Opinion
DOCKET NO. A-2590-14T1
07-20-2016
EIC GROUP, LLC, Plaintiff-Appellant, v. THE TRAVELERS INDEMNITY COMPANY OF AMERICA, Defendant-Respondent.
Jarett L. Warner argued the cause for appellant (Havkins, Rosenfeld, Ritzert & Varriale, L.L.P., attorneys; Mr. Warner, on the briefs). Frank E. Borowsky, Jr., argued the cause for respondent (Borowsky & Borowsky, L.L.C., attorneys; Mr. Borowsky and Erin M. McDevitt-Frantz, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Simonelli. On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4817-13. Jarett L. Warner argued the cause for appellant (Havkins, Rosenfeld, Ritzert & Varriale, L.L.P., attorneys; Mr. Warner, on the briefs). Frank E. Borowsky, Jr., argued the cause for respondent (Borowsky & Borowsky, L.L.C., attorneys; Mr. Borowsky and Erin M. McDevitt-Frantz, on the brief). PER CURIAM
This appeal involves a dispute as to whether defendant, The Travelers Indemnity Company of America (Travelers), was required to provide a defense to its insured, plaintiff EIC Group, LLC (EIC), pursuant to a commercial general liability policy (the CGL policy), for which EIC paid Travelers an annual premium of $621. EIC, an engineering firm, was also insured pursuant to a design professionals liability policy (the PL Policy) issued by Navigators Insurance Company (Navigators), for which EIC paid an annual premium of $27,084.
In August 2013, EIC was named as a defendant in a lawsuit filed by Samuel A. and Dawne K. Danch (collectively, Danch), Monmouth County property owners who alleged damage to their real property and business as a result of the negligence of EIC and other defendants. The Danch complaint centered around a publicly-bid County project for the reconstruction of County Road 524 (the project). Danch alleged that EIC was hired by the project's general contractor "to draft and provide the design specifications" for a temporary road. The complaint made no other factual allegations regarding EIC's involvement with the project.
Significant rain fall resulted in the flooding of Danch's property, and the complaint alleged that the temporary road "was not properly designed, constructed or maintained to handle a large increase in water flow." Danch alleged that all defendants "were negligent in their design, construction, supervision and maintenance of the [project] and [t]emporary [r]oad for several reasons[,]" thereafter listing a number of specific allegations regarding the temporary road without identifying any particular defendant's responsible involvement.
EIC tendered its defense in the Danch lawsuit to Navigators, believing the claim fell within coverage provided by the PL policy. Navigators advised EIC to notify Travelers, which EIC did. Contemporaneously, Travelers' claim representative spoke to one of EIC's principals, David Newkirk, who advised that his company's "involvement [in] the project was limited to designing a temporary roadway[.]" Additionally, Travelers advised EIC of a professional services exclusion in the CGL policy, and Newkirk acknowledged the exclusion and indicated he believed the policy did not apply. In a letter dated September 6, 2013, Travelers notified EIC that it was disclaiming coverage, citing provisions of the CGL policy, which we digress briefly to explain.
Under the terms of the CGL policy, Travelers agreed to "pay those sums that [EIC] bec[ame] legally obligated to pay as damages because of . . . 'property damage' to which th[e] insurance applie[d]." Travelers had the right to defend EIC in any suit seeking such damages, but it had "no duty to defend [EIC] against any 'suit' seeking damages for ['bodily injury' or 'property damage'] to which th[e] insurance d[i]d not apply." The CGL policy contained an endorsement, entitled "EXCLUSION — ENGINEERS, ARCHITECTS OR SURVEYORS PROFESSIONAL LIABILITY," which excluded coverage for bodily injury or property damage "arising out of the rendering of or failure to render any 'professional services.'" "Professional Services" were defined as
any service requiring specialized skill or training including the following.
a. Preparation, approval, provision of or failure to prepare, approve, or provide any map, shop drawing, opinion, report, survey, field order, change order, design, drawing, specification, recommendation, warning, permit application, payment request, manual or instruction;
b. Supervision, inspection, quality control, architectural, engineering or surveying activity or service, job site safety, construction contracting, construction administration, construction management, computer consulting or design software, development or programming service, or selection of a contractor or subcontractor; or
c. Monitoring, testing, or sampling service necessary to perform any of the services included in a. or b. above.
[(Emphasis added).]
In April 2013, Navigators advised Newkirk that it would provide a complete defense to EIC under the PL policy pursuant to a reservation of rights. Specifically, Navigators asserted that the Danch "[c]omplaint lump[ed] all of the claims against all of the defendants together." For example, Navigators asserted that the PL policy did not provide coverage for allegations that EIC breached "a duty to inspect and maintain the structures of the project," and such "claims . . . would be covered under the [CGL] policy for premises liability." Navigators asserted that since coverage existed under the CGL policy, the PL policy provided coverage in excess of the limits of the CGL policy.
Although dated April 22, 2013, the copy of the letter in the record explicitly references the Danch complaint which was not filed until August of that year. It is apparently undisputed that Navigators sent a reservation of rights letter to EIC prior to EIC filing this complaint.
The PL policy provided coverage for damages as a result of EIC's "wrongful act" "in the performance of professional services," which included services EIC performed "for others in the practice of an . . . engineer." --------
In November 2013, EIC commenced this declaratory judgment action against Travelers. Specifically, EIC asserted that the Danch complaint alleged damages caused by EIC's failure to "properly supervise, inspect, monitor, and maintain the temporary road, and thus contain[ed] express allegations suggesting that . . . EIC's liability . . . falls outside of any professional services purportedly rendered," and thereby outside the CGL policy exclusion. EIC sought a declaration that Travelers was obligated to provide it with insurance coverage, including a defense in the Danch action. Travelers filed an answer and both parties eventually cross-moved for summary judgment.
