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First Mercury Insurance Company v. Cholish Salvage, Inc.

Superior Court of New Jersey, Appellate Division

November 12, 2013

TRUE & ASSOCIATES, Third-Party Defendant. PORCHTOWN RECYCLERS, INC., Plaintiff-Respondent,


Argued October 21, 2013

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket Nos. L-3086-11 and L-1370-11.

Kristin V. Gallagher argued the cause for appellant First Mercury Insurance Company (Carroll, McNulty & Kull, LLC, attorneys; Ms. Gallagher and Jorge L. Amieva, of counsel and on the brief).

Robert J. Morrow argued the cause for appellant Star Insurance Company (Maloof, Lebowitz, Connahan & Oleske, PA, attorneys; Mr. Morrow, on the brief).

Lance J. Kalik argued the cause for respondent Harleysville Insurance Company of New Jersey (Riker, Danzig, Scherer, Hyland & Perretti, LLP, attorneys; Mr. Kalik, of counsel and on the brief; Christian A. Cavallo, on the brief).

Kevin F. Colquhoun argued the cause for respondent Cholish Salvage, Inc./Tri State Recycling, Inc. (Colquhoun & Colquhoun, P.A., attorneys; Mr. Colquhoun, on the brief).

Before Judges Parrillo, Kennedy, and Guadagno.


Plaintiff First Mercury Insurance Company appeals from portions of orders entered on April 27, 2012, denying its motion for summary judgment and granting summary judgment to defendant Harleysville Insurance Company. First Mercury also appeals from an order entered on June 26, 2012, awarding counsel fees and costs to defendant Cholish Salvage, Inc., and an order entered on September 28, 2012, denying reconsideration.

Intervening plaintiff Star Insurance Company also appeals from the April 27, 2012 order denying its motion for summary judgment and from the September 28, 2012 order denying reconsideration. We have consolidated these appeals for the purpose of this opinion and affirm all orders.


Cholish is engaged in the business of salvage and recycling, and purchases used cars from junkyards to be resold as scrap metal. Before transporting the cars, Cholish often brings one of its portable car-crushing machines to the junkyards to compress the cars.

The portable car crusher in question is owned by Cholish and was manufactured by Overbuilt, Inc. It is comprised of a flat base with two sidewalls, a back wall, and is equipped with hydraulic crushing plates powered by a diesel engine. The car crusher is not independently mobile. It is fitted with eight wheels and can only be moved by being towed by another vehicle.

The car crusher is registered with the State of New Jersey and bears a license plate number and vehicle identification number. Prior to purchasing this machine, Cholish had received citations for transporting other car crushers on public roads without a license plate. The owner of Cholish, Leonard Cholish sought guidance from the New Jersey Division of Motor Vehicles[1] (DMV), and received a letter dated October 12, 1988, from the DMV stating:

The 1987 Mac Car Crusher does not receive a title or registration as per a phone conversation and inquiry made to Patty in Trenton. The statement of origin acts as a title to this Car Crusher[, ] which is considered as industrial equipment and not a vehicle.

Copies of the letter were placed in all of Cholish's trucks and car crushers. According to Leonard Cholish, the letter was often successful in preventing the police from issuing a citation or when contesting a citation in court. However, because some of Cholish's drivers continued to receive citations, Cholish opted to register the car crushers with the DMV, as it was less costly than to contest the citations.

On June 1, 2008, Cholish transported the car crusher to a junkyard in Bayville, where it was used to compress several cars. A Cholish employee noticed that a hydraulic plate was not functioning properly and arrangements were made to transport the crusher to Cam Co. Hydraulics ("Camco") for inspection. A Camco employee requested that "a couple [of] cars" be left inside the car crusher so that operation of the plates could be observed. After Cholish completed work at the junk yard, Leonard Cholish asked Tony Copeland, a truck driver employed by Porchtown Recyclers, Inc., to transport the car crusher to Camco. Before Copeland left, two small cars were placed inside the machine.

On June 4, 2008, before leaving the junkyard, Copeland failed to lower the hydraulic crushing plate completely. Using a Porchtown truck, Copeland towed the car crusher onto the southbound lane of the Garden State Parkway. When Copeland attempted to pass under the Lacey Road overpass in Lacey Township, the top arm of the car crusher struck the bottom of the overpass, causing the machine to become wedged underneath the overpass. The height of the car crusher with the two cars inside was approximately seventeen feet; the bottom of the overpass was fifteen feet above the roadway.

The overpass was extensively damaged and debris from the collision struck a nearby vehicle. Approximately eighty gallons of hydraulic fluid spilled onto the roadway, requiring environmental cleanup by a hazardous materials unit. The cleanup took several hours and involved eight tow trucks and other heavy equipment.

Copeland was issued two summonses for violating N.J.A.C. 19:9-1.9(b)(2) (operating an oversized vehicle on the Garden State Parkway) and N.J.A.C. 19:9-1.12(d) (discharging debris onto the roadway, which caused damage to property).

On April 19, 2010, the New Jersey Turnpike Authority ("NJTA") and Garden State Parkway filed a complaint against Cholish and other defendants seeking damages for the cost of repairs to the Lacey Road overpass. The NJTA filed an amended complaint that sought $5.6 million in damages. The First Mercury Policy

First Mercury issued a commercial general liability policy to Cholish with limits of $1, 000, 000 for each occurrence and $2, 000, 000 general aggregate. The policy provides coverage as follows:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

The First Mercury policy contains the following relevant exclusion:

This insurance does not apply to:
. . . .
g. Aircraft, Auto or Watercraft
"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."

The First Mercury policy defines "auto" and "mobile equipment" as:

"Auto" means a land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment. But "auto" does not include "mobile equipment."
. . . .
"Mobile equipment" means any of the following types of land vehicles, including any attached machinery or equipment:
a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;
b. Vehicles maintained for use solely on or next to premises you own or rent;
c. Vehicles that travel on crawler treads;
d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted:
(1) Power cranes, shovels, loaders, diggers or drills, or
(2) Road construction or resurfacing equipment such as graders, scrapers or rollers;
e. Vehicles not described in a., b., c. or d. above that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:
(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or
(2) Cherry pickers and similar devices used to raise or lower workers; f.Vehicles not described in a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo.
However, self-propelled vehicles with the following types of permanently attached equipment are not "mobile equipment" but will be considered "autos":
(1) equipment designed primarily for:
(a) Snow removal;
(b)Road maintenance, but not construction or resurfacing, or
(c)Street cleaning;
(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and
(3) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.

Harleysville Auto Policy

Harleysville issued a business automobile policy to Cholish with a one million dollar limit for liability coverage. The policy provides auto liability coverage as follows:

We will 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".

After modification by endorsement, the policy defines auto as:

a. Any land motor vehicle, "trailer" or semitrailer designed for travel on public roads; or
b. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.
However, "auto" does not include "mobile equipment."

"Mobile equipment" is defined the same as in the First Mercury policy except a provision was added by the endorsement in the Harleysville policy:

However, "mobile equipment" does not include land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered "autos".

The Star Policy

Star provided coverage to the Porchtown truck that was pulling the car crusher and the Porchtown driver, Copeland. Porchtown had a combined $3 million in liability insurance available under auto and umbrella policies issued by Star.

The Coverage Actions

On September 22, 2011, First Mercury filed a declaratory judgment complaint against Cholish and Harleysville, seeking a declaration that Harleysville was obligated to defend and indemnify Cholish with respect to the NJTA suit. First Mercury also sought a declaration that Harleysville was obligated to reimburse First Mercury for past defense costs.

On April 13, 2011, Porchtown filed a declaratory judgment action against Harleysville seeking coverage from Harleysville, arguing the crusher was a "covered auto" under the policy and that Copeland was a permissive user of the car crusher.

On November 22, 2011, Star filed a complaint in the Porchtown action, alleging Porchtown was entitled to coverage under both the Harleysville and First Mercury policies. On December 16, 2011, all the relevant suits were consolidated for discovery purposes.

