LEDA PUHLOVSKY v. RUTGERS CASUALTY INSURANCE COMPANY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

LEDA PUHLOVSKY,

Plaintiff-Respondent/

Cross-Appellant,

v.

RUTGERS CASUALTY

INSURANCE COMPANY,

Defendant-Appellant/

Cross-Respondent.

______________________________________________

July 1, 2015

Argued November 13, 2014 Decided

Before Judges Fuentes, Kennedy and O'Connor.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8037-08.

David M. Schwadron argued the cause for appellant/cross-respondent.

Jeffrey A. Bronster argued the cause for respondent/cross-appellant.

PER CURIAM

Defendant, Rutgers Casualty Insurance Company (Rutgers), appeals a judgment against it for $643,160.11, following a jury verdict in favor of plaintiff, who had filed a complaint against Rutgers for breach of contract. Plaintiff asserted in the complaint that she had suffered a substantial property loss, and that Rutgers wrongfully denied coverage for the loss under a policy of insurance it had issued to plaintiff.

Rutgers argues that the jury verdict form utilized by the court "materially changed the terms of the insurance contract" and therefore was "confusing and misleading" to the jury. Plaintiff cross-appeals and argues that the jury's valuation of damages is unsupported by the evidence. We have carefully considered the arguments of the parties in light of the record and the law, and we affirm.

This is the second time we have considered this matter. Earlier, we reversed a grant of summary judgment for defendant and remanded the case to the Law Division. Puhlovsky v. Rutgers Casualty Ins. Co., No. A-5100-10 (App. Div. September 7, 2012), certif. denied, 213 N.J. 388 (2013). On remand, the case was tried before a jury which returned a verdict for plaintiff in the amount of $544,000 plus pre-judgment interest in the amount of $99,160.11.

I.

The facts at trial are these.

Rutgers had issued a "Commercial Package Policy" to plaintiff for the period November 15, 2007, to November 15, 2008. The policy limit for plaintiff's building in Paterson was $600,000 and the policy stated Rutgers "will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." The term "Covered Property" included plaintiff's building at 69 Market Street.

In a separate section entitled "Causes of Loss - Special Form" the policy stated "Covered Causes of Loss means Risks of Direct Physical Loss unless the loss is: 1. Excluded in Section B., Exclusions; or 2. Limited in Section C., limitations; that follow." The following "Section B. Exclusions" is divided into four subsections of exclusions identified numerically.

Subsection (B)(1) states

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

This subsection then lists eight causes of loss. For purposes of this appeal, we set forth only the exclusion at issue on the appeal, b(4):1

Earth Movement

[e]arth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include the contraction, expansion, freezing, thawing, eroding, improperly compacted soil and the action of water under the ground surface.

Plaintiff owned a four-story building at 69 Market Street in Paterson. Erected prior to 1900, the building had two retail stores on the first floor and a number of residential apartments on the upper three floors. In late March of 2008, a wood-frame building at 67 Market Street, which was adjacent to the west side of plaintiff's building, partially collapsed into a schoolyard that was situated to the west of 67 Market Street.

Because sections of 67 Market Street that did not collapse were nonetheless bulging, Paterson officials ordered demolition of the entire building. The demolition contractor pulled down the remaining sections of that building utilizing a mechanical excavator with a pincer attachment.

Between March 28, 2008, and April 1, 2008, the demolition contractor was at the site removing debris that had accumulated during the demolition process. The basement at 67 Market Street was also filled with quarry-processed stone in order to "prevent undermining of the foundation" of plaintiff's building.

Plaintiff's building was constructed of brick and its western brick wall was built into the wood frame of the building at 67 Market Street, creating a "common wall" between them. Some of the horizontal timber supporting beams on the upper floors of plaintiff's building had extended "through the common wall" into the interior of the building at 67 Market Street.

On April 1, 2008, Paterson officials inspected plaintiff's building and advised that her tenants would have to vacate the property, finding it to be unsafe. Plaintiff notified Rutgers at this time that she would be making a claim under the policy Rutgers had issued for the property.

