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Merchants Insurance Group v. Miller

July 27, 2010

MERCHANTS INSURANCE GROUP, PLAINTIFF-RESPONDENT,
v.
WILLIAM T. MILLER AND JILL MILLER, H/W, JOINTLY AND SEVERALLY; AND WILLIAM T. MILLER AND JILL MILLER, D/B/A CLEO'S FISH PALACE, INC., DEFENDANTS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-462-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 24, 2010

Before Judges Fisher and Sapp-Peterson.

Defendants, William T. and Jill Miller (the Millers), are the former owners of property on which an underground oil tank was left and from which there apparently was leakage of pollutants not only onto their property but also onto the property of a neighbor. The current owners, to whom the Millers sold their property, were sued by their neighbor and, as a result, they commenced a third-party action against the Millers. The Millers sought coverage from their insurer, plaintiff, Merchants Insurance Group (Merchants), which was denied. They commenced an action in Superior Court, Special Civil Part, seeking "a declaratory judgment that [Merchants] [is] required to fully defend and indemnify the [Millers]" with respect to the third-party action. The relief sought included "[a]ttorneys['] fees and costs of this action pursuant to [Rule] 4:42-9[.]" Merchants filed a motion for summary judgment, arguing that the Millers were not entitled to coverage. The Millers opposed the motion and also filed a cross-motion seeking a declaration that they were entitled to coverage. In their brief, the Millers contended they "reasonably expected that the heating oil migration on the applicable and neighboring property was covered up to $10,000 as per the applicable policy of insurance." (emphasis added).

The motion judge found "that the insurance policy was not actually navigable by the insurer to the final conclusion that the pollution clean[]up at issue is not covered. . . . The declarations sheet very clearly states that 'Pollutant Clean[]Up and Removal' are part of the 'Automatic Coverages' of the policy." The court denied Merchants' motion but granted the Millers' cross-motion.

Although the Millers' complaint sought the award of counsel fees, in their cross-motion for summary judgment, they failed to raise the issue of counsel fees. Later, however, through their attorney's apparent discussion and correspondence with Merchants' attorney, they claimed they were entitled to reimbursement for the counsel fees and costs they incurred. Merchants disagreed and filed a complaint seeking declaratory relief adjudging that its maximum exposure under the policy issued to the Millers was $10,000 and the Millers were not "entitled to a reimbursement of their legal fees and costs . . . in connection with their filing of the first declaratory judgment action" because they were "first[-]party insureds." Both parties subsequently filed summary judgment motions.

In its June 5, 2009 order, the court found that the Millers "did not seek a declaration for indemnity benefits or attorneys' fees within their [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction" and that they were "barred from asserting a claim that they should have briefed in the [o]riginal [a]ction."

The court denied their motion for summary judgment, but granted Merchants' cross-motion for summary judgment.

The Millers moved for reconsideration, which the court denied after concluding that the motion "does not present anything new to the [c]court, nor does it demonstrate how the June 5, 2009 [o]rder was based upon a 'palpably incorrect or irrational basis.'" (citation omitted).

The court, in its September 1 written opinion denying reconsideration, found:

Defendants' [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction was one that sought first[-]party direct coverage. This [c]court noted that defendants did not seek a declaration for indemnity benefits or attorneys' fees within their [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction. This [c]court finds that its [o]rder dated January 22, 2008 constituted a final determination on the merits for purposes of issue and claim preclusion.

The Millers filed the ensuing appeal. On appeal, they contend the motion judge erred in not awarding counsel fees because fees were recoverable pursuant to Rule 4:42-9(a)(6) and their claim for fees was not subject to claim preclusion. Specifically, the Millers argue: (1) that they were required to subsidize their defense on a claim covered by their insurance policy; (2) the claim for counsel fees and costs should not have been precluded because only the issue of coverage was resolved; (3) the issue of attorneys' fees and costs was not ripe for determination because counsel fees and costs were still being accrued; and (4) Merchants was aware that the Millers were still paying attorneys' fees after the court's declaratory judgment declaring that they were entitled to coverage. We reject these contentions and affirm substantially for the reasons expressed by Judge Joseph E. Kane in his written opinions of June 5, 2009 and September 1, 2009. We add the following brief comments.

"The concept that a party is required to bring all possible claims in one proceeding is embodied in the closely linked concepts of res judicata and the entire controversy doctrine." McNeil v. Legislative Apportionment Comm'n, 177 N.J. 364, 395 (2003), cert. denied, 540 U.S. 1107, 124 S.Ct. 1068, 157 L.Ed. 2d 893 (2004). Res judicata, or claim preclusion, is a long-established doctrine that not only restricts a litigant's ability to bring claims in a subsequent civil action that were actually litigated in an earlier proceeding but precludes litigation, in a subsequent proceeding, of those claims that could have been adjudicated in an earlier lawsuit involving the same parties. Lubliner v. Bd. Of Alcoholic Bev. Control, 33 N.J. 428, 435 (1960). Claim preclusion "rests upon policy considerations which seek to guard the individual against vexatious repetitious litigation and the public ...


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