In a written decision that accompanied his order, Judge David F. Bauman denied EIC's motion for summary judgment and granted Travelers' cross-motion for summary judgment dismissing the complaint. He reasoned:
[T]he allegations in the Complaint that specifically mention EIC relate to the drafting and planning of the design, which are activities specifically excluded by the professional services exclusion. Although there are other general allegations against [d]efendants at large, EIC is an engineering company retained to draft and plan the design. Accordingly, any allegations against EIC must necessarily arise from EIC's drafting and planning activities. Coverage, therefore, is barred by Travelers' professional services exclusion.Citing our decision in Polarome International, Inc. v. Greenwich Insurance Co., 404 N.J. Super. 241, 275 (App. Div. 2008), certif. denied, 199 N.J. 133 (2009), Judge Bauman concluded that "looking beyond the four corners of the [c]omplaint, it is clear that any successful claim against EIC would implicate its engineering services and . . . would be barred under the [CGL] policy."
Before us, EIC argues the judge "misapplied the legal standard regarding Travelers' duty to defend by disregarding claims against EIC that f[e]ll outside the professional services exclusion" of the CGL policy. EIC contends that the Danch complaint contained allegations of negligent "monitoring, supervision, and maintenance" which, whether ultimately proven true or meritless, were covered by the CGL policy because they fell outside that policy's professional services exclusion. As a result, based solely on the allegations in the Danch complaint, Travelers was required to furnish EIC a defense. We reject these arguments and affirm.
The standards we apply on appeal are well-known. "An appellate court reviews an order granting summary judgment in accordance with the same standard as the motion judge." Bhagat v. Bhagat, 217 N.J. 22, 38 (2014) (citing W.J.A. v. D.A., 210 N.J. 229, 237-38 (2012); Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). We "identify whether there are genuine issues of material fact and, if not, whether the moving party is entitled to summary judgment as a matter of law." Ibid. (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46-2(c)).
[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to 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.We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 231 (App. Div.), certif. denied, 189 N.J. 104 (2006). In this regard, "[w]e review the law de novo and owe no deference to the trial court." Zabilowicz v. Kelsey, 200 N.J. 507, 512 (2009).
[Brill, supra, 142 N.J. at 540.]
We acknowledge some basic principles upon which EIC relies. "An insurer is contractually obliged to provide the insured with a defense against all actions covered by the insurance policy." Abouzaid v. Mansard Gardens Assocs., LLC, 207 N.J. 67, 79 (2011) (citing Hartford Accident & Indemn. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22 (1984)). "The duty to defend is triggered by the filing of a complaint alleging a covered claim." Ibid.
This court established long ago the method for initially determining whether a complaint triggered the insurer's duty to defend: "'[T]he complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment, and in reaching a conclusion, doubts should be resolved in favor of the insured.'" Polarome, supra, 404 N.J. Super. at 273 (quoting Danek v. Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953), aff'd, 15 N.J. 573 (1954)); accord Muralo Co., Inc. v. Emp'rs Ins. of Wausau, 334 N.J. Super. 282, 289 (App. Div. 2000) ("[T]he insured's right to a defense is, at least initially, determined by the allegations of the complaint against it, even if meritless or frivolous, and . . . the insurer is obliged to provide a defense if the claims of damage are within the policy's covenant to pay, i.e., the coverage of the policy.") (citing Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 388-89 (1970); Hartford Ins. Grp. v. Marson Constr. Corp., 186 N.J. Super. 253, 257 (App. Div. 1982), certif. denied, 93 N.J. 247 (1983)), certif. denied, 167 N.J. 632 (2001).
There are two exceptions to this general rule.
The insurer need not provide the defense at the outset if the allegations include claims that are not covered by the policy as well as claims that are covered or if the question of coverage is not, by its nature, capable of determination in the underlying action against the insured. In those situations, the insurer's obligation to defend becomes an obligation to reimburse for defense costs to the extent that the defense is later determined to have been attributable to the covered claims and, if coverage is not determinable in the underlying action, it is later determined that there was in fact coverage.
[Muralo, supra, 334 N.J. Super. at 289-90.]In short, "[i]f an insurer believes that the evidence indicates that the claim is not covered, the insurer is not always required to provide a defense." Polarome, supra, 404 N.J. Super. at 274.
In this case, EIC cites to the allegations in the Danch complaint alleging negligence on the part of all defendants with respect to the "monitoring, supervision, and maintenance" of the project. However, the CGL exclusion was broad, effectively denying coverage to EIC for a variety of duties including "[s]upervision, inspection, . . . job site safety, construction contracting, construction administration, construction management" and any "[m]onitoring" of these services. (Emphasis added). The only allegation not within the express language of the exclusion was for negligent maintenance, although it seems obvious to us that, at the least, "maintenance" subsumes "inspection" as well as "construction management." So, we question whether EIC demonstrated that any of the claims in the complaint fell outside the professional services exclusion and therefore within the coverage provided by the CGL policy.
More importantly, Travelers denied any obligation to provide a defense. On cross-motions for summary judgment, Judge Bauman was entitled to consider the entire motion record, including EIC's own admission that it only provided design services and nothing else to the project. In other words, he properly determined as a matter of law that any defense costs were not attributable to claims covered by the CGL policy, but rather, were wholly attributable to claims of professional negligence that were excluded. Muralo, supra, 334 N.J. Super. at 290.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION