January 6, 2011
STEELE R. CHADWELL, PLAINTIFF-APPELLANT,
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2306-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 13, 2010 - Decided
Before Judges Grall and LeWinn.
Plaintiff Steele R. Chadwell filed a complaint against defendant New Jersey Manufacturers Insurance Company (NJM), seeking a declaratory judgment of coverage under a homeowner's policy issued by NJM. The claim was for mold-related loss caused by ice-damming. He appeals from an order granting NJM's motion for summary judgment, which was entered on the parties' cross-motions.*fn1 Finding no basis for construing the policy to cover Chadwell's claim, we affirm.
Chadwell and his family have lived in the insured residence since 1981, and NJM has insured it since 1986. Chadwell discovered the mold on September 18, 2007, when he removed aluminum siding revealing mold, mildew and water damage on the underlying wood siding of two exterior walls. According to Chadwell, the "best of the many explanations" for the condition is that ice filled the gutter along those walls at some point and forced water to travel (1) out of the back of the gutter, (2) along the underside of the roof overhang toward the wall, and (3) down, with the aid of gravity, between the aluminum siding and the original cedar siding of those walls.
Chadwell's NJM policy covers a period commencing on September 4, 2007 and ending on September 4, 2008. It includes an HO-2 broad form and, relevant here, an endorsement entitled "LIMITED FUNGI, WET OR DRY ROT, OR BACTERIA COVERAGE" (mold endorsement). The total premium is $1334, and the cost of the mold endorsement is $82.
Section I of Chadwell's broad form policy has four components. Those sections are: SECTION I - PROPERTY COVERAGES, SECTION I - PERILS INSURED AGAINST, SECTION I - EXCLUSIONS, and SECTION I - CONDITIONS. SECTION I - PROPERTY COVERAGES includes a subsection titled "Additional Coverages." The various sections and subsections of the broad form policy are listed in its table of contents, which is entitled "YOUR HOMEOWNERS POLICY QUICK REFERENCE New Jersey HO-2 Broad Form."
SECTION I - PERILS INSURED AGAINST identifies sixteen perils. Among them are: 1) fire or lightning; 2) windstorm or hail; 3) explosion; 10) falling objects; 11) weight of ice, snow or sleet which causes damage to a building or property contained in a building; and 12) accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. Under a major heading in the table of contents, "SECTION I - PERILS INSURED AGAINST," all sixteen perils insured against that are set forth in the policy are listed and numbered one through sixteen.
SECTION I - PROPERTY COVERAGES, "Additional Coverages," includes eleven additional coverages, which does not include an "additional coverage" for fungi, wet or dry rot, or bacteria. Under a major heading in the table of contents, SECTION I -PROPERTY COVERAGES and the subheading "Additional Coverages," the eleven additional coverages provided in the broad form policy are listed and numbered one through eleven.
The mold endorsement is printed on a form, and its caption warns: "THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY." Throughout, the mold endorsement references sections and subsections of the broad form policy. The mold endorsement adds a twelfth "Additional Coverage" to the eleven included in the broad form policy, limits the additional coverage to the sixteen perils insured against in the broad form policy and modifies the twelfth peril insured against - "Accidental Discharge Or Overflow Of Water Or Steam." In pertinent part it provides:
SECTION I - PROPERTY COVERAGES ADDITIONAL COVERAGES The following Additional Coverage is added:
12. "Fungi", Wet Or Dry Rot, Or Bacteria
a. The amount shown in the Schedule above is the most we will pay for:
(1) The total of all loss payable under Section I - Property Coverages caused by "fungi", wet or dry rot, or bacteria;
(2) The cost to remove "fungi", wet or dry rot, or bacteria from property covered under Section I;
(3) The cost to tear out and replace any part of the building or other covered property as needed to gain access to the "fungi", wet or dry rot, or bacteria; and
(4) The cost of testing of air or property to confirm the absence, presence or level of "fungi", wet or dry rot, or bacteria, whether performed prior to, during or after removal, repair, restoration or replacement. The cost of such testing will be provided only to the extent that there is a reason to believe that there is the presence of "fungi", wet or dry rot, or bacteria.
b. The coverage described in 12.a. only applies when such loss or costs are a result of a Peril Insured Against that occurs during the policy period and only if all reasonable means were used to save and preserve the property from further damage at and after the time the Peril Insured Against occurred. [(Emphasis added).]
. . . . [The omitted paragraphs, c. and
d., discuss the amount the insurer will pay and damage that is and is not caused, in whole or in part, by fungi, wet or dry rot or bacteria.]
12. Accidental Discharge Or Overflow Of Water Or Steam Paragraph 12.e. is added:
SECTION I - PERILS INSURED AGAINST
e. Caused by constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all "insureds" and is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure.
