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Continental Casualty Co. v. Northland Ins. Co.

Superior Court of New Jersey, Appellate Division

November 14, 2013



Argued July 9, 2013.

On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1374-11.

Harry R. Howard argued the cause for appellant Continental Casualty Company.

Frank E. Borowsky, Jr. argued the cause for respondent Northland Insurance Company (Borowsky & Borowsky, attorneys; Mr. Borowsky and Erin M. McDevitt-Franz, on the brief).

Before Judges Ostrer and Hayden.


In this declaratory judgment action, plaintiff Continental Casualty Company appeals the April 13, 2012 Law Division order granting summary judgment to defendant Northland Insurance Company. For the reasons that follow, we affirm.

Viewing the record in the light most favorable to Continental, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), we discern the following facts. Defendant Juan Carrea was the principal officer of defendant Valley Auto Wreckers, L.L.C., which was a salvage yard and also a used auto and boat dealership, engaged in the business of buying, repairing, and selling cars and boats. The repair work was done on premises in Wharton, unless a boat was too large, at which time Carrea rented a boat slip and stored the boat there while repairing it.

Sometime in April 2009, Carrea contacted plaintiff Stephen Gullo about participating in a charitable donation program whereby Gullo would donate his boat to a charity that would provide him with documentation to enable him to receive a charitable tax deduction. Generally, Carrea paid the charity for the donated boats he obtained, then repaired them, and sold them for profit. Later in May 2009, Carrea sent Gullo a packet of documents, including a bill of sale, to review with his accountant and to sign in order to donate his boat.

In July 2009, in contemplation of the donation transaction happening, Carrea moved Gullo's boat from a New York City marina to a public marina in Brick Township. Gullo contended that he had not given Carrea permission to move his boat from New York to New Jersey, and had declined to sign the donation papers. Carrea contended that he was waiting for Gullo to sign the papers when a fire occurred.

On July 8, 2009, a fire occurred at the public marina where Gullo's boat was docked. Defendant Albert Mogavero accidently caused the fire while he was in a separate boat, which was owned by Carrea. The fire spread to two nearby boats, owned respectively by Gullo and plaintiff Stephen Edgin. Continental insured both Gullo's and Edgin's boats. There were no employees of Valley present at the marina and no work was being performed by Valley on any of the boats involved in the fire.

Mogavero was not an employee of Valley, but a contractor who had his own marine repair business in Brick and occasionally did work for Carrea. Because Mogavero had a fifteen-year friendship with Carrea, on the night of the fire he took Carrea's boat without asking his explicit permission. He was not working for Valley at the time and the purpose of his trip was purely recreational.

Continental paid Edgin and Gullo for the property damage to their boats from the fire under the terms of their individual policies. Continental then filed a subrogation complaint against Valley, Carrea, and Mogavero, alleging that defendants were negligent in the "operation, control and maintenance" of the boat that caused the fire. Northland undertook to defend against the subrogation action, while reserving its right to deny coverage.

Continental then filed this action, seeking a declaratory judgment that Northland was responsible for liability coverage for the property damage to Gullo and Edgin. In its answer, Northland denied coverage, claiming that the defendants were not covered by the policy, and the liability alleged was not covered or was excluded under the terms of the policy. This matter was consolidated for purposes of discovery with the underlying negligence action.

Northland had issued Valley a "commercial auto/garage coverage" insurance policy, which identified Valley's business as a "used car dealership." The policy covered "all sums an 'insured' legally must pay as damages because of . . . 'property damage' to which this insurance applies, caused by an 'accident' and resulting from 'garage operations' involving the ownership, maintenance or use of covered 'autos.'" The insured included Valley, its members, employees, directors, and shareholders, "but only while acting within the scope of their duties."

