ZARIA & MAYA JACKSON, et al. v. JOHN & BARBARA ATLANTIC, MAGIC WONDER BAR, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1526-04T5F1526-04T5F

ZARIA & MAYA JACKSON, minors

by their guardian ad litem,

HYLISHA JACKSON natural mother

of ZARIA & AMAYA JACKSON and

HYLISHA JACKSON individually,

Plaintiff,

v.

JOHN & BARBARA ATLANTIC, MAGIC

WONDER BAR, INC., and each of

them JOINTLY, SEVERALLY and in

the ALTERNATIVE,

Defendants/Third Party

Plaintiffs,

v.

A.J. RENDA ASSOCIATES, INC.

and MARK RENDA,

Third Party Defendants/

Fourth Party Plaintiff-

Respondent,

v.

UNITED STATES LIABILITY

INSURANCE GROUP,

Fourth Party Defendant-

Appellant.

__________________________________

 

Argued October 3, 2005 - Decided

Before Judges Alley and Yannotti.

On appeal from Superior Court of New Jersey, Law Division, Civil Part, Essex County, L-4502-03.

Steven J. Polansky argued the cause for appellant United States Liability Insurance Group (Marshall, Dennehey, Warner, Coleman & Goggin, attorneys; Mr. Polansky on the brief).

Patrick J. Clare argued the cause for respondents A.J. Renda Associates, Inc. & Mark Renda (Hardin, Kundla, McKeon & Poletto, attorneys; Mr. Clare, of counsel, and on the brief)

PER CURIAM

Zaria Jackson and Amaya Jackson (Jacksons, or plaintiffs) filed a complaint, through their guardian ad litem and natural mother, Hylisha Jackson, against John and Barbara Atlantic and Magic Wonder Bar, Inc. (we refer to them jointly as Atlantic), alleging that Atlantic's property, where they resided, exposed them to lead-based paint. Atlantic then filed an answer and a third party complaint against A.J. Renda Associates, Inc., and Mark Renda (Renda, jointly, or respondent), asserting that it had specifically requested Renda to obtain insurance coverage for lead paint exposure, but that Renda had failed to do so.

Renda filed an answer and a fourth party complaint on February 13, 2004, against United States Liability Insurance Group (USLIG, or appellant), alleging that appellant was obligated to defend and indemnify Renda for all professional liability claims. Appellant refused to defend and indemnify Renda based upon the Absolute Pollution Exclusion-Professional included in the insurance policy.

USLIG and Renda cross-moved for summary judgment, and the trial court, on September 24, 2004, ordered USLIG to defend and indemnify Renda according to the USLIG policy. Moreover, the court also ordered USLIG to reimburse Renda's reasonable attorneys' fees and ordered Renda to submit an affidavit of services in regard to its claim for counsel fees. On November 9, 2004, the trial court ordered USLIG to pay a sum of $13,874.60 to Renda.

The provisions at issue here are contained in the policy of "Insurance Agents and Brokers Professional Liability Insurance," number IAE1004811, that USLIG issued to Renda. The policy insured Renda from June 18, 2002 through June 18, 2003, and according to its language, USLIG as "the Company" agreed to insure Renda as "the Insured," as follows:

A. The Company will pay on behalf of the Insured any Loss excess of the Deductible not exceeding the Limit of Liability to which this coverage applies that the Insured shall become legally obligated to pay because of Claims first made against the Insured during the Policy Period or if applicable, during any Extension Period, for Wrongful Acts of an Insured or because of the Personal Injury arising out of Wrongful Acts of an Insured.

Additionally, the policy specifically defined as follows the terms "claim" and "wrongful act:"

B. "Claim" means:

any written notice received by any Insured that any person or entity Intends to hold such Insured responsible for a Wrongful Act; or

any judicial or administrative proceeding Initiated against any Insured seeking to hold such Insured responsible for a Wrongful Act, any appeal therefrom.

. . . .

K. "Wrongful Act" means any actual or alleged negligent act, error or omission of an Insured arising solely from the Insured's services rendered for others as any insurance agent, insurance broker, insurance general agent, surplus lines insurance broker, insurance consultant, . . .

The policy also excludes certain losses or claims from coverage:

IV. EXCLUSIONS

This Policy does not apply to, and the Company will not defend or pay Loss for, any Claim arising out of, directly or indirectly resulting from, based upon or in any way involving any actual or alleged:

. . . .

