August 19, 2013
DEANNA COTTLE and MICHAEL COTTLE, Plaintiffs,
WALGREENS, PIECO SERVICES, Defendants. And WALGREEN EASTERN CO., INC. Respondent-Third-Party Plaintiff,
FARM FAMILY CASUALTY INSURANCE COMPANY, Appellant/Third-Party Defendant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 8, 2013
On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3180-08.
Edward R. Murphy argued the cause for appellant Farm Family Casualty Insurance Company (Law Offices of Michael J. Dunn, LLC, attorneys; Mr. Murphy, on the brief).
James P. Lisovicz argued the cause for respondent Walgreen Eastern Co., Inc. (Coughlin Duffy LLP, attorneys; Mr. Lisovicz, of counsel and on the brief; Timothy P. Smith and Adam M. Maurer, on the brief).
Before Judges Messano and Kennedy.
Farm Family Casualty Insurance Company (Farm Family) appeals from Law Division orders requiring it to defend and indemnify Walgreen Eastern Co., Inc. (Walgreen) in a personal injury action brought by plaintiffs, and requiring it to pay counsel fees and costs on Walgreen's declaratory judgment action for coverage. Farm Family insured defendant Pieco Services, Inc. (Pieco), and Walgreen had an oral agreement with Pieco whereby it would provide snow removal and salting services at Walgreen's property in Burlington. Deanna Cottle (plaintiff)slipped and fell on "black ice" in Walgreen's parking lot, and filed a negligence complaint against Walgreen and Pieco. Walgreen asserted a third-party claim for declaratory judgment against Farm Family for defense and indemnity as an additional insured under the policy Farm Family issued to Pieco.
On appeal, Farm Family argues it was not obligated to indemnify, and by extension defend, because Walgreen failed to demonstrate that the black ice "arose out of" Pieco's work. We disagree and affirm.
Our review of a motion court's order granting or denying summary judgment is de novo, and we apply the same standard as the motion court in determining whether there are any genuinely disputed issues of material fact sufficient to warrant resolution of the disputed issues by the trier of fact. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Our analysis requires that we first determine whether the moving party has demonstrated that there are no genuine disputes as to material facts, and then we decide "whether the motion judge's application of the law was correct." 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 so doing, we view the evidence "in the light most favorable to the part[y] opposing summary judgment." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We accord no special deference to the motion judge's conclusions on issues of law. Zabilowicz v. Kelsey, 200 N.J. 507, 512 (2009).
Following are the salient facts viewed in a light most favorable to Farm Family. Plaintiff filed a complaint against Walgreen and Pieco for damages caused by her fall in an allegedly icy parking lot on February 21, 2007, at the Walgreen premises in Burlington. Plaintiff asserted a cause of action against Walgreen, and against Pieco, alleging Pieco "was legally responsible for the maintenance and conditions of the parking lot, " and "as a direct and proximate result of [Pieco's] negligence and carelessness, " she suffered injury and damages.
Several days before plaintiff's fall, Pieco performed snow plowing and salting services at the Walgreen's lot after a winter storm. The day after plaintiff's fall, Pieco sent an invoice to Walgreen which read:
On February 13, 2007 [at] 7:30 AM, we had a snow event start. The event originally forecasted as a dusting, leaving most areas with 1.5" by 4:00 PM. February 14, 2007 brought an all day ice/snow mix that did not end until early hours on the 15th. Total accumulations for this event ranged from 2.25" to 4.5". Combine all this with temperatures not going above the teens made for a difficult event to manage. The Governor and D.O.T. Chairman both noted on Thursday evening the difficulty in trying to manage the roads. They also noted that the rock salt was melting, but due to extreme temperatures, everything would re-freeze and then the process would start all over again.
Pieco performed services at Walgreen's property at various times from February 13 to 16, 2007.
Walgreen filed a third-party complaint against Pieco's insurance carrier, Farm Family, alleging Walgreen was an additional insured under the policy it issued to Pieco, and was entitled to a defense and indemnity on plaintiff's complaint, reimbursement of defense costs and fees, and reimbursement of attorneys' fees and costs it incurred in asserting the third-party claim. Walgreen's claim was based on an endorsement to a New Jersey Contractors Advantage Special policy Farm Family issued to Pieco, which stated:
This endorsement modifies insurance provided under the following: . . .
BUSINESSOWNERS LIABILITY COVERAGE FORM SCHEDULE
Name of Person or Organization: Walgreen Co.
. . . .