The mold endorsement also modifies SECTION I - Exclusions. The broad form policy has eight exclusions, and the mold endorsement adds a ninth. It provides:
SECTION I - EXCLUSIONS
Exclusion 9. is added.
9. "Fungi", Wet Or Dry Rot, Or Bacteria "Fungi", Wet Or Dry Rot, Or Bacteria meaning the presence, growth, proliferation, spread or any activity of "fungi", wet or dry rot, or bacteria. This exclusion does not apply:
a. When "fungi", wet or dry rot, or bacteria results from fire or lightning; or
b. To the extent coverage is provided for in the "Fungi", Wet Or Dry Rot, Or Bacteria Additional Coverage under Section I - Property Coverage with respect to loss caused by a Peril Insured Against other than fire or lightning.
Direct loss by a Peril Insured Against resulting from "fungi", wet or dry rot, or bacteria is covered. [(Emphasis added).]
On review of the grant of a motion for summary judgment in favor of a defendant, the question for this court is whether the evidential materials submitted on the motion, viewed in the light most favorable to plaintiff, entitle the defendant to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). This court and the trial court apply the same standard; thus, the review is de novo. Bello v. Lyndhurst Bd. of Educ., 344 N.J. Super. 187, 190 (App. Div. 2001).
"In a dispute involving coverage under a liability policy, the insured has the burden to bring the claims within the basic terms of the policy." F.S. v. L.D., 362 N.J. Super. 161, 165-66 (App. Div. 2003) (internal quotations omitted). Coverage depends on the terms of the insurance policy, and because the policy is a contract, its interpretation is a question of law. Adron, Inc. v. Home Ins. Co., 292 N.J. Super. 463, 473 (App. Div. 1996).
There are well-settled rules on construction that guide interpretation of insurance contracts. Clauses defining coverage are interpreted liberally, but clauses narrowing coverage through exclusions are strictly construed. Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 576 (1970); Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 429 (App. Div. 2004). When a policy is sufficiently ambiguous to permit readings excluding and providing coverage, "the interpretation supporting coverage will be applied." Simonetti, supra, 372 N.J. Super. at 428. "[A] genuine ambiguity" warranting application of that rule arises "where the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979). Faced with genuine ambiguity, courts resolve it "to comport with the reasonable expectations of the insured." President v. Jenkins, 180 N.J. 550, 563 (2004) (internal quotations omitted). Nevertheless, "[w]hen the terms of the contract are clear and unambiguous, [courts] must enforce the contract as it is written; the court cannot make a better contract for parties than the one that they themselves agreed to." Simonetti, supra, 372 N.J. Super. at 428.
NJM does not rely on a clause narrowing coverage by exclusion. NJM relies on the unambiguous language of the mold endorsement defining the scope of the coverage. The pertinent language is set forth above, in its context, with emphasis. The scope of coverage provided in the endorsement is stated without ambiguity: "The coverage described in 12.a only applies when such loss or costs are a result of a Peril Insured Against."
Chadwell contends "that the mold endorsement misleads consumers by purporting to also amend the perils and exclusions sections of the broad form" policy. We disagree. The endorsement states: "12. Accidental Discharge Or Overflow Of Water Or Steam" and specifies that "Paragraph 12.e is added." In our view, this amendment clearly directs the consumer to the single peril insured against that is modified, the peril numbered "12" in the broad form policy. Peril number "12," as defined in the broad form policy, includes paragraphs 12.a, 12.b, 12.c and 12.d. Given the clear interrelated structure of the broad form and the mold endorsement, the phrasing of the policy does not preclude the average policyholder from discerning the boundaries of coverage. Even if we were to accept the dubious proposition that we should consider confusion encountered by a consumer who elects to read the mold endorsement without reference to the broad form policy it modifies, Prather v. Am. Motorists Ins. Co., 2 N.J. 496, 503 (1949), we could not conclude that this endorsement specifically modifying sections and paragraphs of the broad form policy is confusing. Because the mold endorsement cannot be understood without reading the specific provisions of the broad form policy it modifies, the average policyholder would not attempt to read it as a free-standing document.
Chadwell presents no argument to bring his mold condition, attributable to ice-damming, within the basic terms of the policy covering a loss or cost for loss or costs that are "a result of a Peril Insured Against," and we see none that applies. In the absence of a material dispute of fact that would bring the claim within the basic terms of the policy, NJM is entitled to summary judgment.
In light of our conclusion that the loss is not covered, we find that Chadwell's remaining arguments, including those improperly raised for the first time in his reply brief, Bello, supra, 344 N.J. Super. at 190, are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). The format of the endorsement and policy clarifies and highlights the relationship between the documents, and it is not misleading. Although his payment for the mold endorsement did not yield a benefit, that is only because the protection he purchased plainly did not include this claim.