NATIONWIDE MUTUAL INSURANCE COMPANY v. CARIS et al, No. 1:2014cv05330 - Document 74 (D.N.J. 2016)
Court Description: OPINION. Signed by Judge Joseph H. Rodriguez on 3/14/2016. (TH, )
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NATIONWIDE MUTUAL INSURANCE COMPANY v. CARIS et al Doc. 74 UNITED STATES DISTRICT COURT DISTRICT OF NEW J ERSEY NATIONWIDE MUTUAL INS. CO., as : successor by m erger to HARLEYSVILLE MUT. INS. CO., as successor to : PENN MUTUAL INS. CO., Plaintiff, : v. Hon. J oseph H. Rodriguez Civil Action No. 14-5330 OPINION : PAUL CARIS, OLIVIA CARIS, : J EFFREY R. ULAK, MICHELLE L. ULAK, Defendants . : This m atter is before the Court on Plaintiff’s m otion to dism iss Counts II, III, and IV of the Counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) [Doc. 17] and on cross-m otion of Defendants Paul and Olivia Caris individually and as the lim ited representative of Defendant J effrey Ulak for sum m ary judgment on their Counterclaim [Doc. 36]. The Court has considered the subm issions of the parties and heard oral argument on the motion on J anuary 14, 20 16. For the reasons expressed on the record, and those set forth below, Plaintiff’s m otion to dism iss Counts II, III, and IV of the Counterclaim will be granted, and the crossm otion of Defendants for sum mary judgm ent on their Counterclaim will be denied. 1 Dockets.Justia.com BACKGROUND On August 25, 20 14, Plaintiff Nationwide Mutual Insurance Com pany filed this action seeking a declaratory judgm ent pursuant to 28 U.S.C. § 220 1(a) that it does not owe any indemnification obligation to the Defendants in connection with environm ental remediation of property located at 47 Manhasset Trail, Medford Lakes, New J ersey (the “Property”). A State court action filed in the Superior Court of New J ersey, Law Division, Burlington County, captioned Caris v. Triassic Technology, Inc., Docket No. L-1253-12, claim ed that the sellers of the Property, Defendants J effrey and Michelle Ulak, along with other defendants, 1 fraudulently subm itted closure paperwork to the New J ersey Departm ent of Environm ent Protection (“NJ DEP”), which allegedly caused dam ages to the Property buyers, Paul and Olivia Caris. See Schaberg Cert., Ex. A. It appears from the State court action that the Carises purchased the Property at issue from the Ulaks on August 14, 20 0 8 for $215,0 0 0 . Prior to this transaction, on December 21, 20 0 7, an underground storage tank was rem oved from the Property. The contractor on site observed holes in the 1 These were Triassic Technology, Inc., an environmental consulting firm , Lisa Gatone, an environm ental consultant em ployed by Triassic, Prudential Fox and Roach, a real estate agency, and Debra R. Hales, a real estate broker. 2 tank, suspected release therefrom, and reported the suspected release to the NJ DEP. The Ulaks then reported the suspected release to their insurance carrier, Farm ers Insurance Com pany, 2 which retained a consulting engineering firm to investigate. An April 23, 20 0 8 report back to Farm ers indicated that neither the soil nor the groundwater contained contam inants above allowable standards. At the same time, the sellers were going through a divorce and their realtor allegedly represented to the buyers that they m ay be able to procure the property for well below asking price. Id. On the heels of the consulting firm ’s report to the NJ DEP, on August 11, 20 0 8, the NJ DEP issued a No Further Action Letter regarding the Property. On J uly 9, 20 0 9, however, the NJ DEP notified the buyers that the No Further Action Letter issued on their Property had been rescinded due to falsified docum ents. The underlying State court action followed alleging fraud, m isrepresentation, intentional infliction of em otional distress, and breach of contract, am ong other claim s, including a Spill Act claim for strict liability against the Ulaks pursuant to N.J . Stat. Ann. § 58:10 -23.11. Id. Farm ers issued hom eowners policies to the Ulaks from J uly 31, 20 0 3 to J uly 31, 20 0 8. Com pl. ¶ 14; Schaberg Cert., Ex. C. 2 3 In J anuary 20 14, the Carises agreed to a settlement in principle with the State court defendants. Compl. ¶ 16. Those defendants agreed to fund the environmental remediation of the Property for a total of $ 60 ,0 0 0 and if the NJ DEP required further rem edial response costs, they would fund such costs based on set percentage shares. Id. On the record mem orializing the settlement, the State court indicated that the m atter was settled as to the Ulaks only as to their liability during the years they were insured by Farm ers, not the years prior when insured by Penn Mutual. Com pl. ¶ 1618. The Ulaks had obtained hom eowners’ insurance on their Property from Penn Mutual Insurance Com pany, policy no. HO 0 169735, for annual policy periods from J uly 31, 1997 to J uly 31, 20 0 3, with annual personal liability lim its of $ 30 0 ,0 0 0 per occurrence. Compl. ¶ 8; Schaberg Cert., Ex. B. On Novem ber 22, 20 0 2, Harleysville Mutual Insurance Com pany entered into an agreement with Penn Mutual whereby Harleysville Mutual agreed to acquire and succeed in interest to all of the liabilities under certain insurance policies issued by Penn Mutual (including the Penn Mutual policies held by the Ulaks). Pursuant to this transaction, Penn Mutual was legally dissolved effective J anuary 24, 20 0 5. As a result, Harleysville Mutual becam e the successor to Penn Mutual, the form er 4 insurer of the Ulaks. Com pl. ¶2. On May 1, 20 12, Nationwide then m erged with and into Harleysville Mutual, with Nationwide the sole surviving entity. That is, Harleysville Mutual ceased to exist as a legal entity as of May 1, 20 12. On March 6, 20 14, Nationwide first appeared in the State court action to oppose the Carises’ m otion for default judgm ent against Ulak. Com pl. ¶ 30 . By Order dated May 23, 20 14, the State court set the date for a proof hearing – J uly 14, 20 14. Com pl. ¶ 31. On J une 25, 20 14, Nationwide filed a m otion to intervene in the State court action to protect its rights at the proof hearing, which m otion was denied. Com pl. ¶ 32. Prior to the proof hearing, the Carises’ counsel advised the State court and Nationwide’s counsel that the Carises had reached a settlement in principle with Ulak for the years he was insured by Penn Mutual; Ulak agreed to a consent judgm ent for over $ 350 ,0 0 0 and an assignm ent of rights against Nationwide. Compl. ¶ 33. Nationwide has alleged two causes of action in its Com plaint here: 1) that there is no coverage under the Penn Mutual policies for the claim s alleged in the State court action or in the Consent J udgment because the claim s at issue do not fall within the term s, conditions, and exclusions of the Ulak policies; and 2) that the $ 389,498.16 Consent J udgm ent that the 5 Carises obtained against Ulak is unenforceable as against Nationwide because it is unreasonable and was entered into collusively and in bad faith. Com pl. at pp. 7-8. The Carises have filed a Counterclaim, which is the subject of the m otions now before the Court. Count I claim s that because the Carises are judgm ent creditors of the Ulaks, Penn Mutual is now responsible to satisfy the $ 389,498.16 Consent J udgment, plus interest from August 19, 20 14, entered in the State court action. Count II alleges that Penn Mutual violated the New J ersey Consum er Fraud Act, N.J . Stat. Ann. § 56:8-1 (“NJ CFA”), by its allegedly unconscionable business practices in failing to acknowledge or properly handle the claim against the Ulak policies. In Count III, the Carises reference the Unfair Claim s Settlement Practice Act, N.J . Stat. Ann. § 17:29B-4(9) (“UCSPA”) in claim ing that Nationwide is liable for negligence per se due to its inaction for two years regarding this claim . In Count IV, the Carises seek to hold Plaintiff accountable for bad faith. In essence, the Carises claim that Nationwide should be held liable because it abandoned the Ulaks, their insureds, and wrongly declined to defend them . See Griggs v. Bertram, 443 A.2d 163, 168 (N.J . 1982) (“[O]nce an insurer has had a reasonable opportunity to investigate, or has learned of grounds for questioning coverage, it then is under a duty 6 prom ptly to inform its insured of its intention to disclaim coverage or of the possibility that coverage will be denied or questioned. Unreasonable delay in disclaim ing coverage, or in giving notice of the possibility of such a disclaim er, even before assum ing actual control of a case or a defense of an action, can estop an insurer from later repudiating responsibility under the insurance policy.” (Citations om itted.)). Presently, Nationwide seeks dism issal of Counts II, III, and IV of the Counterclaim or, alternatively, to sever these claims and stay them until a decision is made on the original coverage issue. The Carises request sum m ary judgment on all but Count IV of their Counterclaim . Applicable Standards Federal Rule of Civil Procedure 12(b)(6) allows a court to dism iss an action for failure to state a claim upon which relief can be granted. In such cases, the District Court m ust “accept as true all of the allegations in the com plaint and all reasonable inferences that can be drawn therefrom , and view them in the light m ost favorable to the plaintiff.” Morse v. Lower Merion School Dist., 132 F.3d 90 2, 90 6 (3d Cir. 1997). A com plaint will survive a m otion to dism iss if it contains sufficient factual m atter to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 7 678 (20 0 9) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (20 0 7)). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Ashcroft, 556 U.S. at 678 (citing Twom bly, 550 U.S. at 556). “A pleading that offers ‘labels and conclusions’ or ‘a form ulaic recitation of the elements of a cause of action will not do.’ Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (internal quotations and alterations om itted). “[W]here the well-pleaded facts do not perm it the court to infer m ore than the m ere possibility of m isconduct, the com plaint has alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’” Id. at 679. “In addition to the com plaint itself, the court can review docum ents attached to the complaint and m atters of public record, and a court m ay take judicial notice of a prior judicial opinion.” McTernan v. City of York, Penn., 577 F.3d 521, 526 (3d Cir. 20 0 9) (internal citations om itted). Federal Rule of Civil Procedure 56(c) provides that sum m ary judgm ent should be granted if “pleadings, depositions, answers to interrogatories, and adm issions on file, together with affidavits, if any, show 8 that there is no genuine issue as to any m aterial fact and that the m oving party is entitled to a judgm ent as a m atter of law.” See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a m otion for sum m ary judgment, the court m ust construe all facts and inferences in the light m ost favorable to the nonm oving party. See Boyle v. Allegheny Pa., 139 F.3d 386, 393 (3d Cir. 1998). The m oving party bears the burden of establishing that no genuine issue of material fact rem ains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A fact is m aterial only if it will affect the outcom e of a lawsuit under the applicable law, and a dispute of a m aterial fact is genuine if the evidence is such that a reasonable fact finder could return a verdict for the nonm oving party. See Anderson, 477 U.S. at 252. The nonm oving party m ust present “more than a scintilla of evidence showing that there is a genuine issue for trial.” Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 20 0 5). “If the evidence is merely colorable . . . or is not significantly probative . . . sum m ary judgm ent m ay be granted.” Anderson, 477 U.S. at 249-50 (internal citations om itted). The court’s role in deciding the m erits of a sum m ary judgm ent m otion is to determ ine whether there is a genuine issue for trial, not to determ ine the credibility of the evidence or the truth of the m atter. Id. at 249. 9 Analysis The Carises argue that they are entitled to enforcement of the State court Consent J udgm ent against the Penn Mutual policy proceeds. “Given Nationwide’s failure to properly acknowledge the Carises’ claim s against the Ulaks, the failure to investigate the claim , the failure to notify their insureds, and the failure to enter an appearance that would have prevented the entry of judgment against the Ulaks, the com pany should not be perm itted to rely upon its policy terms to contest coverage.” (Def. Br. at Doc. 66, p. 33.) If there is no coverage available to the Ulaks under the Penn Mutual policies for the Consent J udgment, the Carises, as judgm ent creditors, would have no right to recover. On the record before the Court, this coverage question is replete with genuine issues of m aterial fact. Accordingly, sum mary judgment will be denied on Count I of the Counterclaim . The parties’ competing requests for declaratory judgment will proceed. NJ CFA Nationwide argues that Count II of the Counterclaim cannot survive because it does not arise out of any alleged fraud in the sale and m arketing of insurance policies, which is the only circum stance in which CFA claim s 10 m ay proceed against an insurance carrier. See Myska v. New J ersey Manufacturers Ins. Co., 114 A.3d 761, 777 (N.J . Super. Ct. App. Div. 20 15) (“[W]hile the CFA ‘encom pass[es] the sale of insurance policies as goods and services that are m arketed to consum ers,’ it was not intended as a vehicle to recover dam ages for an insurance com pany’s refusal to pay benefits.” (Quoting Lemelledo v. Beneficial Mgm t. Corp. of Am ., 696 A.2d 546, 551 (N.J . 1997)). A federal court exercising diversity jurisdiction is obliged to apply the substantive law of the state in which it sits. Erie Railroad Co. v. Tompkins, 30 4 U.S. 64 (1938). In the absence of a State Supreme Court decision directly on point, a federal court sitting in diversity m ust predict how the State’s Suprem e Court would decide the issue. McKenna v. Ortho Pharm aceutical Corp., 622 F.2d 657, 661– 62 (3d Cir. 1980 ). “Decisions of interm ediate appellate courts of the state, while not conclusive, are ‘indicia of how the state’s highest court m ight decide’ the issue.” McGowan v. University of Scranton, 759 F.2d 287, 291 (3d Cir. 1985) (quoting Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co., 652 F.2d 1165, 1167 (3d Cir. 1981)). In New J ersey, “[t]o prevail on a CFA claim , a plaintiff m ust establish three elements: ‘1) unlawful conduct by defendant; 2) an ascertainable loss 11 by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss.’” Zaman v. Felton, 98 A.3d 50 3 (N.J . 20 14) (quoting Bosland v. Warnock Dodge, Inc., 964 A.2d 741 (N.J . 20 0 9)). Under the CFA, an “unlawful practice” is defined to include: unconscionable com m ercial practice, deception, fraud, false pretense, false prom ise, m isrepresentation, or the knowing, concealm ent, suppression, or om ission of any m aterial fact with intent that others rely upon such concealm ent, suppression or om ission, in connection with the sale or advertisem ent of any m erchandise or real estate, or with the subsequent perform ance of such person as aforesaid, whether or not any person has in fact been m isled, deceived or dam aged thereby. N.J . Stat. Ann. § 56:8– 2. In this case, there are no allegations that Nationwide fraudulently procured the purchase of the insurance policies issued. Rather, the claim is that Nationwide wrongly refused to pay benefits. The New J ersey Courts’ Appellate Division has recently m ade clear that such a claim cannot properly form the basis of a CFA suit. Myska, 114 A.3d at 777 (Noting “the insurance industry is already heavily regulated by the Departm ent of Insurance, m aking exclusive regulatory jurisdiction of insurance com panies, at least with respect to the payment of claim s, within the Department of Insurance.” (Citations om itted.)). This Court acknowledges the 20 0 7 language used by the Third Circuit Court of Appeals that “[t]he CFA covers fraud both in the initial sale (where 12 the seller never intends to pay), and fraud in the subsequent performance (where the seller at some point elects not to fulfill its obligations),” Weiss v. First Unum Life Ins. Co., 482 F.3d 254, 266 (3d Cir. 20 0 7), but finds that decision distinguishable from this case as the Circuit was dealing with the discontinuation of previously authorized insurance benefits in the m iddle of claim , rather than determ ination of an initial coverage dispute. Indeed, the Appellate Division considered but distinguished Weiss on the same grounds: We are not persuaded by plaintiffs’ reliance on Weiss v. First Unum Life Insurance Com pany, 482 F.3d 254 (3d Cir. 20 0 7). . . . We need not determ ine the soundness of this legal analysis because the facts in Weiss are significantly distinguishable from those at hand. The court in Weiss found the CFA applied to allegations of fraudulent discontinuation of previously authorized benefits. The Court did not discuss the precedent we have cited, which excludes determ ination of initial coverage disputes. Nikiper v. Motor Club of Am . Cos., 557 A.2d 332 (N.J . Super Ct. App. Div. 1989); Kuhnel v. CAN Ins. Cos., 731 A.2d 564 (N.J . Super Ct. App. Div. 1989) [As opposed to im plicating the m arketing or sale of insurance policies, issues involving the receipt of benefits are beyond the scope of the CFA.] Myska, 114 A.3d at 777. In predicting how the New J ersey Supreme Court would decide this issue, this Court finds Myska well-reasoned and persuasive: the CFA does not provide Plaintiffs a rem edy for Nationwide’s failure to pay benefits. See Granelli v. Chicago Title Ins. Co., 569 Fed. Appx. 125, 133 (3d Cir. 20 14) (“New J ersey courts . . . have consistently held 13 that the payment of insurance benefits is not subject to the Consum er Fraud Act.” (Quoting VanHolt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 168 (3d Cir. 1998.)). Further, as assignees of Ulak, the Carises lack standing to sue under the NJ CFA because they have not alleged that they suffered an ascertainable loss as a result of Plaintiff’s conduct. See, e.g., Levy v. Edm und Buick-Pontiac, Ltd., 637 A.2d 60 0 , 60 1 (N.J . Super. Ct. Law Div. 1993) (finding that the plaintiff was “merely the voluntary assignee of a right to pursue the claim ; he has not dem onstrated that he suffered any ascertainable loss. Plaintiff assum ed the claim , not the statutory relief afforded to the victim of the allegedly unconscionable conduct.”) (Em phasis in the original). Finally, it appears that a tort claim for fraud against an insurance carrier could not have been assigned prior to the entry of judgm ent on such a claim . See, e.g., Dransfield v. Citizens Cas. Co. of N.Y., 74 A.2d 30 4, 30 6 (N.J . 1950 ) (“While the injured person has no greater right under the policy than has the assured, he has ‘a cause of action the m om ent he is injured’ which ripens into a right of action when he recovers a judgm ent against the assured.”). For these reasons, the Court grants the motion to dism iss Count II of the Counterclaim . 14 UCSPA The Carises contend that Nationwide’s violation of claim s-handling regulations “designed to prevent precisely the harm caused by the failure to follow the regulations,” (Def. Br., p. 37), m ay be considered negligence per se. (Citing Thom pson v. Victor’s Liquor Store, 523 A.2d 269 (N.J . Super. Ct. App. Div. 1987) (finding the sale or service of alcoholic beverages to an intoxicated person or a m inor constitutes negligence per se)). However, as judgm ent creditors and assignees, the Carises lack standing to bring this claim because Ulak did not obtain a judgm ent against Nationwide for negligence. In New J ersey, “[a] tort claim is not subject to assignment prior to judgm ent.” Cherilu v. Federal Exp., 87 A.3d 269, 273 (N.J . Super. Ct. App. Div. 20 14) (citations om itted). The Carises’ assignment is potentially valid only for Ulak’s coverage claim . Moreover, to the extent the Carises allege negligence as an alternative to bad faith, they have failed to state a legally cognizable cause of action under New J ersey law. See Pickett v. Lloyd’s, 621 A.2d 445, 457 (N.J . 1993) (holding that “an insurance com pany m ay be liable to a policyholder for bad faith in the context of paying benefits under a policy. The scope of that duty is not to be equated with sim ple negligence.”). 15 Further, there is no private right of action for policyholders against their insurers based on UCSPA violations or negligence. Pickett v. Lloyd’s, 621 A.2d 445, 468 (N.J . 1993) (the UCSPA “regulatory fram ework does not create a private cause of action”); Pierzga v. Ohio Cas. Group of Ins. Cos., 50 4 A.2d 120 0 , 120 4 (N.J . Super. Ct. App. Div. 1986) (affirm ing dism issal of insured’s claims under the UCSPA, noting that the “statute applies to wrongs to the public rather than any individual and violations of the statute do not create individual or private causes of action”); ProCentury Ins. Co. v. Harbor House Club Condo. Ass’n, Inc., 652 F. Supp. 2d 552, 563 (D.N.J . 20 0 9) (dism issing insured’s com plaint to the extent it could be construed to state a cause of action under the UCSPA); Rothschild v. Forem ost Ins. Co., 653 F. Supp. 2d 526, 537 (D.N.J . 20 0 9) (holding that there is no private right of action for violations of the UCSPA and that in passing the UCSPA, the New J ersey Legislature “was prim arily concerned with addressing injuries to the public rather than providing individual citizens with another avenue of recovery against insurance providers.”). As such, Count III of the Counterclaim is dism issed. Bad faith To state a claim for bad faith denial of insurance coverage, Plaintiff m ust show: (1) the insurer lacked a reasonable basis for its denying 16 benefits, and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim . Pickett, 621 A.2d 445. Such bad faith claim s are to be analyzed in light of a “fairly debatable” standard, which posits that “[i]f a claim is ‘fairly debatable,’ no liability in tort will arise.” Pickett, 621 A.2d at 453. “Under the salutary ‘fairly debatable’ standard enunciated in Pickett, ‘a claim ant who could not have established as a m atter of law a right to sum m ary judgm ent on the substantive claim would not be entitled to assert a claim for an insurer’s bad faith refusal to pay the claim.’” Badiali v. New J ersey Mfrs. Ins. Group, 10 7 A.3d 1281, 1288 (N.J . 20 15). “In other words, if there are material issues of disputed fact which would preclude sum mary judgm ent as a m atter of law, an insured cannot m aintain a cause of action for bad faith.” Ketzner v. J ohn Hancock Mut. Life Ins. Co., 118 Fed. App’x 594, 599 (3d Cir. 20 0 4) (citation om itted). See also Tarsio v. Provident Ins. Co., 10 8 F. Supp. 2d 397, 40 1 (D.N.J . 20 0 0 ). Thus, when the insured’s complaint presents issues of m aterial fact as to the underlying claim, dism issal of a related bad faith claim is proper. Fuscarello v. Com bined Ins. Group, Ltd., 20 11 WL 4549152, at *5 (D.N.J . Sept. 29, 20 11) (dism issing plaintiff’s bad faith claim on a m otion to dism iss where insurer’s reason for refusing to pay, as alleged in the com plaint, presented disputed issues of m aterial fact as to the 17 underlying substantive claim ); Dare Inv., LLC v. Chicago Title Ins. Co., 20 11 WL 260 0 594, at * 12 (D.N.J . J une 29, 20 11) (dism issing plaintiffs bad faith claim because plaintiff could not prevail on sum m ary judgm ent for the underlying insurance claim due to the am biguity of the title policy at issue and the plaintiff’s reasonable expectations thereunder). In the case of processing delay, bad faith is established by showing no valid reasons existed to delay processing the claim and the insurance com pany knew or recklessly disregarded the fact that no valid reasons supported the delay.” Pickett, 621 A.2d at 457-58. “Although applied in slightly different circum stances, the ‘fairly debatable’ and ‘unreasonable delay’ tests are ‘essentially the same.’” J ohnson v. Liberty Mut. Ins. Co., No. 10 – 0 494, 20 10 WL 2560 489, at *2 (D.N.J . J une 24, 20 10 ) (quoting Pickett, 621 A.2d at 454). “[M]ere failure to settle a debatable claim does not constitute bad faith.” Badiali, 10 7 A.3d at 1288 (citations om itted). In Count IV of their Counterclaim , the Carises generally allege that Nationwide failed to properly confirm the Carises’ claim s, failed to properly handle the claim s, failed to investigate the facts underlying coverage, failed to issue an adequate denial of coverage, failed to adequately reserve their rights, failed to have the claim s handled by an authorized agent of a com pany licensed to produce and handle hom eowners insurance in New 18 J ersey, failed to com ply with any of the m inim um handling procedures and deadlines set forth in the New J ersey Insurance Regulations, engaged in Fraudulent Trade Practices, and have accused its own policyholder and the Carises of fraud. The Carises cannot establish that Nationwide lacked a reasonable basis to deny the J anuary 20 13 claim or that Nationwide’s coverage position -- that the State court action did not allege “property dam age” caused by an occurrence prior to 20 0 3 -- was otherwise not fairly debatable. When a carrier proffers “plausible reasons for the denial of coverage” and “dem onstrates that there is, at the very least, genuine questions regarding whether [an insured’s] claim s fall within the coverage provided,” dism issal of a related bad faith claim is proper, even on a m otion to dism iss. New J ersey Title Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, No. 11CV-0 630 DMC J AD, 20 11 WL 6887130 , at *7 (D.N.J . 20 11); see also Fuscellaro v. Com bined Ins. Group, Ltd., 20 11 WL 4549152, at *5 (D.N.J . 20 11) (dism issing bad faith claim on a m otion to dism iss). Under New J ersey law, liability policies only respond to alleged dam age that occurs during an insurer’s policy period. Quincy Mut. Fire Ins. Co. v. Borough of Bellm awr, 799 A.2d 499, 50 2 (N.J . 20 0 2) (“insurance policies cover losses resulting only from ‘occurrences’ that take place during 19 the policy period.”). In the case of coverage for alleged progressive environmental property dam age, New J ersey requires the insured to bear the burden to prove that groundwater contam ination occurred during a policy period in order to trigger coverage. Carter-Wallace v. Adm iral Ins. Co., 712 A.2d 1116, 1125 (N.J . 1998) (citations om itted); Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 483 A.2d 40 2, 40 9 (N.J . 1984) (where the issue “is whether there was a contract of insurance in effect when an incident occurred, [it is] the party claim ing coverage [that] has the burden of proof”). Because this Court finds that Nationwide’s denial of benefits was fairly debatable, the Carises’ claim of bad faith cannot survive. Conclusion For these reasons, as well as those expressed on the record during oral argument, Plaintiff’s m otion to dism iss Counts II, III, and IV of the Counterclaim will be granted, and the cross-m otion of Defendants for sum m ary judgment on their Counterclaim will be denied. An appropriate Order will be entered. Dated: March 14, 20 16 /s/ J oseph H. Rodriguez J OSEPH H. RODRIGUEZ U.S.D.J . 20
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