C. bodily injury, sickness, or death of any person, or damage to or destruction of any tangible property, including the loss of use thereof; however, this Exclusion shall not apply to a Claim resulting from any actual or alleged failure of the Insured to effect or maintain any insurance or bond, in whole or in part, or on any particular terms or with any particular limits[.]

Besides this exclusion, the policy contained an "Absolute Pollution Exclusion - Professional" (pollution exclusion), which superseded all other terms and conditions, and which provided:

This insurance does not apply:

to any loss, cost or expense in connection with any Claim made against any Insured;

to damages for devaluation of property or for the taking, use or acquisition or interference with the rights of others in property or air space;

to any loss, cost or expense, including but not limited to fines and penalties, arising out of any governmental direction or request, or any private party or citizen action, that an Insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize "pollutants", or

to any litigation or administrative procedure in which an Insured may be involved as a party;

arising directly, indirectly, or in concurrence or in any sequence out of actual, alleged or threatened existence, discharge, dispersal, release or escape of "pollutants", whether or not such actual, alleged or threatened existence, discharge, dispersal, release or escape is sudden, accidental or gradual in nature.

In addition, this insurance does not apply to any loss, cost or expense arising out of or related to any form of "pollutant," whether or not such actual, alleged or threatened existence, discharge, dispersal, release or escape is intentionally caused, or whether or not such injury, damage, devaluation, cost or expense is expected or intended from the standpoint of the Insured.

This exclusion applies even if such "pollutant" has a function in, or is used by any Insured in the Insured's business, operations, premises, site or location.

"Pollutants" means any noise or any solid, liquid, gaseous or thermal irritant or contaminant, including . . . lead . . . .

On June 24, 2003, Renda notified USLIG about a potential claim involving one of Renda's clients, Atlantic. Atlantic owned property at 603 Grove Street in Irvington, where the Jacksons were tenants from December 4, 2001 to April 23, 2002. The Jacksons alleged that the Atlantic property exposed them to lead paint and sued for damages. Renda had insured Atlantic with American Equity Insurance from August 29, 2001 through August 29, 2002, and then through Penn-America Group, Inc., under policy number PAC6265206, from August 29, 2002 through August 29, 2003. The Penn-America Group policy contained a total pollution exclusion endorsement, but coverage was denied because lead-based paint exposure was not included in the policy. In turn, Atlantic sued Renda with allegations that they specifically requested coverage for lead exposure and claimed that Renda failed to advise that the requested lead coverage was not obtained.

After Renda requested that USLIG provide a defense and indemnification as to the claim Atlantic had brought against Renda, USLIG informed Renda by letter on July 9, 2003, "there is no coverage under the Policy for this claim. Accordingly, the Company will neither defend nor indemnify you or A.J. Renda Associates, Inc. in this matter." Specifically, USLIG stated to Renda that:

[t]he Third Party Plaintiffs [Atlantic] allege that you failed to procure lead poisoning coverage for the Third Party Plaintiffs, failed to advise them that such coverage was not obtained, and/or was difficult to obtain and negligently prepared the insurance application submitted to Penn America Group for a policy to include lead poisoning coverage. It is also alleged that you failed to inform the Third Party Plaintiffs of the need to obtain secondary insurance with lead poisoning coverage.

Relying upon the pollution exclusion, USLIG explained that "[b]ecause the allegations of negligence against you flow from the underlying litigation over alleged lead paint poisoning, the Absolute Pollution Exclusion cited above precludes coverage for the Third Party lawsuit."

On August 21, 2003, Renda again requested that USLIG provide a defense and indemnification. Renda contended that USLIG's policy with Renda covered "wrongful acts" such as negligence. It submitted that Atlantic's claim against Renda was for negligent preparation of an insurance application and professional negligence for failing to advise Atlantic that the requested coverage was not obtained. Renda argued that the pollution exclusion was inapplicable because Renda did not use, release, disperse, allow to escape, or discharge the lead "pollutant" as within the scope of the pollution exclusion. Furthermore, Renda asserted that although the pollution exclusion covered claims arising directly or "indirectly" from lead and Atlantic's suit against Renda "flowed" from the original lawsuit over lead exposure, this interpretation was misguided.

USLIG once again denied Renda's request for coverage on December 18, 2003, maintaining the pollution exclusion "clearly reflects the Company's intent to exclude coverage for any claims arising out of lead pollution under any circumstances."

