December 13, 2010
SELECTIVE WAY INSURANCE COMPANY, PLAINTIFF-APPELLANT,
ARTHUR J. OGREN, INC., CUMBERLAND COUNTY BOARD OF CHOSEN FREEHOLDERS, DEFENDANTS-RESPONDENTS, AND THE VITETTA GROUP AND CONTINENTAL INSURANCE COMPANY, DEFENDANTS.
On appeal from Superior Court of New Jersey, Law Division, Cumberland County, Docket No. L-940-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 30, 2010
Before Judges Skillman, Parrillo and Espinosa.
Plaintiff Selective Way Insurance (Selective) sought a declaratory judgment that it did not owe a defense or indemnification for its insured, defendant Arthur J. Ogren, Inc. (Ogren), for claims arising from damages that were manifested approximately two years prior to Selective's policy period. Selective now appeals from an order that denied summary judgment to it and we reverse.
Selective issued a commercial general liability (CGL) policy to Ogren with limits of $1,000,000 per occurrence for the policy period of 8/17/97 to 8/17/98 (the "Policy"). The Policy was renewed annually until 8/17/01. Pursuant to the terms of the Policy, one of the prerequisites for coverage is that "the 'bodily injury' or 'property damage' occurs during the policy period." "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
On October 1, 2007, the Cumberland County Board of Chosen Freeholders (Cumberland) initiated suit against Ogren and others, seeking to recover for property damage caused by allegedly faulty work performed in the expansion and renovation of the Cumberland County Courthouse, Cumberland County Board of Chosen Freeholders v. Vitetta Group, P.C., et al. Docket No. CUM-L-962-07 (the underlying action). The work performed by Ogren was substantially completed in August 1995, and a temporary certificate of occupancy was issued on August 16, 1995. According to Cumberland's amended complaint, damages began to accrue shortly after completion of the Courthouse Project when pervasive, ongoing water leakage occurred throughout the four walls of the new construction and the renovation portions of the Courthouse Project resulting in exterior and interior damage, including mold, cracking of cast stone window sills, cornices and coping units and failed masonry.
The complaint further alleged that the direct and proximate cause of the damages was the negligence of Ogren and others in the construction.
Ogren provided notice of this claim and a copy of the summons and complaint to Selective. By letter dated November 29, 2007, Selective acknowledged the claim and agreed to defend Ogren in the matter under a reservation of rights, including the right to disclaim for the counts of the complaint that alleged claims against Ogren. The letter explicitly advised:
This policy does not provide coverage or a defense for "bodily injury" or "property damage" which occurs outside the policy period. Given the investigation to date, there remains a strong possibility that this occurrence occurred outside your policy period of insurance with Selective Way Insurance Company.
It is undisputed that, as revealed in discovery in the underlying action, Cumberland first became aware of the property damage attributed to Ogren's negligence in 1995 and that efforts to repair the damage began in November 1995. By letter dated February 26, 2009, Selective notified Ogren that none of the claims asserted in the underlying action qualified for coverage under the Policy because the loss did not occur during Selective's policy period and that Selective therefore could not offer either a defense or indemnification against those claims. Selective's letter also noted that CNA Insurance, which "provided general liability insurance to [Ogren] covering the period of this loss," had provided counsel to Ogren in defense of the underlying action.
Selective filed a complaint for declaratory relief, seeking a declaration pursuant to N.J.S.A. 2A:16-50 to -62 that it is not obligated under the terms of the Policy to defend or indemnify Ogren regarding the claims in the underlying action.
Ogren filed an answer and counterclaim for declaratory judgment. Thereafter, Selective filed a motion for summary judgment. Both Cumberland and Ogren opposed the motion, arguing that coverage should be available because the leaks continued and caused property damage after 1995 and into the policy period.
The trial court denied Selective's motion. In so doing, the court found the continuous-trigger theory articulated in Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994) applicable because of the continuing nature of the property damage. Selective filed a motion for leave to appeal from the order denying summary judgment, which we granted.
In this appeal, Selective raises the following issues:
A TRIAL COURT'S SUMMARY JUDGMENT RULING IS REVIEWED BY THE APPELLATE COURT USING A DE NOVO STANDARD OF REVIEW.
THERE IS NO COVERAGE UNDER THE SELECTIVE POLICY BECAUSE THERE WAS NO "OCCURRENCE" DURING THE SELECTIVE POLICY PERIOD.
A. THE BURDEN IS ON OGREN TO BRING THE CLAIM WITHIN THE INSURING AGREEMENT.
B. SELECTIVE'S POLICY DOES NOT PROVIDE COVERAGE TO OGREN BECAUSE THERE WAS NO "OCCURRENCE" DURING THE SELECTIVE POLICY PERIOD.