First Mercury, Harleysville, Star, and Cholish each filed motions or cross-motions for summary judgment. On April 27, 2012, the motion court ruled that the car crusher was "mobile equipment" and not a "motor vehicle" under both the Harleysville Auto policy and the First Mercury policy. As a result, the motion court ruled that Cholish was entitled to coverage under the First Mercury policy only, and that Star alone was obligated to provide coverage to Porchtown. Accordingly, the motion court denied First Mercury's motion for summary judgment in the First Mercury coverage action, granted Harleysville's and Cholish's cross-motions for summary judgment, and dismissed First Mercury's claims against them with prejudice. The motion court also granted Harleysville's cross-motion for summary judgment in the Porchtown coverage action, denied Star's cross-motion, and dismissed the claims against Harleysville with prejudice.

The motion court awarded Cholish $27, 740.93 in counsel fees and costs from First Mercury. First Mercury and Star filed motions for reconsideration of the April 27, 2012 orders. On September 28, 2012, the court denied both motions.

On July 23, 2012, the underlying NJTA action settled for $4.325 million. Star agreed to pay $3.4 million and First Mercury agreed to pay $925, 000. This appeal followed.


In reviewing a grant or denial of summary judgment, this court must "employ the same standard that governs trial courts in reviewing summary judgment orders." Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). The motion is granted when there is "no genuine issue as to any material fact[.]" R. 4:46-2(c). The motion court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "The judge's function is not himself [or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Ibid. (citations omitted).

"[T]he language used in a policy of insurance should be given its ordinary and usual meaning." Scarfi v. Aetna Cas. & Sur. Co., 233 N.J.Super. 509, 514 (App. Div. 1989). "[W]hen the language of the policy is clear, the court is bound to enforce its terms as they are written, so as to fulfill the objectively reasonable expectations of the parties to the contract." Ibid.

First Mercury attempts to avoid coverage by arguing the car crusher is a semitrailer and is therefore excluded under its policy. Neither the First Mercury nor the Harleysville policy defines semitrailer. New Jersey's motor vehicle and traffic statutes define semitrailer as "every vehicle with or without motive power, other than a pole trailer, designed for carrying persons or property and for being drawn by a motor vehicle and so constructed that some part of its weight and that of its load rests upon or is carried by another vehicle." N.J.S.A. 39:1-1 (emphasis added).

Although the car crusher has large truck tires and is designed to be drawn by a motor vehicle, it was not designed for carrying persons or property. That is reinforced by the machine's Operating and Safety Manual, which provides: "Never move crusher unless the crushing chamber is completely empty and the crusher lid is in the closed position and "DO NOT move the crusher unless the crushing chamber is completely empty and the lid is in the down position." Although the car crusher happened to be carrying two cars at the time of the accident, it was clearly not designed to carry cargo and First Mercury offered no evidence to the contrary.

In the definition of "auto, " the First Mercury policy expressly provides that the term "does not include mobile equipment." The motion court determined the "car crusher is mobile equipment under the definition as set forth in [the] First Mercury [policy]." That conclusion finds adequate support in the record. The car crusher is designed for use "principally off public roads" and was not intended to transport persons or cargo. Although it is fitted with truck-sized tires and a fifth wheel pin, these features support rather than conflict with the machine's identity as "mobile equipment."

First Mercury and Star argue that the car crusher is an auto, as it is subject to N.J.S.A. 39:6B-1, New Jersey's compulsory motor vehicle insurance law, and to N.J.S.A. 39:6-25, New Jersey's financial responsibility law. N.J.S.A. 39:6B-1 requires that "[e]very owner or registered owner of a motor vehicle registered or principally garaged in this State shall maintain motor vehicle liability insurance coverage[.]" N.J.S.A. 39:6-25 requires every owner of a motor vehicle to demonstrate their ability to satisfy any judgment that may be obtained against them for damages arising out of an accident involving the motor vehicle by obtaining motor vehicle insurance for the motor vehicle. Both laws apply only to motor vehicles.

N.J.S.A. 39:1-1 defines "motor vehicle" to include "all vehicles propelled otherwise than by muscular power, excepting such vehicles as run only upon rails or tracks and motorized bicycles." "Vehicle" is defined as "every device in, upon or by which a person or property is or may be transported upon a highway, excepting devices moved by human power or used exclusively upon stationary rails or tracks or motorized bicycles." N.J.S.A. 39:1-1. Another relevant definition is "motor-drawn vehicle, " which includes "trailers, semitrailers, or any other type of vehicle drawn by a motor-driven vehicle." N.J.S.A. 39:1-1.

