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Richard Campiglia v. New Jersey Insurance Underwriting Association


July 27, 2011


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2957-07.

Per curiam.


Argued March 2, 2011

Before Judges R. B. Coleman and J. N. Harris.

Plaintiff Richard Campiglia appeals from an order granting summary judgment in favor of defendant New Jersey Insurance Underwriting Association (NJIUA) and dismissing plaintiff's complaint for insurance coverage of a loss due to fire. Finding no ambiguity in the terms of the policy issued by NJIUA, which provided coverage only for a two-family dwelling, the court concluded that full coverage was not provided for a second one-family structure on the parcel. We affirm.

In April 1999, plaintiff purchased real property on Orange for $135,000. The property contained two structures, a two-family building in the front and an additional building at the rear, which plaintiff occupied as his primary residence. In connection with the purchase, plaintiff met with insurance broker Jose E. Pantoja, who procured insurance for the property through NJIUA, an underwriting association created by the Legislature to provide essential property insurance to applicants who cannot secure coverage in the voluntary market. The application, dated April 8, 1999, described the property to be insured as an owner occupied, two-family frame building. NJIUA issued a new policy declaration of insurance for $150,000, beginning April 10, 1999 through April 10, 2000, covering a "frame owner occupied 2 family dwelling." Neither the application nor the policy made reference to the second structure on the property.

The description of the property on applications for continuation of coverage and on declarations for ensuing years remained unchanged. Thus, in each renewal application, plaintiff certified that the property continued to be owner occupied as described in the existing policy, and that there were no changes to the policy limits, perils, coverage, mortgagees, names and addresses.

According to the NJIUA's underwriting guidelines, "[i]nspections are conducted to confirm information provided on the application, or to verify insurability of property." A home inspection report is then sent back to the underwriter to be reviewed to determine whether or not the information on the application for insurance is correct. Pursuant to the guidelines, plaintiff's property was first inspected in 1999 for NJIUA by a field inspector, Raymond Bishof. While on site at the property, Bishof found a potential conflict between the NJIUA report he received for the property and what was physically there. Bishof noted on his April 25, 1999 home inspection report that the building was of frame construction, that the dwelling was occupied by two families, but that there was an absentee landlord, with the property not owner occupied.

The property was again inspected in late 2001, and in his second report, dated November 25, 2001, Bishof indicated that the dwelling was occupied by two families. It was reported as owner occupied and tenant occupied. He noted on the report, that "[t]his report covers only the front dwelling not the rear mercantile building." At no point did NJIUA's underwriter, Steve Mutterperl, follow up on any inconsistency between Bishof's two reports and the applications filed by plaintiff.

On December 8, 2006, a fire destroyed the structure at the rear of the property, where plaintiff lived with his family. Plaintiff alleges he was under the impression that for the preceding six years his one-family rear dwelling was included within his policy. He submitted a claim to the NJIUA to recover the full policy limit of $150,000 but that claim was denied. Instead, pursuant to Coverage B of the policy, NJIUA distributed to plaintiff ten percent of the policy's coverage, amounting to $15,000.*fn1

On April 11, 2007, plaintiff filed a complaint against NJIUA and insurance broker Pantoja*fn2 to recover the policy balance of $135,000 for the fire-damaged rear dwelling. NJIUA filed an answer and cross-claims for indemnification and contribution against co-defendant Pantoja. Following a period of discovery, NJIUA moved for summary judgment and that motion was granted. Finding no disputed issue of material fact in interpreting the insurance contract, the motion judge ruled that the property was insured in accordance with plaintiff's application:

While NJIUA's Guidelines may have required an inspector to compare the declaration page with the application, this does not amount to a duty of care owed to plaintiff.

The description of the property contained in the Declaration Page is not ambiguous but plain, ordinary language that any person of average intelligence would understand . . . that a "Frame owner occupied 2 Family Dwelling" did not refer to 3 Family Dwellings or 2 separate structures, but just one (1) 2 family structure and not the separate structure where plaintiff lived.

