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Community Association Underwriters of America, Inc. A/S/O Club v. Christopher Mcgillick; Edward Spang

December 13, 2010


The opinion of the court was delivered by: Thompson, U.S.D.J.




This matter has come before the Court upon Defendant, Kevin Otte and Third-Party Defendants Theresa Otte and James P. Otte's Motion for Summary Judgment [docket # 48]. Plaintiff Community Association Underwriters of America, Inc. (―CAU‖) opposes the Motion [49]. Defendants Andrew Eckert and Edward Spang have each filed Cross-Motions for Summary Judgment and Contingent Oppositions to the Motion for Summary Judgment [50; 51]. The Court has decided the motion upon the submissions of both parties and without oral argument, pursuant to Fed. R. Civ. P. 78(b). For the reasons stated below, the motions are denied.


Plaintiff CAU is the insurer of Club II at Mattix Forge (―Club II‖), a property which sustained damage due to a fire that allegedly originated at the condominium unit rented by Defendants McGillick, Eckert, Spang and Otte, and owned by Third-Party Defendants James and Theresa Otte.*fn1 Having paid for damages pursuant to Club II's insurance policy, CAU became subrogated to Club II's claims asserted in this action. CAU claims that the fire that damaged Club II's property was proximately caused by the negligence of the Defendants and/or their party guests. (First Am. Compl. ¶¶ 14--15, 18--21) [23]. *fn2

After CAU filed its Amended Complaint, Defendant Edward Spang filed a Third-Party Complaint against James Otte and Theresa Otte, alleging that they negligently failed to supervise and control the actions of the tenant Defendants, to follow condominium rules and regulations, and to keep their premises in a hazard-free condition. (Third-Party Compl. ¶ 2) [36]. Defendant Kevin Otte and the Third-Party Defendants now move for Summary Judgment on the grounds that Club II's public offering statement and condominium association bylaws both contain a waiver of subrogation of claims against unit owners. (Br. in Supp. 3) [48].*fn3 They further argue that Kevin Otte cannot be sued because the subrogation waiver precludes any action against their insurance policy, which includes Kevin Otte, and that public policy reasons favoring waiver apply equally to tenants. (Id. at 6--8.) Plaintiff does not oppose Summary Judgment as to the Third-Party Defendants, but opposes Summary Judgment as to Kevin Otte because Club II's policy itself does not contain a subrogation waiver and because any alleged subrogation waiver does not apply to tenants of unit owners. (Br. in Opp'n 9.)

Defendants Andrew Eckert and Edward Spang each seek Summary Judgment dismissing all claims against them based on the same public policy reasons cited by Defendant Otte for applying subrogation waivers to tenants. (Cross-Mot. for Summ. J. of Andrew Eckert & Contingent Opp'n ¶ 3) [50]; (Cross-Mot. for Summ. J. of Edward Spang & Contingent Opp'n ¶ 3) [51]. *fn4 Eckert and Spang each argue in the alternative that, if they are denied Summary Judgment, then Summary Judgment should also be denied as to Defendant Kevin Otte. (Eckert Cross-Mot. ¶ 8); (Spang Cross-Mot. ¶ 8).


A.Standard of Review for Summary Judgment Motions

Summary judgment is appropriate if the record shows ―that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.‖ Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding whether summary judgment should be granted, a district court considers the facts drawn from ―the pleadings, the discovery and disclosure materials, and any affidavits‖ and must ―view the inferences to be drawn from the underlying facts in the light most favorable to the party opposing the motion.‖ Fed. R. Civ. P. 56(c); Curley v. Klem, 298 F.3d 271, 276--77 (3d Cir. 2002) (internal quotations omitted). In resolving a motion for summary judgment, the Court must determine ―whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.‖ Anderson v. Liberty Lobby, 477 U.S. 242, 251--52 (1986). Specifically, summary judgment should be granted if the evidence available would not support a jury verdict in favor of the nonmoving party. Id. at 248--49.

B.Subrogation and Waiver

This case is before the Court on diversity jurisdiction, under 28 U.S.C. 1332(a)(1). Accordingly, while we follow federal procedural rules, we apply the substantive law of the state in which this Court sits. See generally Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The crux of the present motion is whether the Plaintiff insurance company waived subrogation, the right to step into the shoes of the insured condominium association and thereby sue either the unit owners or the tenants allegedly responsible for the damage costs paid out. Because subrogation is a common law doctrine, we apply New Jersey law. See Continental Ins. Co. v. Boraie, 672 A.2d 274, 278 (App. Div. 1995) (stating that ―subrogation is an assignment that arises either by contract, or equitable principles‖); see, e.g., Continental Cas. Ins. Co. v. Darella Elec., Inc., 2010 WL 502988, at *3 (D.N.J. February 9, 2010) (applying New Jersey case law to subrogation case).

The New Jersey Supreme Court has defined subrogation as ―a device of equity to compel the ultimate discharge by the one who in good conscience ought to pay it.‖ Standard Accident Ins. Co. v. Pellechia, 104 A.2d 288, 292 (N.J. 1954). Under New Jersey law, ―a carrier paying an insurance loss is entitled to subrogation against the tortfeasor‖ responsible for any damage to the insured. Boraie, 672 A.2d at 275 (citing Pellechia, 104 A.2d 288). However, ―the rights of a subrogated insurer can rise ...

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