THE TRIAL COURT ERRED IN RULING THE CONTINOUS TRIGGER DOCTRINE APPLIED.
A. THE continuous-trigger DOCTRINE IS INAPPLICABLE TO THIS CASE.
B. THE TRIAL COURT'S RULING THAT EACH INSTANCE OF WATER INFILTRATION CONSTITUTES ANOTHER "OCCURRENCE" IS ALSO ERRONEOUS.
C. SELECTIVE HAS NO DUTY TO DEFEND OGREN.
When reviewing a summary judgment decision, we employ the same standards used by the trial court, which grants summary judgment if the record shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). Coyne v. N.J. Dep't of Transp., 182 N.J. 481, 491 (2005); Burnett v. Gloucester County Bd. of Chosen Freeholders, 409 N.J. Super. 219, 228 (App. Div. 2009); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Because the facts are undisputed here, we turn to a de novo review of the legal issue whether the motion judge correctly applied the continuous-trigger theory to determine that Selective was obligated to provide a defense and indemnification to Ogren in the underlying action. See Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009); Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230-31 (App. Div.), certif. denied, 189 N.J. 104 (2006).
In Winding Hills Condo. Assoc., Inc. v. North American Specialty Ins. Co., 332 N.J. Super. 85, 92 (App. Div. 2000), we considered whether the continuous-trigger rule should be applied to a first-party property damage claim as opposed to the traditional manifestation-trigger rule, in which an insurance policy's coverage is triggered when the injury first manifests itself. See Hartford Accidental & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 27 (1984). We concluded that the manifestation-trigger rule remained appropriate for a variety of reasons that bear relevance to the property damage claim here. First, the damages suffered by a property owner like Cumberland as the result of a contractor's alleged negligence do not invoke "the law's solicitousness for victims of mass toxic torts and other environmental contamination[.]" Winding Hills, supra, 332 N.J. Super. at 91. Additionally, although the interests involved extend beyond those of the property owner and its insurer, the property owner had the ability, when negotiating the contract, to require the contractor to obtain adequate insurance coverage. See id. at 92. However, we need not decide whether the continuous-trigger theory is appropriate in third-party property damage claims because we conclude that, even if that theory is applicable, Selective is not obligated to provide a defense or indemnification based upon the undisputed facts.
The continuous-trigger theory affords "the greatest ultimate redress," Winding Hills, supra, 332 N.J. Super. at 91, and is well suited to cases such as environmental contamination and asbestos-related disease because of the slow and uncertain progression from exposure to the manifestation of injury. The "'conceptual underpinning' . . . is that injury occurs during each phase of environmental contamination -- exposure, exposure in residence (defined as further progression of injury even after exposure has ceased), and manifestation of disease." Owens-Illinois, supra, 138 N.J. at 451. The Court held that in such cases the occurrence that triggers the policy occurs from the time that asbestos fibers are first inhaled and continues up to and including the time that an asbestos-related disease is manifested. Id. at 454. See also Quincy Mut. Fire Ins. Co. v. Borough of Bellmawr, 172 N.J. 409, 419 (2002).
Thus, even when the continuous-trigger theory is appropriately applied, the time when damage is manifested remains a critical factor in determining if there has been an "occurrence" in a given policy period. As we observed in Polarome Int'l, Inc. v. Greenwich Ins. Co., 404 N.J. Super. 241, 268 (App. Div. 2008), certif. denied, 199 N.J. 133 (2009), the benefit derived from maximizing coverage under this theory "does not mandate triggering every CGL policy from first exposure until a claim is made[.]" Accordingly, in Polarome we found no error in the trial judge's conclusion that "the last pull of the trigger" was the initial manifestation of a toxic-tort related personal injury. Ibid.
The issue of scientific uncertainties as to the precise date when injury first occurs in a toxic-tort personal injury case was resolved by adopting the continuous-trigger theory, thus ending the debate over whether the injury occurred at first exposure, when the injury was manifested, or sometime between those two events. Once a diacetyl-related personal injury is initially manifest, the scientific uncertainties are laid to rest and subsequent CGL policies are not triggered.
[Id. at 268-69 (Emphasis added).]
We therefore conclude that, even if the continuous-trigger theory applied here, the undisputed fact that the damage was manifest approximately two years before Selective's initial policy period precludes a determination that Selective is obligated to provide a defense or indemnification under the Policy. In light of this conclusion, it is unnecessary to review the remaining arguments raised on appeal.
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