WHO IS AN INSURED (Who Is An Insured for General Liability and Medical Expense) is amended to include as an insured the person or organization named above, but only with respect to liability arising out of "your work" for that insured by or for you.
The policy defines "your work" as:
a. Work or operations performed by you or on your behalf; and
b. materials, parts or equipment furnished in connection with such work or operations.
"Your work" includes warranties or representations made at any time with respect to the fitness, quality, durability or performance of any of the items included in a. or b. above.
Robert J. Scannapieco, president of Pieco, conceded that Pieco had an oral agreement with Walgreen to perform snow and ice removal services at the premises described in plaintiff's complaint. Specifically, Pieco "would come out on two inches or more of snow and service the lot. If there was an ice storm before that . . ., we would come out and service them on that. . . . Or if the stores called us on an as needed basis we would service them." Pieco denied that Walgreen called it to undertake any services after February 16, 2007.
Michael Marchlowitz, Walgreen's store manager, testified at his deposition that he "call[ed] Pieco when [he] got to work on February 21, 2007 to ask [it] to come spread salt" after noticing black ice in the parking lot. He testified that he left a message on Pieco's answering machine at approximately 7:00 a.m., asking Pieco to respond to the Walgreen lot "if there was a truck in the area . . . ." He stated that Pieco never responded.
Plaintiff's expert report opined that extreme warm and cold temperatures following the February 13-15 snow fall caused a melt and refreeze cycle that created the black ice. He stated that plaintiff slipped on an "icy condition that had not been treated with salt, sand, ice melt or other substance" and that both property owners and their "contractors" are required to use reasonable care to prevent "dangerous conditions such as those caused by melting snow and re-freezing which generally occurs during the overnight hours." The expert concluded "the subject hazard was caused by inadequate snow/ice management."
Walgreen moved for summary judgment on the third-party complaint and Farm Family conceded that Pieco had "agreed to perform snowplowing and salting services" at the Walgreen store; that a "snow and ice storm" obligated Pieco to perform "snowplowing and salting services" for Walgreen between February 13 and February 16, 2007; and that Pieco's invoice of February 22, 2007, acknowledged that "due to extreme temperatures, everything would re-freeze and then the process would start all over again . . . ." In its opposition, Farm Family nonetheless argued that issues of material fact remained and that Walgreen was not entitled to coverage because Pieco's obligations under the verbal contract were not "related" to plaintiff's claims.
The motion judge granted Walgreen's motion and declared that Farm Family must "defend and indemnify Walgreen as an additional insured under the policy issued . . . to Pieco." In a written opinion, the motion judge held Farm Family's duty to indemnify stemmed from the "substantial nexus" which existed between Pieco's work on February 13 to 16, 2007, and plaintiff's accident. The judge explained that Pieco explicitly recognized a "risk of refreezing" at Walgreen's premises and that plaintiff's claims fell precisely within the risk for which the policy provided insurance coverage. The judge further ordered Farm Family "to reimburse Walgreen for all reasonable attorneys' fees and defense costs" it incurred from September 1, 2009, to the date of summary judgment in defending against plaintiff's claims, and in bringing the declaratory judgment action.
Farm Family moved for reconsideration of the October 29, 2010 order for summary judgment. The motion judge granted, in part, Farm Family's motion as to indemnification, noting, "the [c]ourt cannot determine whether there is a substantial nexus between Pieco's work and [p]laintiff's slip and fall. Therefore, it [wa]s premature to determine whether there [wa]s a duty to indemnify . . . ." The judge denied Farm Family's motion as to the duty to defend, finding it was "exactly within the risk that Walgreen was attempting to insure against, " "regardless of the merits of [plaintiff's] claim and regardless of the fact that extrinsic facts obtained through discovery may later reveal that the slip and fall was the result of something other than improper snow removal." On January 24, 2011, the motion judge entered an order requiring Farm Family to reimburse Walgreen $43, 842.58 in attorneys' fees and costs for Walgreen's defense in plaintiff's action, and $7624 in attorneys' fees and costs expended in prosecuting the declaratory action against Farm Family.
Walgreen moved for reconsideration of the January 14 order, arguing that because the discovery end date had passed without additional evidence supporting an alternative explanation for the icy condition, the court should reinstate its original decision requiring Farm Family to indemnify Walgreen. The motion judge agreed and vacated the January 14 order. The action was later dismissed after Farm Family settled with plaintiff and preserved its rights against Walgreen.
Thereafter, the motion court ordered Farm Family to reimburse Walgreen $39, 931.13 for its fees in prosecuting the declaratory judgment action. This appeal followed.
