Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Oxford Realty Group Cedar v. Travelers Excess and Surplus Lines Co.

Supreme Court of New Jersey

May 25, 2017

OXFORD REALTY GROUP CEDAR, CLA MANAGEMENT, and R.K. PATTEN, LLC, Plaintiffs-Respondents,
v.
TRAVELERS EXCESS AND SURPLUS LINES COMPANY, Defendant-Appellant.

          Argued January 31, 2017

         On certification to the Superior Court, Appellate Division.

          Wystan M. Ackerman, a member of the Connecticut and New York bars, argued the cause for appellant (Robinson & Cole, attorneys; Mr. Ackerman and Michael J. Mernin, on the brief).

          Allan Maitlin argued the cause for respondents (Sachs, Maitlin, Fleming & Greene, attorneys; Mr. Maitlin and Christopher Klabonski, on the brief).

         In this appeal, the Court considers coverage under a surplus lines insurance contract and determines whether debris removal coverage applies in addition to the policy's endorsement limiting flood coverage for all losses "resulting from Flood to buildings, structures or property in the open" in the covered flood zone.

         Plaintiffs Oxford Realty Group Cedar, CLA Management, and R.K. Patten LLC (collectively, Oxford) own and manage an apartment complex located on in Long Branch, New Jersey (the Property). The Property is located in Flood Zone A according to National Flood Insurance Program classifications. Oxford entered into an insurance contract with defendant Travelers Excess and Surplus Lines Company (Travelers) to insure the Property.

         The Property suffered significant flood damage when Superstorm Sandy struck New Jersey in October 2012. Oxford submitted a claim to Travelers pursuant to the Policy. Oxford claimed flood damage in excess of $1, 000, 000 and $207, 961.28 in debris removal costs. Travelers asserted that all damage caused by the flood was subject to the $1, 000, 000 limitation for a flood occurrence and paid Oxford only $1, 000, 000 on its claim.

         In July 2013, Oxford sued Travelers in Superior Court. Both parties moved for partial summary judgment on the issue of Travelers' liability for the debris removal costs.

         The trial court granted partial summary judgment in favor of Travelers. The court did not find the Policy to be ambiguous regarding flood coverage and debris removal coverage. The court acknowledged that the Supplemental Coverage Declarations appeared to allow additional debris removal coverage but concluded that the Limit of Insurance for Flood nullified any coverage for flood damage above $1, 000, 000.

         The court further held that "the general condition that the debris removal is an additional coverage must yield to the specific term in the Supplemental Coverage Declarations that the [$1, 000, 000] coverage applies to 'all losses' caused by flood." Accordingly, the trial court granted partial summary judgment in favor of Travelers. In August 2014, the court granted summary judgment in favor of Travelers on all remaining counts.

         The Appellate Division reversed the grant of summary judgment and remanded for entry of judgment in favor of Oxford. The panel concluded that the Policy required the provision of up to $500, 000 for debris removal coverage in addition to the $1, 000, 000 flood limit. The panel held that the $1, 000, 000 limitation in the

         Supplemental Coverage Declarations applied only to insured buildings rather than insured occurrences. In contrast, the panel held that the Property Coverage Form's additional debris removal coverage applied to all Covered Property, not just Oxford's buildings. The panel further reasoned that the Flood Endorsement did not limit Oxford's damages to $1, 000, 000 because the endorsement applied "only to loss or damage to covered property caused by flood, meaning Oxford's building." (Emphasis added).

         The Court granted Travelers' petition for certification. 227 N.J. 216 (2016).

         HELD: Although the Policy assigns debris removal a coverage sublimit, it does not constitute a self-contained policy provision outside the application of the $1, 000, 000 flood limit. Because the terms of the Policy are not ambiguous, the Court need not address contentions about contra proferentem or the doctrine of reasonable expectations.

         1. Surplus lines insurance policies, governed by N.J.S.A. 17:22-6.40 to -6.84, offer coverage in specialized situations. Surplus lines policies insure risks which insurance companies authorized or admitted to do business in New Jersey have refused to cover by reason of the nature of the risk. These policies are unique in that the insured parties engage in high risk enterprises for which insurance could only be obtained from a surplus lines carrier through a broker. Insureds procure surplus lines policies covering commercial risk through insurance brokers, thus involving parties on both sides of the bargaining table who are sophisticated regarding matters of insurance. (p. 13)

         2. In assessing the meaning of provisions in an insurance contract, courts first look to the plain meaning of the language at issue. If the language is clear, that is the end of the inquiry. If an ambiguity exists, the court will resort to tools and rules of construction beyond the corners of the policy. But courts will not manufacture an ambiguity where none exists. An insurance policy is not ambiguous merely because two conflicting interpretations of it are suggested by the litigants. Nor does the separate presentation of an insurance policy's declarations sheet, definition section, and exclusion section necessarily give rise to an ambiguity. (pp. 13-15)

         3. Ordinarily, our courts construe insurance contract ambiguities in favor of the insured via the doctrine of contra proferentem. Sophisticated commercial insureds, however, do not receive the benefit of having contractual ambiguities construed against the insurer. Similar to the doctrine of contra proferentem, the doctrine of reasonable expectations, under which the insured's "reasonable expectations" are brought to bear on misleading terms and conditions of insurance contracts, is less applicable to commercial contracts. (pp. 15-16)

         4. The Flood Endorsement places a hard cap on the amount recoverable for flood damage. Under that section, "[t]he most [Travelers] will pay for the total of all loss or damage caused by Flood . . . is the single highest Annual Aggregate Limit of Insurance specified for Flood shown in [Section B.14 of] the Supplemental Coverage Declarations." (Emphasis added). Section B.14 sets that Limit of Insurance at $1, 000, 000. Thus, the Flood Endorsement categorically denies any flood damage coverage in excess of $1, 000, 000. The Flood Endorsement also clarifies that this $1, 000, 000 ceiling will apply even if more than one Limit of Insurance applies, such as the Limit of Insurance for debris removal in the Supplemental Coverage Declarations. There is no indication that this limitation applies only to Oxford's buildings. The Policy limits Oxford's flood coverage to $1, 000, 000 and therefore will be enforced as written. (pp. 16-19)

         5. The Eighth Circuit addressed a similar issue in Altru Health System v. American Protection Insurance Co., 238 F.3d 961 (8th Cir. 2001). The insured plaintiff and insurer defendant contracted to cover a commercial hospital. One section of the contract provided coverage for losses incurred during "Interruption by Civil Authority." A severe flood damaged the hospital and caused a civil authority to close the hospital temporarily. The insured claimed that losses sustained from the civil authority's closure of the hospital applied in addition to the $1, 500, 000 flood limit. The court reasoned that the Civil Authority coverage was not "a self-contained policy provision" to which the flood limit did not apply. Rather, the court held that the $1, 500, 000 flood limit applied to all damages caused by an occurrence of flood, even if the contract assigned individual sublimits to specific types of damages. Thus, Altru Health supports the conclusion that the $500, 000 debris removal limit does not apply in addition to the Flood Endorsement's $1, 000, 000 limit. Although the Policy assigns debris removal a coverage sublimit, it does not constitute a self-contained policy provision outside the application of the $1, 000, 000 flood limit. (pp 19-20)

         6. Because the Court does not find the terms of the Policy ambiguous, it does not address Oxford's contentions about contra proferentem or the doctrine of reasonable expectations. (pp 20-21)

         The judgment of the Appellate Division is REVERSED, and the trial court's grant of summary judgment in favor of Travelers is REINSTATED.

          JUSTICE ALBIN, DISSENTING, expresses the view that the insurance contract is hopelessly ambiguous and needlessly complex. Because reasonable minds can differ about the meaning and interplay of the flood insurance and debris removal clauses in the insurance policy and because Travelers drafted the ambiguous policy terms, the insured's interpretation should prevail under the doctrines of contra proferentem and reasonable expectations, according to Justice Albin.

          CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, PATTERSON, and SOLOMON join in JUSTICE FERNANDEZ-VINA's opinion. JUSTICE ALBIN filed a separate, dissenting opinion in which JUSTICE TIMPONE joins.