The policy contained several exclusions. The insurance did not apply to damage to property "loaned" to the insured, held for sale or being transported by the insured, or in the "insured's care, custody or control." The coverage also excluded property damage to "[a]ny watercraft or aircraft except watercraft while ashore on premises where [Valley] conduct[s] 'garage operations.'" The policy defined "garage operations" as "the ownership, maintenance or use of locations for garage business and that portion of the roads or other accesses that adjoin these locations."

Having completed discovery, both Continental and Northland filed motions for summary judgment.[1] After hearing oral argument, the motion judge found that there were no genuine issues of fact that the boat involved was in a public marina afloat in the water. As such, he concluded the boat was a watercraft explicitly excluded from coverage because it was not ashore on the premises where the insured conducted garage operations. Accordingly, the judge found no coverage under Northland's policy for damage to Gullo's boat, granted Northland's motion for summary judgment, and dismissed the complaint. This appeal followed.[2]

We begin with a review of the well-established legal principles that guide our analysis. "The interpretation of an insurance contract is a question of law for the court to determine, and can be resolved on summary judgment." Adron, Inc. v. Home Ins. Co., 292 N.J.Super. 463, 473 (App. Div. 1996) (citing Weedo v. Stone-E-Brick, Inc., 155 N.J.Super. 474, 479 (App. Div. 1977), rev'd on other grounds, 81 N.J. 233 (1979)). "An insurance policy is a contract that will be enforced as written when its terms are clear in order that the expectations of the parties will be fulfilled." Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010).

An insurance policy should be interpreted in accordance with the "'plain and ordinary meaning'" of its terms. Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J. 512, 525 (2012) (quoting Flomerfelt, supra, 202 N.J. at 441). Any ambiguities must be resolved in favor of the insured. Ibid. However, simply because different wording could possibly make a provision more clear, does not render the language chosen ambiguous. Villa v. Short, 195 N.J. 15, 26 (2008) (citing Argent v. Brady, 386 N.J.Super. 343, 352 (App. Div. 2006)). Indeed, "the test for determining if an ambiguity exists is whether 'the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage.'" Nunn v. Franklin Mut. Ins. Co., 274 N.J.Super. 543, 548 (App. Div. 1994) (quoting Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979)).

"[W]hen considering ambiguities and construing a policy, courts cannot 'write for the insured a better policy of insurance than the one purchased.'" Flomerfelt, supra, 202 N.J. at 441 (quoting Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529 (1989)). Moreover, the courts must not read one provision such that another provision is rendered meaningless. Homesite Ins. Co. v. Hindman, 413 N.J.Super. 41, 47 (App. Div. 2010) (Homesite).

In general, "the insured has the burden 'to bring the claim within the basic terms of the policy.'" S.T. Hudson Eng'rs, Inc. v. Pa. Nat'l Mut. Cas. Co., 388 N.J.Super. 592, 603 (App. Div. 2006) (quoting Reliance Ins. Co. v. Armstrong World Indus., Inc., 292 N.J.Super. 365, 377 (App. Div. 1996)), certif. denied, 189 N.J. 647 (2007). If the policy language "supports two reasonable meanings, one favorable to the insurer and one favorable to the insured, the interpretation supporting coverage will be applied." Ibid.

If the clause being evaluated is an exclusionary clause, such clauses must be construed narrowly and "'the burden is on the insurer to bring the case within the exclusion.'" Gibson v. Callaghan, 158 N.J. 662, 671 (1999) (quoting Am. Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 41 (1998)). "However, exclusionary provisions are presumptively valid and will be given effect if specific, plain, clear, prominent, and not contrary to public policy." Homesite, supra, 413 N.J.Super. at 46 (citing Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997)).

In an appeal from the grant of summary judgment, we utilize "'the same standard [of review] that governs the trial court.'" Mem'l Props., LLC, supra, 210 N.J. at 524 (quoting Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). Thus the evidence must be viewed "in the light most favorable to the non-moving party" and must be analyzed to determine "whether the moving party was entitled to judgment as a matter of law." Ibid. (citing Brill, supra, 142 N.J. at 523).

