On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-3495-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lisa and Reisner.
Plaintiff, Morgan Callo, suffered personal injuries resulting from an assault and battery committed by Tara Burgess, an insured of Allstate Insurance Company (Allstate). After issuing a reservation of rights letter, Allstate provided Burgess with counsel to defend the underlying action, which also included claims of negligent conduct. In that action, the jury found that Burgess committed an intentional assault and battery and awarded Callo $250,000. The verdict withstood an unsuccessful motion for a new trial and was sustained on appeal. While the appeal was pending, Burgess filed for bankruptcy, although the amount of the verdict was within the limits of coverage provided by Allstate.
Allstate refused to pay the judgment, contending that its insured's conduct fell outside the scope of coverage provided by the policy. Callo brought this declaratory judgment action against Allstate seeking a declaration of coverage. The parties exchanged extensive discovery, after which they filed cross-motions for summary judgment. They also provided Judge Peterson with a transcript of the trial in the underlying action. Both parties agreed that no material facts were in dispute and the matter was ripe for summary disposition.
Callo argued that Allstate's reservation of rights letter was couched in oblique and ambiguous terms and was insufficient to preserve a future right to disclaim coverage once it assumed the defense of Burgess and her parents (against whom a claim had also been made in the underlying action). Callo further argued that Allstate should be precluded from denying coverage because it failed to communicate its ultimate coverage decision to Burgess prior to trial of the underlying action. Callo also argued that, for various reasons, Allstate should be estopped from denying coverage. These reasons included the failure to provide separate counsel for Burgess and her parents and coercion in the submission of the reservation of rights letter. Finally, Callo argued that the trial record did not establish that Burgess intended to harm Callo, and instead demonstrated that she had no such intention, as a result of which Callo's conduct fell within the coverage provisions of Allstate's policy.
Allstate contended that the trial record in the underlying action established as a matter of law that Burgess' conduct was intended to cause harm to Callo, as a result of which the claim could not be found to fall within the coverage of the policy. Allstate further argued that the terms of the reservation of rights letter were clear and sufficiently placed Burgess and her parents on notice of Allstate's litigation and coverage positions. Allstate also argued that it did nothing in the course of these events that would estop it from denying coverage. Indeed, it pointed out that nothing in the record suggested that its insured, Burgess, ever thought she was covered for this conduct or detrimentally relied on any conduct by Allstate. This was evidenced most clearly by the fact that Burgess filed for bankruptcy after the judgment was entered against her. Had she thought she was covered, she would have pursued payment of the judgment by Allstate rather than filing for bankruptcy. Because the amount of the judgment was within the coverage limits, none of her personal assets would have been jeopardized if there was coverage.
Judge Peterson rendered a thorough oral decision on December 18, 2009. He comprehensively addressed each of the arguments of the parties. He rejected Callo's arguments and accepted Allstate's. He therefore granted Allstate's summary judgment motion and denied Callo's.
On appeal, Callo makes the following arguments:
POINT I: ALLSTATE IS ESTOPPED FROM DENYING COVERAGE.
A. THE CRYPTIC, OBLIQUE AND AMBIGUOUS LANGUAGE USED BY ALLSTATE IN ITS LETTER OF MAY 22, 2003 WAS INSUFFICIENT TO PRESERVE A FUTURE RIGHT TO DISCLAIM COVERAGE ONCE IT ASSUMED CONTROL OF THE LITIGATION.
B. ALLSTATE'S FAILURE TO COMMUNICATE ITS COVERAGE DECISION TO TARA BURGESS PRIOR TO THE TRIAL OF MORGAN CALLO'S LAWSUIT AGAINST HER ESTOPPED IT FROM DENYING COVERAGE FOLLOWING TRIAL.
C. ALLSTATE'S FAILURE TO SATISFY ITS FIDUCIARY OBLIGATION TO TARA BURGESS ESTOPS IT FROM ...