Farm Family argues that it is not obligated to defend and indemnify Walgreen merely because it insured Pieco when plaintiff fell on ice at Walgreen's parking lot. Farm Family contends that questions of fact existed on whether plaintiff's injury "arose out of" Pieco's work.
Addressing first the duty to defend, a party does not have to await trial to ascertain if there is a duty to defend. "Whether an insurer has a duty to defend is determined by comparing the allegations in the complaint with the language of the policy." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992). "When the two correspond, the duty to defend arises, irrespective of the claim's actual merit." Ibid. (citing Danek v. Hommer, 28 N.J.Super. 68, 76-77 (App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954)). See also Danek, supra, 28 N.J.Super. at 77 (holding that the duty to defend arises when a complaint states a claim for a risk insured against, even if the claim is fraudulent or cannot be maintained); Abouzaid v. Mansard Gardens Assocs., LLC, 207 N.J. 67, 79-80 (2011).
We reject Farm Family's argument that there was no duty to defend. Comparing the complaint and the policy, it is clear that plaintiff's allegation against Walgreen was that Walgreen had not fulfilled its duty to clear the parking lot of an ice hazard. This is precisely what Walgreen had hired Pieco to undertake on its behalf, and precisely the type of claim covered on Farm Family's insurance policy. We now address the policy itself.
However, before turning to the policy language at issue, we state some basic principles that guide our analysis. As a general rule, "'[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 Indem. 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, supra, 200 N.J. at 513. 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).
The phrase "arising out of" is broader than proximate cause, and has been defined broadly to mean conduct "originating from, " "growing out of" or having a "substantial nexus" with the activity for which coverage is provided. Westchester Fire Ins. Co. v. Continental Ins. Cos., 126 N.J.Super. 29, 38 (App. Div. 1973), aff'd, 65 N.J. 152 (1974); see also Franklin Mutual Ins. Co. v. Security Indemnity Ins. Co., 275 N.J.Super. 335, 340-41 (App. Div.), certif. denied, 139 N.J. 185 (1994); Harrah's Atlantic City, Inc. d/b/a Harrah's Marina Hotel & Casino v. Herleysville Ins. Co., 288 N.J.Super. 152, 157-59 (App. Div. 1995); Minkov v. Reliance Ins. Co., 54 N.J.Super. 509, 516 (App. Div. 1959). New Jersey courts have given a broad and liberal interpretation to common insurance policy language pertaining to coverage for additional insured parties for injuries "arising out of" work performed by the main policyholder. W9/PHC Real Estate LP v. Farm Family Cas. Ins. Co., 407 N.J.Super. 177, 191 (App. Div. 2009); Fed. Home Loan Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 444 (3d. Cir. 2003).
In Cnty. of Hudson v. Selective Ins. Co., 332 N.J.Super. 107 (App. Div. 2000), for example, we analyzed language equivalent to that contained in the Farm Family policy, and held that the additional insured was covered under the circumstances. In that case, a general contractor held a commercial general liability insurance policy on which Hudson County, which had hired the general contractor, was an additional insured. Id. at 110-11. The language in an endorsement to that policy stated: "WHO IS AN INSURED (SECTION II) is amended to include as an insured the person or organization shown in the Schedule [Hudson County, its agents, representatives & employees] but only with respect to liability arising out of "your work" for that insured by or for you." Id. at 112.
We reversed the Law Division's grant of summary judgment for the insurance company and remanded with directions to enter summary judgment for Hudson County. See id. at 117. We explained that though there were multiple reasonable interpretations of the policy language, New Jersey courts apply principles of liberal construction in examining insurance policy language:
Although insurance policies are contractual in nature, they are not ordinary agreements; they are contracts of adhesion and, as such, are subject to special rules of interpretation. Consequently, we are
directed to take a broad and liberal view so that the policy is construed in favor of the insured.
. . . [P]urchasers of insurance are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. And their policies should be construed liberally in their favor to the end that coverage is afforded to the full extent that any fair interpretation will allow.
[Id. at 112-13 (citations and internal quotation marks omitted).]
