NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 1, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Gloucester County, Docket No. C-57-11.
John T. Coyne argued the cause for appellant (McElroy, Deutsch, Mulvaney & Carpenter, L.L.P., attorneys; Mr. Coyne, on the brief).
Lallie M. Banks, III argued the cause for respondent (Christie, Pabarue, Mortensen and Young, attorneys; Carolyn Bates Kelly, on the brief).
Before Judges Sapp-Peterson and Haas.
Plaintiff, Excelsior Insurance Company ("Excelsior"), appeals from the trial court order confirming an arbitration award issued in favor of defendant, One Beacon Insurance Company ("Beacon"). We affirm.
Both Excelsior and Beacon are members of Arbitration Forum, Inc. ("AFI"), and signatories to its arbitration process. Special arbitration under AFI resolves disputes between multiple insurers to the extent, if any, of apportioning liability between the multiple insurers, each of whom has acknowledged a coverage obligation. Where, however, an insurer has denied coverage, AFI lacks jurisdiction to entertain the matter, and the denial of coverage is an affirmative defense under AFI provisions.
Excelsior and Beacon provided coverage to Hovson's, Inc., a developer who built homes in a development known as Holiday City in Monroe Township. The homes were built between 1996 and 2002. Beacon provided liability coverage to Hovson's from March 1999 through March 2001, while Excelsior provided similar coverage from March 2001 through March 2005. Homeowners sustained property damage resulting from water infiltration and sued Hovson's. Excelsior denied coverage on the basis that New Jersey law applied to any interpretation of the claims and that under New Jersey law, coverage is determined by a "manifestation trigger, " meaning that the water filtration did not manifest during the period of coverage by Excelsior. Beacon, however, agreed to defend Hovson's under a reservation of rights and, once judgment was entered against Hovson's, instituted a special arbitration against Excelsior. After Excelsior failed to answer the arbitration pleading and after the arbitrator denied Excelsior's last-minute adjournment request, the matter proceeded to arbitration where an award was entered in favor of Beacon.
Excelsior filed a verified complaint and order to show cause seeking to vacate the arbitration award. Beacon filed a timely answer. Judge Eugene J. McCaffrey, Jr., denied Excelsior's motion on April 20, 2012. In doing so, the judge noted it was undisputed that Excelsior, inexplicably, never responded to the demand for arbitration with an answer or a contention sheet and that under AFI, the failure to do so operates as a waiver of defenses, including any jurisdictional defense. The judge found that Excelsior had "every opportunity to proceed and participate in the arbitration proceeding, but for reasons not articulated, failed to do so. [Excelsior] did not attempt to assert an affirmative defense of jurisdiction until a day before the arbitration hearing and several days after the materials were due." Based upon Excelsior's conduct, Judge McCaffrey concluded:
[T]he Arbitration Panel in this matter clearly acted within the scope of the powers afforded them in the Agreement between the parties. The Arbitrator found that [Excelsior] did not provide a sufficient cause for adjourning the arbitration hearing . . . . The Court finds that the Arbitrators acted within their scope of authority in denying [Excelsior's] last-minute request for an adjournment. Affirmative defenses not raised in the contention sheet are waived. Adjournment requests may be granted provided the request is made a least three (3) days before the hearing date and the party requesting the adjournment has filed its "contention sheet" in a timely manner.
The judge additionally found that Excelsior's denial of coverage was based upon its conclusion that the damage sustained by the homeowners manifested itself two years before the inception date of its coverage and, as such, under New Jersey law, its duty to provide coverage had not been triggered. The judge concluded that Excelsior's denial of coverage for this reason "does not constitute 'denial of coverage' as defined in the Arbitration Agreement. Therefore, . . . [AFI] had jurisdiction to hear the dispute." Thus, recognizing the narrow grounds upon which an arbitration award may be vacated, the court concluded Excelsior failed to meet any of those grounds.
On July 13, 2012, Beacon filed a motion to confirm the arbitration award. During oral argument, Judge McCaffrey granted the motion, stating that the arguments against confirmation were "essentially the same arguments made when the motion to vacate the arbitration award was filed." Excelsior's counsel agreed that Excelsior's primary argument against confirmation of the arbitration award was AFI's lack of jurisdiction. ...