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Surety Mechanical Services, Inc. v. The Phoenix Insurance Company

United States District Court, D. New Jersey

June 27, 2014

SURETY MECHANICAL SERVICES, INC., Plaintiff,
v.
THE PHOENIX INSURANCE COMPANY et. al, Defendants.

RAYMOND JAMES WENT, JR., HANKIN, SANDSON, SANDMAN, BRADLEY & PALLADINO, PC, ATLANTIC CITY, NJ, Attorney for plaintiff Surety Mechanical Services, Inc.

ERIN MARIE McDEVITT-FRANTZ, BOROWSKY & BOROWSKY LLC, SHREWSBURY, NJ, STUART M. BERGER, BOROWSKY & BOROWSKY LLC, SHREWSBURY, NJ, Attorneys for defendant The Phoenix Insurance Company.

OPINION

NOEL L. HILLMAN, District Judge.

Before the Court are cross Motions for Partial Summary Judgment by Plaintiff Surety Mechanical Services, Inc. ("Surety") and Defendant The Phoenix Insurance Company ("Phoenix"). For the reasons set forth below, Phoenix's Motion will be granted in part and denied in part, and Surety's Motion will be denied.[1]

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75, 000.

Choice of Law

In diversity cases, federal courts apply the forum state's choice of law rules to determine which state's substantive laws are controlling. Maniscalo v. Brother Int'l (USA) Corp., 709 F.3d 202, 206 (3d Cir. 2013)(citing Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487 (1941)). However, defendants must raise choice of law issues or they are waived. Neely v. Club Med Mgmt. Servs., Inc., 63 F.3d 166, 180 (3d Cir. 1995) ( en banc ). Neither party has questioned the applicability of New Jersey law, which is the basis of Surety's claims. Therefore, the Court will apply New Jersey substantive law.[2]

Background

This case arises from a dispute between an insurance carrier and its insured over the insurer's duty to defend the insured in a lawsuit. In August, 2006, Surety entered into a contract with Cape May County Vocational Technical School District ("Tech School") to provide mechanical services for the school's heating, ventilation, and air conditioning ("HVAC") system. (Aff. of Thomas Paul [Doc. No. 51-22] ¶¶ 2-4.) Surety finished its work and was paid on August 19, 2008. (Id. at Ex. C.) Three years later, on August 24, 2011, the Tech School filed a lawsuit in the Superior Court of New Jersey ("Tech School Litigation") alleging that Surety performed its work negligently, that it "failed to perform [its] contractual obligations in a workmanlike manner, " and that it failed to perform its work in accordance with "common industry standards and the expectations for the Project." (Pl.'s Statement of Material Facts Ex. E [Doc. No. 51-8], at 10-12.) As a result, the Tech School claimed it suffered "compensatory and consequential damages." (Id.)

From May 16, 2006 through May 16, 2009, Surety was insured under a Commercial General Liability ("CGL") policy issued by Phoenix ("Policy"). (Id. at Ex. A-C.) Surety submitted the Tech School's claim to Phoenix for indemnity and defense, and on March 15, 2012 Phoenix issued a letter declining coverage. (Id. at Ex. J.) Surety subsequently filed the instant action in the Superior Court of New Jersey seeking a declaratory judgment as to Phoenix's duties to indemnify and defend. (Notice of Removal Ex. A [Doc. No. 1-2].) Phoenix then removed the action to this Court. (Notice of Removal [Doc. No. 1].)

Surety moved for summary judgment on the issues of whether Phoenix has a duty to defend in the Tech School Litigation, and whether Phoenix is obligated to reimburse Surety for the costs it has already incurred in the Tech School Litigation. (Pl.'s Mot. for Summ. J. [Doc. No. 51].) Phoenix filed its opposition and a Cross Motion for Summary Judgment on the same issues. (Def.'s Cross Mot. For Summ. J. [Doc. No. 54].)

Standard for Summary Judgment

Summary judgment is appropriate where the Court is satisfied that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986); Fed.R.Civ.P. 56(a). An issue is "genuine" if it is supported by evidence such that a reasonable jury could return a verdict in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" if, under the governing substantive law, a dispute about the fact might affect the outcome ...


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