We agree with the motion judge and affirm.


Summary judgment must be granted where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2. The trial court must not decide issues of fact, but must only decide whether there are any such issues. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On appeal, we use the same standards as the motion court, by first deciding if there exists a genuine issue of material fact which would preclude a grant of summary judgment. Prudential Prop. & Cas. Ins. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998). If there is no genuine issue as to a material fact, we then decide whether the trial court's ruling on the law was correct. Ibid.

Plaintiff does not argue that there are factual disputes that should have precluded the grant of summary judgment. Rather, plaintiff argues that "NJIUA's failure to comply with its own underwriting guidelines, its failure to address the conflict disclosed in the home inspection and its failure to follow up with the broker . . . warrants an inference that the policy in question was issued incorrectly." Plaintiff then adds

"[h]ad [the policy] been processed and issued correctly, the insured would have been alerted to the error in the application because he would have had to pay a higher premium for an absentee landlord property[.]"


Plaintiff's first challenge to the validity of the policy in question is based on his contention that NJIUA failed to comply with its own underwriting guidelines. As plaintiff points out, the declaration sheets and his insurance applications*fn3 specified that the dwelling to be insured was "owner occupied." Yet, the home inspection report ordered by NJIUA and prepared by Bishof dated April 25, 1999, revealed that the two-family dwelling to be insured involved an "absentee landlord" and was not owner occupied. In addition, the inspection reports prepared by Bishof indicated that his inspections only covered the front building and not the rear mercantile building. In his deposition, Bishof admitted that he saw the rear building but did not inquire as to the nature of the building or who lived there because he "thought it was a mercantile building, associated with those dump trucks[]" in the driveway.

After submitting his two inspection reports, Bishof stated that he never had any follow up from the NJIUA underwriter to inspect the back building. As a result, plaintiff submits that once NJIUA discovered the contradiction between a dwelling that involved an absentee landlord and not an owner-occupied dwelling, NJIUA had a duty to further investigate, which was breached. We disagree.

An insurer's duty to investigate is limited. John Hancock Mut. Life Ins. Co. v. Cronin, 139 N.J. Eq. 392, 398 (E. & A. 1947). An insurer's duty arises "'only when the independent investigation . . . discloses sufficient facts to seriously impair the value' of the application." Ledley v. William Penn Life Ins. Co., 138 N.J. 627, 639 (1995) (alterations in original) (quoting Gallagher v. New Eng. Mut. Life Ins. Co., 19 N.J. 14, 22 (1955)). On the other hand, an insured bears the responsibility for the accuracy of his application and to respond truthfully to specific questions in the insurance application. Progressive Cas. Ins. Co. v. Hanna, 316 N.J. Super. 63, 70 (App. Div. 1998).

The mere fact that an insurer makes an investigation does not absolve the applicant from speaking the truth nor lessen the right of the insurer to rely upon his statements, unless the investigation discloses facts sufficient to expose the falsity of the representations of the applicant or which are of such a nature as to place upon the insurer the duty of further inquiry. [Ledley, supra, 138 N.J. at 639 (citing Cronin, supra, 139 N.J. Eq. at 398).]

Plaintiff argues that the failure of the insurer to investigate further resulted in a misrepresentation of the scope of coverage that was repeated in each renewal, and under Harr v. Allstate Insurance Co., 54 N.J. 287, 306 (1969), NJIUA is estopped from denying coverage. We disagree.

In Harr, the insurer was estopped from denying coverage because of detrimental reliance by the insured on representations that the insured's property was fully covered. Id. at 310. In reliance on such representation, the insured did not purchase additional coverage. Id. at 309-10. Harr is clearly distinguishable from the present factual context since plaintiff has presented no evidence that NJIUA made any false representation or that plaintiff relied on any "misrepresentations" by NJIUA to his detriment.

The position of NJIUA is that its policy only covered the two-family dwelling situated on the property. That NJIUA did not follow up on a potential conflict between the application and that home inspection report did not mislead plaintiff nor induce plaintiff to rely to his detriment on the belief that the policy covered the separate structure as a primary dwelling.


Our Supreme Court has recognized that "the one page [of the insurance policy] most likely to be read and understood by the insured is the declarations sheet." Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 272 (2008) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 603 (2001)). Because it is "the one page of the policy tailored to the particular insured and not merely boilerplate," the declarations sheet is recognized as a basis for defining the insured's reasonable expectation of coverage. Lehrhoff v. Aetna Cas. and Sur. Co., 271 N.J. Super. 340, 346-48 (App. Div. 1994). Therefore, at a minimum, the insured must act as "a conscientious policyholder," and, upon receipt, examine "the declaration page to assure himself that the coverages and their amounts . . . accord with his understandings of what he is purchasing." Id. at 346-47.

The numerous declaration sheets issued to plaintiff in the consecutive years following his purchase of the property only identify one building to be insured. That building is of frame construction and is occupied by two families. The occupant of one of the units may or may not have been an owner. The record reflects that on January 4, 2007, plaintiff acknowledged in a recorded statement to the insurance adjuster, that he did not understand why his broker had only included a single two-family building instead of one "two-family" and one "one-family" on the application. This confirms that plaintiff understood or, with a modicum of attention, would have understood the stated coverage of the policy. Nevertheless, plaintiff submits that the language on the declaration page of the policy is ambiguous. Specifically, plaintiff asserts the phrase "FRAME OWNER OCCUPIED," which appears on the declaration page of the insurance application, directly above "2 FAMILY DWELLING" defeated his reasonable expectation to be covered for his fire loss claim.

"When interpreting an insurance policy, courts give the policy's words 'their plain, ordinary meaning.'" President v. Jenkins, 180 N.J. 550, 562 (2004) (quoting Zacarias, supra, 168 N.J. at 595). Courts "should not engage in a strained construction to support the imposition of liability." Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537 (1990) (quoting Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529 (1989)).

The insured is bound "to make such examination as would be reasonable for the average person under the particular circumstances[.]" Harr, supra, 54 N.J. at 310. Moreover, we may depart from the plain reading of the policy only if:

[T]he text appears overly technical or contains hidden pitfalls, cannot be understood without employing subtle or legalistic distinctions, is obscured by fine print, or requires strenuous study to comprehend. Second, the plain terms of the contract will be enforced if the "entangled and professional interpretation of an insurance underwriter is [not] pitted against that of an average purchaser of insurance," or the provision is not so "confusing that the average policyholder cannot make out the boundaries of coverage." [Zacarias, supra, 168 N.J. at 602 (internal citations omitted).]

We are convinced the declaration sheets unambiguously reflect coverage only for the two-family dwelling. Under the subheading "LIMIT OF LIABILITY" in plaintiff's declaration sheets, "FRAME OWNER OCCUPIED, 2 FAMILY DWELLING FIRE DISTRICT" is clearly stated. There is no mention of the second single family dwelling or structure. Plaintiff did not disclose his residence in that one-family structure anywhere in the application, and he never requested that a one-family structure be insured. When construing ambiguity in this setting, we defer not to any or all expectations articulated by an insured during the course of litigation, but rather to the objectively reasonable expectations at the time the policy was issued, depending on the totality of the circumstances in a given case. Di Orio v. N.J. Mfrs. Ins. Co., 79 N.J. 257, 269 (1979). Significantly, there are no technical or hidden subtleties or fine print or legal interpretations. The circumstances surrounding the issuance of plaintiff's policy lead to the conclusion that plaintiff did not request from his insurer what he now seeks as coverage. Therefore, he cannot objectively expect such coverage.

Plaintiff's proffer of evidence does not create a genuine issue of material fact and does not defeat summary judgment. Shelcusky v. Garguilo, 172 N.J. 185, 201-03 (2002).


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