Rutgers retained Andrew Sharick, P.E., to examine the building. In his initial report of April 3, 2008, Sharick opined that, "[o]ver the years, the front wall has bowed outward at the center of the building height" and that there was also a "gradual separation between the front and the side walls" on the west side of the building above what had been the roofline of 67 Market Street. He added that after the demolition, the separation had increased by an additional half-inch.

Sharick stated that the building was "sufficiently stable" to permit reopening the street "for a few days until either [the building] is demolished or its front wall is braced . . . ." He also explained that "most of the total movement in the front wall at the front left corner of the building has developed gradually over decades[.]"

Paterson's construction code official advised plaintiff that she had two options: remove or repair the building because "this building is unsafe." Plaintiff elected to demolish the building, given the "high cost of repair." In a second report dated April 20, 2008, Sharick stated his inspection of the site on April 3, 2008, showed "no indication of movement or damage" to plaintiff's building as a result of the demolition of the building at 67 Market Street, and he opined that "there had been no vehicle or equipment impact" to plaintiff's building during the demolition next door.

Rutgers' theory of the case was that 69 Market Street was an old building that had deteriorated and had become damaged over time; thus, the damage caused to the building was a result of "earth movement" and the insurance policy did not cover the damage. Plaintiff argued that the damage to her building was caused by the demolition of the neighboring building.

Sharick testified that over the course of decades, earth settlement and movement resulted in the "bowing" of the front wall of plaintiff's building and other structural problems that resulted in the need to demolish the building. This opinion, which was set forth in another report issued by Sharick in April 2008, prompted Rutgers to deny coverage. Rutgers' position was that the "movement/bowing of the front wall has been occurring over a period of many years as a result of earth sinking, rising, or shifting and/or long term settling . . . . " Rutgers added that even if the building next door had not been removed, the "unchecked gradual outward bowing . . . in the front wall of your building would have continued" leading to "a complete failure in that wall despite the support being given from building #67."

Plaintiff's expert, Harold M. Tepper, P.E., opined that plaintiff's building was "habitable" and "stable" prior to the partial collapse and subsequent demolition of the building next door. He concluded that the demolition of that building caused a lateral drag on plaintiff's building, leading to damages that necessitated its demolition.

At the conclusion of the testimony, the court held a lengthy preliminary pre-charge conference, on the record, during which counsel for both parties and the court discussed the language to be used in the jury charges. During this conference, defense counsel objected to the wording in the preliminary jury charge stating that defendant would have to prove both that earth movement occurred and that the earth movement resulted in specific damage. Plaintiff's counsel agreed to change the language so it stated that the earth movement was a cause of the specific damage, to which the court and defense counsel agreed.

The resulting jury interrogatory was framed as follows: "Did the defendant Rutgers Casualty prove by a preponderance of the credible evidence that a condition which lead to Paterson's order to plaintiff to repair or demolish her building was caused by 'earth movement' unrelated to the demolition of 67 Market Street?"

During his charge to the jury, the judge stated, in relevant part, that defendant "contends that the plaintiff's claim was appropriate[ly] denied because the - - a cause of the loss was earth movement, which is an excluded cause of loss." The judge also charged the jury that "the defendant . . . has the burden of establishing by a preponderance of the evidence all the facts necessary to prove that the loss was caused by an excluded cause. In this case, earth movement, unrelated to the demolition at 67 Market Street." He added,

the jury verdict sheet . . . will simply ask you whether . . . a cause of the damage to the plaintiff's building was earth movement . . . . Under this exclusion, Rutgers Casualty must prove two separate facts by a preponderance of the evidence. First, that earth movement actually took place. And, second, that it was the earth movement that the earth movement was a cause of the specific damage in the case.

As we have noted, the jury returned a verdict for plaintiff.

This appeal followed.

II.

An insurance policy is "interpreted according to its plain and ordinary meaning." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 175 (1992). The policy language "underscores the basic notion that the premium paid by the insured does not buy coverage for all . . . damage but only for that type of damage provided for in the policy." Hardy ex rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 102 (2009) (quoting Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 237 (1979)). "[E]xclusions are presumptively valid and will be given effect if 'specific, plain, clear, prominent, and not contrary to public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (citations omitted); see also Hardy ex rel. Dowdell, supra, 198 N.J. at 101-102 (court upheld insurer's denial of benefits to passenger injured in stolen vehicle based on a policy provision excluding PIP benefits to an insured who occupied a vehicle without the owner's permission).