On appeal, Continental argues that the judge erred in permitting Northland to deny coverage based upon the watercraft exclusion because Northland did not specify this exclusion in its answers to interrogatories and thereby waived or is estopped from denying coverage for this reason.[3] Further, Continental contends that the judge incorrectly found that the watercraft exclusion barred coverage in this case. Finally, although this issue was not reached by the judge, Continental claims that Northland failed to prove that the Gullo boat was under Valley's "care, custody or control" at the time of the loss. We are not persuaded that the judge erred in granting summary judgment.

We are satisfied that the policy exclusion for watercraft is clear and unambiguous here. There is nothing in the policy that obfuscates the plain language. A reasonable insured would understand that the policy excludes damages to all watercraft with the limited exception of watercraft ashore on the premises. We are guided by the plain language of the policy and will not torture the language to create ambiguities. Stiefel v. Bayly, Martin and Fay of Conn., Inc, 242 N.J.Super. 643, 651 (App. Div. 1990).

The undisputed facts show that Gullo's boat was in the water in a public marina over seventy miles from the premises, not ashore on the premises where Valley conducted its garage operations. Continental's contention that while the boat is in the water but secured at the dock, it is "ashore on the premises" is unavailing. We will not consider as precedent the unreported out-of-state case which Continental cited without providing a copy. R. 2:6-1(a)(1)(H); R. 1:36-3.

In interpreting a policy, words are accorded their plain and common meaning unless otherwise defined in the policy. President v. Jenkins, 180 N.J. 550, 566 (2004). A common definition of "ashore" is "on land", American Heritage Dictionary (5th ed. 2011), "toward or onto land or on land after coming from an area of water, " Cambridge Dictionary of the English Language (2000), or "to or on the land." Webster's New World College Dictionary 83 (4th ed. 2004). These definitions show that the word ashore, in its ordinary meaning, conveys a direction and a location. It is clear that the word used in the context of the policy at issue here refers to a location – "ashore on the premises" – and not next to the land floating in the water. Cf. Henry v. S. La. Sugars Coop., Inc., 957 So.2d 1275, 1279 (La. 2007) (noting that where a barge is moored to a dock but completely afloat, it is not ashore for purposes of a watercraft exclusion policy).

We reject Continental's claim that Northland is estopped from raising the watercraft exclusion because it did not state in its interrogatory answers that coverage was denied due to the watercraft exclusion. Continental asked for all facts Northland relied on in denying coverage. Northland asserted its reasons as the damage involved two boats, Mogavero was a trespasser and not an employee, and the boat was under the care, custody, and control of Valley. Northland had also provided a copy of the policy to Continental and denied coverage in its answer. Under these circumstances, Northland's answer was sufficient to alert another insurance company it was relying on the exclusion in the policy.

Equally unavailing is Continental's argument that by settling with Edgin, Northland admitted coverage under the policy, and thus was estopped from denying coverage for Gullo except under the claim that Valley had care, custody, and control of his boat. The judge rejected this argument because the settlement could not be used as evidence under N.J.R.E. 408. We agree. Under the cited evidence rule, proof of settlement with other parties is not evidence of contested liability. Borough of Harvey Cedars v. Karan, 425 N.J.Super. 155, 168-69 (App. Div. 2012) (holding that a "settlement is inadmissible to prove underlying merits of the settled dispute"), rev'd on other grounds, 214 N.J. 384 (2013).

Although the motion judge did not determine whether the property was in the care, custody, or control of the insured and thus excluded from coverage, Continental argues that the exclusion does not apply. The question of whether property is under the care, custody, or control of a party is inherently fact-sensitive. Elcar Mobile Home, Inc. v. D.K. Baxter, Inc., 66 N.J.Super. 478, 491 (App. Div. 1961). We decline to exercise original jurisdiction and reach that issue for the first time on appeal. See Alloway v. Marine Indus., L.P., 149 N.J. 620, 643 (1997).

We have considered Continental's remaining contentions and find them without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).


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