          OPINION

          FERNANDEZ-VINA JUSTICE

         In this appeal, we consider competing arguments about a surplus lines insurance contract's coverage for a flood occurrence. Specifically, we are called upon to determine whether debris removal coverage applies in addition to the policy's endorsement limiting flood coverage for all losses "resulting from Flood to buildings, structures or property in the open" in the policy's covered flood zone.

         The insured contracted, through the services of a licensed broker, with the insurer to obtain the surplus lines coverage for certain commercial apartment buildings. The insurance policy provided limits of insurance for the insured's buildings and business personal property. The policy also listed limits of insurance for various occurrences and expenses, including debris removal. According to the policy, the debris removal coverage could apply in addition to certain limits of insurance for covered property under certain conditions.

         Although the original insurance policy disclaimed all flood coverage, the parties added an endorsement to obtain access to flood coverage. The endorsement limited flood coverage to $1, 000, 000, a sum delineated in the supplemental coverage declarations.

         The insured's property sustained severe damage during Superstorm Sandy. The insured claimed debris removal coverage in addition to $1, 000, 000 in flood damage. The insurer refused to pay any amount above the $1, 000, 000 flood damage cap in the endorsement. The insured sued for the debris removal coverage.

         The trial court determined that the policy unambiguously capped the insured's recovery at $1, 000, 000. The Appellate Division reversed and held that the debris removal provisions applied in addition to the $1, 000, 000 flood limit.

         For the reasons set forth in this opinion, we hold that the insurance policy unambiguously capped the insured's recovery at $1, 000, 000. Accordingly, we reverse the decision of the Appellate Division granting additional debris removal coverage.

         I.

         A.

         The material facts are not in dispute. Plaintiffs Oxford Realty Group Cedar, CLA Management, and R.K. Patten LLC (collectively, Oxford) own and manage an apartment complex located on Patten Avenue in Long Branch, New Jersey (the Property). The Property is located in Flood Zone A according to National Flood Insurance Program classifications. Oxford entered into an insurance contract with defendant Travelers Excess and Surplus Lines Company (Travelers) to insure the Property. That insurance policy (the Policy) was effective between February 1, 2012, and February 1, 2013.

         The Policy provided protection for the Property in the event of certain occurrences. Four sections of the Policy are pertinent to this matter: the Property Coverage Form; the Flood Endorsement; the Supplemental Coverage Declarations; and the General Conditions.

         Property Coverage Form

          The Property Coverage Form constitutes the insuring agreement and proceeds to delineate the boundaries of coverage under the Policy. It thus establishes the structure for analyzing how the Policy's parts work together. Section A's Insuring Agreement states that

[Travelers] will pay for direct physical loss or damage to Covered Property at premises as described in the most recent Statement of Values . . . caused by or resulting from a Covered Cause of Loss. Covered Cause of Loss means risks of direct physical loss unless the loss is excluded in Section D., Exclusions; limited in Section E., Limitations; or excluded or limited in the Supplemental Coverage Declarations or by endorsements.

         Under Section B, Coverage explains what is and is not covered. The section notes at the outset that

[c]overage is provided for Covered Property and Covered Costs and Expenses . . . unless excluded in Section C., Property and Costs Not Covered. Coverage applies only when a Limit of Insurance is shown in the Supplemental Coverage Declarations for the specific type of Covered Property or Covered Costs and Expenses, except for items B.2.a., d., e., g., h. and i.[, ] which do not require a specific Limit of Insurance to be shown.

         Section B.1 addresses "Covered Property" and B.2 addresses "Covered Costs and Expenses." "Covered Property" includes "Building(s)" and "Business Personal Property, " among other property items. Under Section B.2, "Covered Costs and Expenses" include "Debris Removal, " among other services and expenses. Section B.2.a. addresses debris removal:

(1) [Travelers] will pay the necessary and reasonable expense incurred by [Oxford] to remove debris of Covered Property, other than "Outdoor Property[, ]" caused by or resulting from a Covered Cause of Loss ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.