Given these three definitions, the Legislature clearly intended the definition of a "motor vehicle" to encompass vehicles that are self-propelled by motors. See Cast Art Indus., LLC v. KPMG LLP, 209 N.J. 208, 224 (2012) ("[C]ourts must presume that every word in a statute has meaning and is not mere surplusage[.]"). By including a separate definition for motor vehicle, the Legislature plainly understood the difference between vehicles with a motor and vehicles without a motor. The car crusher does not have a motor and must be towed by another vehicle. Moreover, by including the definition for "motor-drawn vehicle, " the Legislature distinguished between vehicles that are self-propelled by motor and vehicles that are not independently mobile and must be drawn by a separate motor vehicle. By making the distinction between these three types of vehicles, the Legislature clearly intended to exclude vehicles without their own motor from the definition of "motor vehicle." By looking at the plain language of N.J.S.A. 39:1-1 and giving effect to every word in the statute, the car crusher is not a "motor vehicle" and thus not subject to N.J.S.A. 39:6B-1 or N.J.S.A. 39:6-25.

Next, First Mercury argues the car crusher is subject to N.J.S.A. 39:4-26. We disagree. That statute is not a compulsory motor vehicle insurance law or financial responsibility law. Rather it lists the requirements for a permit to use a trailer or semitrailer to move apparatus or machinery of unusual size or weight along a public road or highway. To move that machinery, the statute requires registration of the trailer or semitrailer being used to transport the equipment, not the equipment itself. See State v. Johnson Lumber Co., 68 N.J.Super. 276, 279 (App. Div. 1961) ("[W]hen road building equipment such as a 'Back Hoe' is moved along or across a public road or highway on a trailer, such trailer must be registered, and permits obtained in accordance with N.J.S.A. 39:4-26."). Moreover, the statute states that the issuing official must be satisfied with the financial responsibility of the person seeking the permit for the trailer or semitrailer, not the financial responsibility of the owner of the equipment transported by the trailer.

The statute deals with the registration of trailers or semitrailers used to transport oversized equipment, not compulsory insurance requirements, or the financial responsibility of mobile equipment like the car crusher.

First Mercury argues N.J.A.C. 19:9-1.12 is a compulsory motor vehicle or financial responsibility law applicable to the car crusher. Again, we disagree. N.J.A.C. 19:9-1.12 imposes fines and other penalties for the discharge of material from a vehicle that causes damage to either the Parkway or New Jersey Turnpike. Copeland received a citation for violating that regulation because of the accident. That statute regulates conduct by operators, owners, or lessees of any vehicle from which material is discharged. The statute imposes no compulsory insurance or financial responsibility requirements on any vehicle.

Star argues that "Motor Vehicle Code 56" is a compulsory motor vehicle insurance or financial responsibility law. Motor Vehicle Code 56, titled "Contractor equipment in-transit, " involves the registration and use of "in-transit" plates when towing or carrying contractor equipment on public roads. State of New Jersey, Motor Vehicle Commission, Commercial Vehicle and Registration Information, (last visited October 31, 2013). We are not persuaded by Star's argument.

First, Vehicle Code 56 is not a law and is not codified as a statute or regulation. Rather it is set forth on the Motor Vehicle Commission's website. See ibid. Second, the provision is not mandatory. The code states that "[a]ny person, partnership or corporation may obtain general registration and plates with the word 'temporary' or 'in-transit' with regard to certain listed machinery." Ibid. (emphasis added). A person or entity transporting construction equipment on public roads may obtain registration and specific plates, but is not required to do so. Ibid. Lastly, this code only applies to road-building machinery; backhoes; front end loaders; cranes; arrow boards; and other self-propelled and towed pieces of equipment used in moving to and from the locations of any type of construction. Ibid. The car crusher is not a piece of construction equipment or similar to any of the listed machinery. It is designed for crushing cars, not any construction activities. Motor Vehicle Code 56 is not a compulsory insurance or financial responsibility law for the purposes of the Harleysville policy. For the reasons previously stated, First Mercury and Star failed to demonstrate that the car crusher is subject to compulsory motor vehicle insurance laws or financial responsibility laws. Thus, the car crusher is "mobile equipment" and not an "auto, " precluding coverage under the Harleysville policy.