It appears that the issue of whether a professional liability policy covers the alleged professional negligence of the insured for failure to obtain a policy including lead exposure, in a case where the underlying case involves lead exposure, is an issue of first impression for the New Jersey courts.

We address preliminarily, as a backdrop for our consideration of the points raised on appeal, some basic principles concerning our standard of review and the interpretation of policies of insurance. Our standard for deciding the appeal from a summary judgment order is the same standard to be applied by the trial court: we decide first whether there was a genuine issue of fact. If there was no genuine issue of fact, then we decide whether the lower court's ruling on the law was correct. Prudential Property Ins. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998), certif. denied, 154 N.J. 608 (1998).

Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2.

Disputed issues that are "of an insubstantial nature" cannot overcome a motion for summary judgment. Brill v. Guardian Life Ins. Co., 142 N.J. 520, 530 (1995). Moreover, "[b]are conclusions in the pleadings, without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment." United States Pipe & Foundry Co. v. American Arbitration Ass'n, 67 N.J. Super. 384, 399-400 (App. Div. 1961).

With respect to the task of policy interpretation, it is firmly established that insurance policies should be interpreted according to their plain and ordinary meaning. Voorhees v. Preferred Mutual Insurance Company, 128 N.J. 165, 175 (1992) (quoting Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990)). Any ambiguities must be resolved in favor of the insured and the insured's objective, reasonable expectations of the agreement. Voorhees, supra, 128 N.J. at 175; see Linden Motor Freight Co., Inc. v. Travelers Insurance Co., 40 N.J. 511, 525 (1963).

On the other hand, courts are not in a position to rewrite an insurance policy to the benefit of the insured. Walker Rogge v. Chelsea Title & Guar. Co., 116 N.J. 517, 529 (1989). An insured's reasonable, objective interpretation will only be accepted as far as the contract language permits. Di Orio v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 269 (1979). Our courts have "consistently" held that the pollution exclusion clause is clear and unambiguous. Kimber Petroleum Corp. v. Travelers Indemnity Co., 298 N.J. Super. 286, 299 (1997), cert. denied, 150 N.J. 26 (1997). "But, if the clause in question is one of exclusion or exception, designed to limit the protection, a strict interpretation is applied." Mazzilli v. Accident & Cas. Ins. Co., 35 N.J. 1, 8 (1961).

We thus address USLIG's contention that the trial court should have granted summary judgment on its behalf because the plain language of the pollution exclusion clearly applies, and therefore USLIG does not have a duty either to defend Renda or to pay Renda's counsel fees.

In asserting that the policy here is not ambiguous and that its meaning is plain and clear, USLIG urges that the pollution exclusion disclaims coverage for any litigation arising directly or indirectly from pollutants such as lead, and that Renda's reasonable expectation of coverage must be based on this clear language.

We disagree. The plain language of the policy creates in USLIG a duty to defend and to indemnify Renda, and a covered "wrongful act" includes an alleged negligent act or omission arising from Renda's services as an insurance broker. Atlantic's complaint alleges that Renda breached its duty of care and negligently prepared an insurance application. Additionally, Renda contends, it is unreasonable "to expect that the professional liability policy covers all professional negligence except insurance advice relating to pollution." Renda further asserts that there is "no insurance broker professional liability insurance policy that cover[s] only broker claims involving pollution-related professional negligence." We also note that the claims of pollution did not arise out of instances where pollution was emitted or discharged in connection with Renda's business, as the only rational interpretation of pollution exclusion requires in these circumstances.

We agree with the judge's determination that, in light of Voorhees, supra, 128 N.J. at 175, the policy must be interpreted in accordance with its plain and ordinary meaning. He observed properly that "the pollution exclusion in any reasonable interpretation was not meant to cover with regard to professional advice." Atlantic's claims against Renda were for professional negligence, which the policy clearly covers. Specifically, the claims did not, even "indirectly," flow from lead poisoning on Renda's premises. Instead, the policy clearly covers professional negligence for wrongful acts, which as Judge Bernstein observed, is "precisely what a professional liability policy is intended for."

It is unpersuasive for USLIG to rely on the "indirect" language in the pollution exclusion when the clear language in the policy covers wrongful acts such as professional negligence. Interpreting the policy according to its plain meaning, Voorhees, supra, 128 N.J. at 175, it is beyond legitimate dispute that "wrongful acts" include professional negligence resulting from errors or omissions of the insured from services rendered as an insurance broker because the policy itself thus defines these acts. Furthermore, Atlantic's complaint against Renda alleges professional negligence: breach of a duty of care, failure to obtain requested coverage, and failure to advise of the lack of the requested coverage.