However, as a general rule, "insurance policy exclusions must be narrowly construed; the burden is on the insurer to bring the case within the exclusion." Princeton Ins. Co., supra, 151 N.J. at 95. If the policy language is clear, we must interpret the policy as written and refrain from "writing a better insurance policy than the one purchased." Hardy ex rel. Dowdell, supra, 198 N.J. at 101-102 (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)); Villa v. Short, 195 N.J. 15, 23 (2008); President v. Jenkins, 180 N.J. 550, 562 (2004). If the policy language is sufficiently ambiguous to support two meanings, one that favors the insurer and one that favors the insured, the policy should be construed to provide coverage, President, supra, 180 N.J. at 563, and to "comport with the reasonable expectations of the insured." Zacarias, supra, 168 N.J. at 595; see also Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008); Search EDP, Inc. v. Home Assurance. Co., 267 N.J. Super. 537, 542 (App. Div. 1993), certif. denied, 135 N.J. 466 (1994).

With these principles guiding our analysis, we note that the Rutgers policy is patently an "all-risk" policy of insurance, rather than a policy that insures against losses arising from specifically identified causes. The Rutgers policy itself defines a "covered loss" to include "all risk of physical loss" to the covered property, unless stated otherwise "or an exclusion applies." In Victory Peach Group, Inc. v. Greater N.Y. Mut. Ins. Co., 310 N.J. Super. 82, 87 (App. Div. 1998), we explained,

An "all-risk" policy creates a "special type of insurance extending to risks not usually contemplated, and recovery under the policy will generally be allowed, at least for all losses of a fortuitous nature, in the absence of fraud or other intentional misconduct of the insured, unless the policy contains a specific provision expressly excluding the loss from coverage."

[ 43 Am. Jur. 2d Insurance 505 (1982) (footnotes omitted); accord Ariston Airline & Catering Supply Co. v. Forbes, 211 N.J. Super. 472 (Law Div. 1986).]

We have defined a "fortuitous loss" as "one that, so far as the parties to the insurance contract is aware, is dependent on chance. Victory Peach Group, Inc. supra, 310 N.J. Super. at n. 1 (citing 5 Appleman, Insurance Law and Practice, 3092 (Supp. 1996-97)).

Whether or not the settling, cracking or other disarrangement of plaintiff's building occurred as a consequence of "earth movement" was a question of fact for trial. Tepper, plaintiff's expert, opined that the damage to plaintiff's property occurred as a consequence of the partial collapse of the structure at 67 Market Street and the activities of the demolition contractors there. Sharick, Rutgers' expert, opined that the damage was the result of decades of earth settlement. Here, the jury determined that plaintiff suffered a loss not caused by earth movement. Rutgers argues this finding was the result of a misleading jury interrogatory.

No party is entitled to have the jury charged in his or her own words; instead, the charge must only be accurate. State v. Thompson, 59 N.J. 396, 411 (1971). When error in a jury charge is alleged, the charge must be read as a whole. State v. Wilbely, 63 N.J. 420, 422 (1973). Where the appellant failed to object to the jury charge, a showing of plain error must be made when appellant claims error on appeal. R. 1:7-2. Plain error occurs when it is "clearly capable of producing an unjust result," R. 2:10-2, or, in the context of jury charges, "sufficient to raise a reasonable doubt as to whether the error led the jury to a result it otherwise might not have reached." State v. Macon, 57 N.J. 325, 336 (1971). Contract interpretation is a matter of law for the court to decide. Camden Bd. of Educ. v. Alexander, 181 N.J. 187, 194 (2004). A trial court's interpretation of law is reviewed de novo by the appellate division. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).

"[A] jury verdict, from the weight of evidence standpoint, is impregnable unless so distorted and wrong, in the objective and articulated view of a judge, as to manifest with utmost certainty a plain miscarriage of justice." Carrino v. Novotny, 78 N.J. 355, 360 (1979) (citations omitted). The appellate court is not to substitute its judgment for that of the jury, but instead is only to "correct clear error or mistake by the jury." Ibid. (quoting Dolson v. Anastasia, 55 N.J. 2, 6 (1969)). Prior to appealing a jury verdict on the grounds that the jury verdict is against the weight of the evidence, the party must have made a motion for a new trial. R. 2:10-1. The trial court's decision on that motion "shall not be reversed unless it clearly appears that there was a miscarriage of justice under the law." Ibid.

The question is whether, in view of all of the jury charges and interrogatory taken as a whole, the jury could have been misled or confused into wrongfully thinking that a valid exclusion did not apply. The jury interrogatory at issue provided that Rutgers was required to prove, by a preponderance of the evidence, that "a" condition leading to damage to plaintiff's building was earth movement unrelated to the demolition of 67 Market Street. The interrogatory, in our view, was accurate, simple, and not misleading in any respect.

Rutgers' argument that the phrase "unrelated to the demolition of 67 Market Street" misstates the policy is without merit. The plain policy language of the exclusion only applies to soil conditions related to "contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface." Under the interrogatory, the jury was permitted to find that earth movement as defined within the section was "a condition" leading to the damage of the building. Had it done so, the verdict would have been different; it did not do so, however.

The argument raised on appeal by Rutgers is, in our view, specious, and, further, contravenes its position at trial. Rutgers asserted that it was decades of soil movement that rendered the building unsafe. The interrogatory accurately identified that issue for the jury, and the jury was not confused by the language.

It would be within the expectation of the parties that cracks in a building, as well as shrinking and bulging, when caused, for example, by normal settling or by expansion and contraction resulting from changes, for example, in soil conditions or temperature over time, would not be covered. Certainly, it was not their expectation or intention that cracking or bulging resulting from some unusual event, such as a vehicular collision, or, here, the collapse of a neighboring structure, would be excluded. The argument raised by Rutgers on appeal would have improperly required the jury to conflate those issues.2

In short, we find no error, much less plain error, in the jury charges or the interrogatories here.

III.

We now turn briefly to plaintiff's cross-appeal. Plaintiff argues that the jury verdict was not properly supported by expert testimony, as the verdict was lower than both the parties' experts' calculations of the loss. New Jersey has adopted the "broad evidence rule" in reviewing appraisal awards. Elberon Bathing Co. v. Ambassador Ins. Co., 77 N.J. 1, 13-14 (1978). Under the broad evidence rule, the fact-finder uses calculations of both fair market value and replacement cost less depreciation as "guidelines, along with any other relevant evidence" to come to a conclusion. The criteria "do not bind the fact-finder." Id. at 13.

Here, there is no indication that the jury did not give reasonable consideration to the relevant evidence in this case. Under Elberson, the jury is not required to accept the expert testimony of either party. As defendant notes, there were many separate variables to which the jury may have given weight when determining the appropriate value of the property, including age and condition of the building, market conditions, the location of the building, etc. The jury not only heard the testimony of multiple experts, including each expert's methodology, but also viewed pictures of the property. Accordingly, plaintiff's argument is without merit.

Affirmed.

1 The Commercial Package Policy issued by Rutgers is an eighty-page document containing scores of provisions granting, limiting and excluding various coverages and governing the payment of claims. We have limited our review to the sections of the policy deemed relevant by the parties. We express no view as to whether any other provision of the policy would require or exclude coverage. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234-35 (1973) ("It is a well-settled principle that our appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available 'unless the questions so raised on appeal go to the jurisdiction of the trial court or concern matters of great public interest.'" Reynolds Offset Co., Inc. v. Summer, 58 N.J. Super. 542, 548 (App. Div. 1959), certif. denied, 31 N.J. 554 (1960)).

2 At oral argument, Rutgers suggested that vibrations caused by a vehicle collision on the street in front of the building resulting in damage to the building, might also be excluded under the "earth movement" exclusion. This argument is without any merit whatsoever, and, as such, we will not address it in this opinion.