First Mercury argues that even if the car crusher is determined to be "mobile equipment" under the Harleysville policy, the machine would still qualify as an "auto" under section I(C)(2) of the policy, which states that a piece of "mobile equipment" will become a "covered auto" "while being carried or towed by a covered 'auto.'" First Mercury contends that the Porchtown Truck that towed the car crusher is a covered auto.

First Mercury failed to raise this issue before the motion court, either in its motion for summary judgment or its motion for reconsideration. Accordingly, we decline to address the argument. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) ("[O]ur appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available unless the questions so raised on appeal go to the jurisdiction of the trial court or concern matters of great public interest.") (internal quotation marks omitted).

Star also argues that Copeland is an "insured" under the Harleysville policy and thus Harleysville must defend and indemnify Porchtown. The Harleysville policy defines the following as insureds:

a. You for any covered "auto".
b. Anyone else while using with your permission a covered "auto" you own . . . .
. . . .
c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.

Star argues that Copeland is an "insured" because he was using the car crusher, which Star argues is a "covered auto." Star then argues that Porchtown is an insured because it is vicariously liable for Copeland's actions. For the reasons previously stated, the car crusher is not a "covered auto" under the Harleysville policy, but rather "mobile equipment." Thus, Copeland is not an "insured" and neither is Porchtown.

First Mercury contests the award of counsel fees to Cholish. After First Mercury filed its motion for summary judgment, Cholish filed a cross-motion for summary judgment that expressly included an application for attorney's fees and costs against First Mercury. An affidavit of services was not included.

On April 27, 2012, the motion court granted Cholish's motion, including the award of counsel fees and costs. In its order, the court directed submission of Cholish's affidavit of services within thirty days. Cholish timely submitted the affidavit of services. First Mercury submitted three letters objecting to the affidavit on procedural grounds. After considering these submissions, the court awarded Cholish attorney fees in the amount of $27, 740.93.

First Mercury argues the award was erroneous because Cholish violated Rule 1:6-2 and Rule 4:42-9(b) by failing to include the affidavit of services with the motion for counsel fees. First Mercury also argues that it was required to include Cholish in the suit and the court erred in failing to make specific findings in the award.

"We invest our trial courts with wide latitude in resolving attorney-fee applications, and we expect that appellate courts will not disturb the decision to deny a plenary hearing unless there is a clear abuse of discretion." Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 25 (2004). "An attorney's application should be sufficiently detailed to allow a trial court to determine the nature of the work performed and by whom, as well as the reasonableness of the hourly rate and the hours expended." Ibid.

First Mercury makes a procedural argument that the affidavit must be submitted with the motion for counsel fees. See R. 1:6-2 and R. 4:42-9(b). First Mercury incorrectly cites Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J.Super. 494 (App. Div. 2003), for support. In Franklin Med., we stated that the "motion judge misapplied her discretion in denying Newark's request to supplement its application for fees with an affidavit of services." Id. at 516. We added that only the fee application must be presented before the entry of final judgment. Id. at 517.

Cholish's cross-motion included an application for fees. We find no error in the decision of the motion judge to allow Cholish to supplement its application with an affidavit for services and no abuse of its discretion in determining the affidavit was fair and reasonable. The affidavit sufficiently detailed the work performed and by whom. The request for counsel fees was reasonable, as Cholish had to protect its own interest to retain coverage. Cholish had to hire an attorney and enter the lawsuit to ensure it was provided coverage by one of the parties.

Finally, First Mercury argues it was not given an opportunity to contest the application for fees. We disagree. Cholish expressly requested fees in its cross-motion for summary judgment. First Mercury filed a reply brief but did not mention any opposition to attorney fees. First Mercury never argued against attorney fees at the hearing. First Mercury submitted letters after the April 27, 2012 order was entered and the affidavit was sent, but these letters solely relied on the flawed procedural argument previously discussed. First Mercury made no substantive arguments challenging the fairness or reasonableness of any element of the affidavit.

The trial court did not err in its award of counsel fees. There was no procedural error because the application for fees was submitted prior to the final judgment and the affidavit of services was timely submitted thereafter. The trial court did not abuse its discretion in accepting the affidavit, as it was detailed and reasonable.


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