambiguous insurance contracts are enforced in accordance with the reasonable expectations of the insured. The court should read policy provisions so as to avoid ambiguities, if the plain language of the contract permits. The court should not torture the language of the policy to create an ambiguity. [Stiefel v. Bayly, Martin and Fay, 242 N.J. Super. 643, 651 (App. Div. 1990) (internal citations omitted).]

"'In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased.'" Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001) (quoting Gibson v. Callaghan, 158 N.J. 662, 670 (1999)).

As a universal tenet, a liability insurer has a contractual obligation to provide a sufficient defense for its insureds against all actions covered by the insurance policy. Hartford Accident & Indemn. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22 (1984). The insurer's duty to defend is more expansive than its duty to indemnify. Rosario v. Haywood, 351 N.J. Super. 521, 534 (App. Div. 2002). The duty to defend is set in motion by a complaint alleging a covered claim. Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992).

"[T]he complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment, and in reaching a conclusion, doubts should be resolved in favor of the insured." Danek v. Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953), aff'd, 15 N.J. 573 (1954). "It is the nature of the claim for damages . . . [that] triggers the obligation to defend." L.C.S., Inc. v. Lexington Ins. Co., 371 N.J. Super. 482, 490 (App. Div. 2004). The insurer remains obligated to defend its insureds even if the asserted claims are meritless, fraudulent, or "poorly developed and almost sure to fail." Voorhees, supra, 128 N.J. at 174 (internal citation omitted). However, that obligation does not extend to "claims which would be beyond the covenant to pay if the claimant prevailed." Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 389 (1970); see also Danek, supra, 28 N.J. Super. at 77.

Notwithstanding the foregoing principles, we have recognized "the duty to defend is not necessarily limited to what is set forth in the complaint." Jolley v. Marquess, 393 N.J. Super. 255, 271 (App. Div. 2007); Hebela v. Healthcare Ins. Co., 370 N.J. Super. 260, 268 (App. Div. 2004). "[F]acts indicating potential coverage that arise during the resolution of the underlying dispute . . . may trigger the duty to defend." SL Indus., Inc. v. Am. Motorists Ins. Co., 128 N.J. 188, 198-99 (1992) ("To allow the insurance company 'to construct a formal fortress of the . . . pleadings and to retreat behind its walls, thereby successfully ignoring true but unpleaded facts within its knowledge that require it, under the insurance policy, to conduct the putative insured's defense,' would not be fair." (internal citations omitted)).

Neither the duty to defend nor the duty to indemnify "exists except with respect to occurrences for which the policy provides coverage." Hartford, supra, 98 N.J. at 22. It is this "obligation to indemnify, either actual or potential, which invokes the duty to defend." Hartford Ins. Group v. Marson Constr. Corp., 186 N.J. Super. 253, 260 (App. Div. 1982), certif. denied, 93 N.J. 247 (1983).

On appeal, GNYMIC contends that the third count of plaintiffs' original complaint--coupled with the utter absence of any other information on its part--left its insureds being sued solely for the intangible emotional injuries alleged by plaintiffs, which lacked any physical manifestations. These injuries, according to GNYMIC, were not covered perils under the policy's definition of bodily injury, which stated: "'[b]odily injury' means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." The third count merely recounted the adult plaintiffs' grievance of "hav[ing] been forced to endure emotional distress and suffering." On its face, this allegation does not constitute the type of harm that triggers coverage for a "bodily injury, sickness or disease."

This stands in stark contrast with the plaintiffs' amended complaint and newly minted third count claiming that the adult plaintiffs "had to incur the cost of medical treatment for the physical impact caused by their emotional distress and suffering." Although not couched in the most graceful language, these statements were enough to impel GNYMIC to intercede and thereafter provide a defense to Mansard. The differences in language are not mere semantic nitpicking; they go to the heart of the definitional linchpin required for coverage--and a defense--under the insurance policy. As the Supreme Court noted in Voorhees, "[w]e are defining the term "bodily injury" under insurance law, not tort law." Voorhees, supra, 128 N.J. at 179.

GNYMIC argues that Voorhees, SL Indus., Inc., and their progeny recognize that if a plaintiff fails to allege a physical manifestation along with emotional injuries, an insured defendant with a policy like Mansard's will not enjoy insurance coverage for the claim. Naturally, this should be of some concern for a plaintiff who would more readily welcome going against an insured defendant in litigation rather than an uninsured one. It is not surprising that even after successfully navigating defendants' motion to dismiss for failure to state a claim, plaintiffs nevertheless tweaked their complaint to add an allegation of physical manifestation.

Mansard argues that the language of the original third count, arguably presenting a Portee claim, was sufficient to obligate GNYMIC to provide a defense under the insurance policy. It suggests that the plaintiffs' amendment to the complaint vindicates its view, as the change in wording was merely for clarification regarding an already existing claim, rather than the introduction of a new or enhanced cause of action. We respectfully disagree.

The well-established elements of a Portee claim for the negligent infliction of emotional distress are: "(1) the death or serious physical injury of another caused by defendant's negligence; (2) a marital or intimate familial relationship between the plaintiff and the injured person; (3) observation of the death or injury at the scene of the accident; and (4) resulting severe emotional distress." Portee, supra, 84 N.J. at 101; see also Dunphy v. Gregor, 136 N.J. 99, 102-05 (1994).

Mansard claims that because of the severity of the emotional distress that must be proven in order to succeed in a Portee action, there is an implicit physical dimension to plaintiffs' allegations, even if imperfectly alleged in the original third count. Yet, there is nothing in Portee and its non-Tort Claim Act*fn5 jurisprudence that requires a physical manifestation as a required element of the cause of action.

Thus, even when viewed indulgently, the third count of plaintiffs' original complaint did not logically command even an inference of physical harm or manifestation. Without an express or implied hint of physical injury--bodily injury, for purposes of the insurance policy--Mansard's exposure to damages from the adult plaintiffs' claims was limited only to intangible, non-bodily harm. Its insurance policy did not provide coverage for that type of non-bodily injury claim, and it was not entitled to a defense of the third count until plaintiffs' supplemental pleading made the allegation of a "physical impact." We further note that GNYMIC's initial decision to defend only counts one and two was unremarkable. See New Jersey Mfrs. Ins. Co. v. Vizcaino, 392 N.J. Super. 366 (App. Div. 2007) (discussing the duty to defend in cases involving covered and uncovered claims).

In light of our determination that GNYMIC did not owe Mansard a defense until the adult plaintiffs--through the amended complaint--lodged a claim that implicated coverage, it was error to reallocate attorneys fees and costs pursuant to Rule 4:42-9(a)(6). Accordingly, because we must reverse the award, we do not need to undertake a thorough review of the Law Division's rationale that resulted in a judgment for those fees and costs in Mansard's favor.

The judgment of the Law Division is reversed. The third-party complaint is dismissed with prejudice.

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