The insured's reasonable expectation must be based on plain meaning, Di Orio, supra, 79 N.J. at 269, and Renda's objective expectation here plainly was that it would have coverage for professional negligence claims. No reasonable construction of the policy would require Renda to expect coverage for all professional negligence claims except those that arise from failing to obtain requested coverage for a pollutant.

The pollution exclusion applies by its terms to any litigation where the insured is involved as a party "arising directly, indirectly, or in concurrence or in any sequence out of actual, alleged or threatened existence, discharge, dispersal, release or escape of pollutants." Here, Renda did not discharge or release pollutants, whether on its own premises or elsewhere; rather, Renda is an insurance broker whose customer, Atlantic, is accused of owning premises with lead-based paint. Renda did not disperse the pollutant itself.

To summarize, the allegation of lead exposure is between the parties to the original action: Jackson and Atlantic. The third-party action between Atlantic and Renda involves claimed professional negligence. The fourth-party action between Renda and USLIG disputes insurance coverage. Although USLIG labels this connection as "indirect," a better description would be "merely attenuated." Renda could not objectively expect a fourth-party action stemming from a lead exposure claim and resulting in a professional negligence claim to fall under the pollution exclusion. And even if "indirectly" was considered "ambiguous" for purposes of policy interpretation, all ambiguities are to be resolved in favor of the insured. DiOrio, supra, 79 N.J. at 269.

We thus conclude that there is no genuine issue as to any material fact, that the policy clearly defines "wrongful act" as professional negligence, and that the relationship between the underlying claim and fourth-party complaint is too attenuated to meet Renda's reasonable expectations.

We also are unpersuaded by USLIG's claim that the trial court "erred in adding a requirement that the lead poisoning arise out of a condition on Renda's premises when no such requirement was contained in the insurance contract." In our view, the trial court did not add this requirement as a hurdle USLIG must clear to apply the pollution exclusion. Rather, that is the plain language of the policy.

Specifically, Judge Bernstein declared that the "claims against Renda do not arise directly or indirectly out of the pollution of Renda's premises because Renda was not involved at all in the lead poisoning. They were brought because Renda allegedly did not procure the appropriate coverage and that is - that was requested by the Atlantics. This is precisely what a professional liability policy is for."

Judge Bernstein manifestly did not contradict the terms of the policy to "eviscerate[] the limitation on coverage," notwithstanding the claim that "the policy exclusion is intended to prevent the professional liability policy from dropping down and providing coverage in a pollution situation which was otherwise uninsurable." The claim being for professional negligence, policy concerns regarding the pollution exclusion are not implicated. The pollution exclusion intends to eliminate USLIG's exposure to a million dollar risk; the policy clearly covers wrongful acts such as professional negligence.

If USLIG had wanted to disclaim coverage in all professional negligence situations, such as a broker's insurance advice relating to pollution, it should have used more precise language. Mazzilli, supra, 35 N.J. at 7. Then, the insured and insurer would have the same expectations of coverage.

In sum, the trial court did not add terms to the policy but rather followed the language of the policy itself. The origin of the pollution itself is irrelevant because Atlantic's claim against Renda is for professional negligence, not pollution stemming from Renda's premises or Renda's acts. There is no genuine issue as to any material fact, and we affirm.

Affirmed.

 

On November 9, 2004, the trial court entered an order on motion by USLIG certifying its September 24, 2004 order as final pursuant to R. 4:42-2. Additionally, the court entered a partial stay of the judgment for attorney's fees but denied the stay for USLIG's order for specific performance.

On November 23, 2004, USLIG filed its notice of appeal. USLIG then moved to stay enforcement of the order for specific performance with this court. On March 1, 2005, we sua sponte reversed the trial court's order certifying the orders as final, granted leave for an interlocutory appeal from the September 24, 2004 order, and granted the motion to stay enforcement of the order for specific performance.

We explained that the September 24, 2004 order did not qualify for certification pursuant to R. 4:42-2, because "only interlocutory orders that confer enforcement rights pursuant to R. 4:59 can be certified."

(continued)

(continued)

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A-1526-04T5F

October 26, 2005