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Emily Marshall, An Infant v. Raritan Valley Disposal

March 13, 2012


On appeal from the Superior Court of New Jersey, Law Division, Warren County, Docket No. L-478-04.

Per curiam.


Argued January 25, 2012 -

Before Judges Graves, Harris, and Koblitz.

This appeal presents a dispute between two insurers concerning their respective monetary contributions, if any, towards the settlement of a personal injury lawsuit. It has its genesis in a fatal accident that occurred at the West Amwell waste transfer station in May 2001. The factual backdrop for our review is found in Marshall v. Raritan Valley Disposal, 398 N.J. Super. 168 (App. Div. 2008), which we need not repeat at length.

In Marshall, we held that an insurer -- not the insured -- has standing to pursue an insurance coverage allocation action against a second insurer to determine contributory responsibilities, if any, under liability insurance policies that are alleged to provide concurrent coverage. Id. at 181. As a result of our remand in Marshall, the Public Alliance Insurance Coverage Fund (the PAIC) was substituted for third-party plaintiff Township of West Amwell and thereafter pursued third-party defendant Illinois National Insurance Company (Illinois National) for a share of the $1.85 million settlement amount (plus defense costs) paid in the tort segment of the litigation. As a result of cross-motions for summary judgment, the Law Division found that both insurers' policies covered the same risk and required an apportionment of expenses pro rata, rather than in equal shares. The court also awarded the PAIC prejudgment interest. Both insurers filed appeals. We affirm the final judgment, except for the calculation of prejudgment interest. We remand for the recalculation of such prejudgment interest and the entry of an amended judgment in accordance with this opinion.



In 2000, West Amwell solicited bids and awarded a contract for municipal solid waste collection (the waste collection contract) to defendant Raritan Valley Disposal. Pursuant thereto, Raritan Valley Disposal delivered a garbage truck to the municipality's waste transfer station every Saturday to aid township residents with their trash deposits. The garbage truck was parked at a location dictated by a municipal employee.

Raritan Valley Disposal was not responsible for assisting residents load trash onto the garbage truck, or for directing traffic, but was required at the end of the day to remove the garbage truck and dispose of its contents.

Section 7.4 of the waste collection contract required Raritan Valley Disposal to maintain "[c]omprehensive automobile liability insurance coverage with bodily injury liability limits of $500,000 for injury to or death of one person and $1,000,000 each occurrence." Furthermore, West Amwell was entitled to receive an insurance certificate from Raritan Valley Disposal listing the municipality as an "additional insured on the . . . automobile liability [policy]." This obligation was similarly expressed in Section 5.16 of West Amwell's predicate "Uniform Bid Specifications, Solid Waste Collection Service" (the bid specifications) as the following:

The Contractor shall take out and maintain in full force and effect at all times during the life of this Contract insurance in conformance with the requirements of N.J.A.C. 7:26H-6.19. The insurance policy shall name the Township of West Amwell as an Additional Named Insured indemnifying the Township of West Amwell with respect to the Contractor's actions pursuant to the Contract.

In furtherance of its obligation to provide West Amwell with insurance protection, Raritan Valley Disposal obtained a Certificate of Liability Insurance from its insurer, Illinois National, listing West Amwell as an additional insured with respect to an already existing "Business Automobile Insurance" policy that provided a limit of $1,000,000 in liability coverage.

Under the Business Automobile Insurance policy, Illinois National agreed, subject to its stated limit of liability, to pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance or use of a covered "auto[.]"

Under Endorsement #010, the policy defined an "insured" as follows:


A. The "Named Insured" for any covered "Auto" and

B. At the option of the Named Insured, any entity or individual prior to or after an "Accident" for any covered "Auto[.]"

Separately, Section 5.18 of the bid specifications provided further protection to West Amwell by means of contractual indemnification, requiring the successful bidder to indemnify and hold harmless the Township of West Amwell from and against all claims, damages, losses, and expenses including all reasonable expenses incurred by the Township of West Amwell on any of the aforesaid claims that may result or arise directly or indirectly, from or by reason of the performance of the contract or form any act or omission by the Contractor, its agents, servants, employees or subcontractors and that results in any loss of life or property or in any injury or damage to persons or property.


On May 12, 2001, Raritan Valley Disposal's garbage truck was involved in a fatal accident when a township resident backed his Ford pick-up truck into plaintiff's decedent (who at the time was unloading trash at the waste transfer station), pinning her against the stationary garbage truck. Initially, survivorship and wrongful death claims were brought against West Amwell on behalf of the decedent and her family. An amended complaint asserted an emotional distress claim based upon the decedent's child witnessing her mother's death. As stated in the amended complaint, the municipality's alleged negligence consisted of its failure to "maintain the premises in a safe condition" and "warn . . . of the unsafe, dangerous and palpably unreasonable condition" at the facility.


Following the accident and the filing of the complaint, West Amwell notified the PAIC, its general liability insurer, which undertook to defend the municipality. West Amwell's insurance policy with the PAIC had a $5 million limit of liability.

Several years after the lawsuit had been pending, West Amwell filed a third-party complaint against Illinois National seeking coverage under the Business Automobile Insurance policy that had been issued to Raritan Valley Disposal. Prior to a resolution of the third-party complaint, the PAIC settled with plaintiff's decedent for $1.85 million.*fn1

The PAIC then continued to prosecute the third-party complaint against Illinois National on the municipality's behalf, and obtained a judgment for it on the issue of coverage. We vacated that judgment in Marshall because the insured lacked standing to pursue the coverage action against Illinois National after the PAIC settled the underlying claims. Id. at 175. However, we remanded the matter to enable the PAIC to be substituted as a party if it wished to pursue the coverage claim. Id. at 181.


After our remand, the Law Division held that West Amwell was an insured pursuant to the terms of Illinois National's Business Automobile Insurance policy. The court held that the policy was "not ambiguous," but even if it were ambiguous, Raritan Valley Disposal was required by the waste collection contract and N.J.A.C. 7:26H-6.17 to obtain primary coverage for the municipality. The court added that West Amwell was specifically insured for the decedent's injuries and death because they resulted from the use of the garbage truck.

The court dismissed the PAIC's claim against Raritan Valley Disposal for breach of contract, finding that, although the contract with West Amwell had required Raritan Valley Disposal to obtain primary insurance coverage, the PAIC was not the intended beneficiary of the contract. The court also rejected Illinois National's claim that the underlying settlement was either unreasonable or not made in good faith, citing a lack of competent evidence to sustain the insurer's position.

Lastly, after reviewing both insurance policies in detail, the court concluded that each insurer had provided primary insurance coverage with an excess other-insurance clause that limited liability where another policy covered the risk for the claim. It further found that each policy "addressed what was to occur" when the excess other-insurance provisions applied, which was to share the economic consequences on a pro-rata basis. Thus, relying on W9/PHC Real Estate LP v. Farm Family Casualty Insurance Company, 407 N.J. Super. 177, 199 (App. Div. 2009), the court held that Illinois National and the PAIC must each contribute a proportionate share of the claimed losses up to their respective policy limits. In its opinion, it explained that any allocation of the settlement and defense costs must be shared pro[-]rata between [Illinois National] and [the] PAIC. As the PAIC policy has a limit of $5,000,000 and the [Illinois National] policy limit is $1,000,000, the allocation of the $1,850,000 settlement would be that PAIC would pay $1,541,050 and [Illinois National] would pay $308,950 ($1,850,000 x .167 = 308,950). It is unknown what the defense costs are, but [Illinois National] has to pay one-sixth (1/6) of same and the PAIC the balance. Although the court's arithmetic was imperfect, it corrected that mistake in its January 6, 2011 final judgment, which provided that Illinois National was liable for $308,333.33 of the $1.85 million settlement cost, and one-sixth of the allocable $13,578.30 defense costs, or $2,263.05.

The court also awarded prejudgment interest to the PAIC in the amount of $79,313.47. It determined that that the PAIC's entitlement thereto was based upon equitable grounds pursuant to Litton Industries, Inc. v. IMO Industries, Inc., 200 N.J. 372, 390 (2009), largely because Illinois National had the use of money to which the PAIC was found to have been earlier entitled. The court applied Rule 4:42-11(b), and held that the date of accrual of interest was April 30, 2006, six months from October 31, 2005, the settlement date, and when Illinois National knew that the PAIC was the real party in interest. The appeal and cross-appeal followed.



"An appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46." Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). In such review, "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382 (2010) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

Similarly, as a general principle, "'[i]nterpretation and construction of a contract is a matter of law for the court.'" Kaur v. Assured Lending Corp., 405 N.J. Super. 468, 474 (App. Div. 2009) (quoting Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 190 (App. Div.), certif. denied, 196 N.J. 85 (2008)). More particularly, our interpretation of an insurance contract is a determination of law. Sealed Air Corp. v. Royal Indemn. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008). We therefore owe no special deference to the motion court's interpretation of the insurance policies in this case or "the legal consequences that flow from the established facts." Zabilowicz v. Kelsey, 200 N.J. 507, 513 (2009). Accordingly, we review the Law Division's analysis of the insurance policies de novo and "look at the contract[s] with fresh eyes." Kieffer v. Best Buy, 205 N.J. 213, 223 (2011); see also Homesite Ins. Co. v. Hindman, 413 N.J. Super. 41, 46 (App. Div. 2010).


We begin with Illinois National's Business Automobile Insurance policy. Illinois National resists any contribution for the settlement because it claims that its policy did not cover the events of May 12, 2001. Specifically, it asserts that (1) West Amwell was not an "insured" under the policy and (2) the decedent's injuries and ...

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