We have held, by way of further example, that an injury need not be the direct and proximate result of the "use" of a vehicle to satisfy the "arising out of" element. Conduit & Found. Corp. v. Hartford Cas. Ins. Co., 329 N.J.Super. 91, 101 (App. Div.), certif. denied, 165 N.J. 135 (2000). Rather, "to determine whether an injury arises out of the . . . use of a motor vehicle thereby triggering automobile insurance coverage, there must be a substantial nexus between the injury suffered and the asserted negligent . . . use of the motor vehicle." Penn Nat'l Ins. Co. v. Costa, 198 N.J. 229, 240 (2009). In Westchester Fire Ins. Co., supra, 126 N.J.Super. at 38, the substantial nexus test was described as follows:
The inquiry should be whether the negligent act which caused the injury, although not foreseen or expected, was in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the automobile, and thus a risk against which they might reasonably expect those insured under the policy would be protected.
Here, there was clearly a substantial nexus between the claim and Pieco's services. Plaintiff's expert held Walgreens and Pieco to the same standard utilizing the same theory of liability: a refreezing of snow melt. This was a condition that Pieco was hired to address and its invoice explicitly reflected its recognition of the substantial probability of a refreeze.
Further, given that discovery had been completed, summary judgment was appropriately granted. It is undisputed that on February 13-15, 2007, there was a storm that caused Pieco to perform snow plowing and salting services for Walgreen. Plaintiff's expert report stated that extreme warm and cold temperatures following the February 13-15 snow fall caused repeated a melt and refreeze cycle that created black ice in the lot. The record contains no other evidence relevant to the source of the black ice. Without other evidence of the source of the ice, there was no material fact in dispute.
Farm Family also argues that the judge failed to adhere to relevant precedent in its examination of Walgreen's fees and costs. We disagree and affirm.
"[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion." Rendine v. Pantzer, 141 N.J. 292, 317 (1995). An abuse of discretion is shown when "a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (internal quotation marks omitted).
"The starting point in awarding counsel fees is a determination of the "lodestar, " or "the 'number of hours reasonably expended multiplied by a reasonable hourly rate.'" Monogram Credit Card Bank of Georgia v. Tennesen, 390 N.J.Super. 123, 134 (App. Div. 2007) (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004) ((quoting Rendine, supra, 141 N.J. at 335))). "The factors that inform the court's determination of what is a reasonable fee are those set forth in RPC 1.5(a). The court must determine both the reasonableness of the rates and the reasonableness of the time actually expended in the litigation." Ibid. (citations omitted). In some instances, "special circumstances" may cause a court to order an insurance carrier to assume the cost of defending both covered and non-covered claims. See, e.g., Aquino v. State Farm Ins. Co., 349 N.J.Super. 402, 413 (App. Div. 2002).
Here, there was a rational explanation and no departure from established law. In deciding the first motion awarding counsel fees, the judge stated:
I've considered RCP 1.5. I've considered Rend[i]ne, and I've considered what's reasonable counsel fees for the area.
Now, I find these rates that are charged to be reasonable . . . they are not out of line for Burlington County.
. . . [T]he time and labor required --there was a lot of work that was put in on this. . . . All of this is explained in the entries. . . .
Novelty, there was some novelty involved. . . . [I]t wasn't overworked, say, by the partner. The associates were, clearly, doing the work and the paralegal.
. . . .
It does not appear that there was an exclusion of other employment.
. . . .
Time limits, there were none. The nature of the relationship, apparently this was a close long-standing relationship between this firm and Walgreens.
Experience of the attorneys, they're . . . certainly qualified for the jobs, the tasks, that they've been given and . . . . their qualifications were set forth.
And this was apparently a fixed fee as opposed to a contingent fee.
The judge noted that she had gone through the bill "line by line" and found some "duplication" and "areas where it could be reduced" on the declaratory judgment action. She reduced fifty percent of the bill on that matter "taking into consideration the fact that now Walgreens was not successful entirely . . . ." Thus, the trial court's analysis of costs and fees were grounded in established guidelines and rationally explained.
In deciding to award counsel fees on the second motion, which sought fees for newly incurred costs, the judge noted that she had "previously found costs and fees, the hourly rates here, to be reasonable" and found no reason to "differ with [its] earlier decision." The judge recognized an "obligation to go through the bill, and to determine what a reasonable charge is." She then eliminated or redacted entries, an "unnecessary appearance", and a "trial time entry, " as well as reduced "excessive" billings. The judge considered RPC 1.5 and was "satisfied with the reasonableness of the fees." However, the judge had not analyzed "new papers" received that day, but promised to "go through and do an analysis, and it will be just a . . . separate summary that will just be part of the same decision." The judge attached a detailed consideration of attorneys' fees to the order. There was a rational explanation for all her conclusions. Accordingly we find no abuse of discretion in the award of attorneys' fees.