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DOCKET NO. A-1152-09T31152-09T3










Argued April 28, 2010 - Decided

Before Judges Payne and Waugh.

On appeal from Superior Court of New Jersey,

Law Division, Ocean County, Docket No. L-43-07.

Paul E. Newell argued the cause for appellants.

Julie C. Smith argued the cause for respondent (Chierici, Chierici & Smith, attorneys; Ms. Smith, on the brief).


Plaintiffs, William and Tanja Petrick, appeal from orders of summary judgment in favor of defendant, State Farm Fire and Casualty Company, on their claims for damage to their dwelling and personal property allegedly arising from a Nor'easter storm on November 10, 2005. Apparently, water infiltrated the home, causing water damage to the interior of the structure and contents and the development of a severe mold condition that allegedly impaired the building's structural integrity.


At the time of the storm, a policy of homeowners insurance issued by State Farm was in effect. The policy had two sections. Section I covered the dwelling and personal property; Section II covered liability. The first insuring clause of Section I stated in relevant part:


We insure for accidental direct physical loss to the property described in Coverage A, except as provided in SECTION I - LOSSES NOT INSURED.


1. We do not insure for any loss to the property described in Coverage A which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through n. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:

. . . .

i. mold, fungus or wet or dry rot;

Rider FE-5440, captioned "FUNGUS (INCLUDING MOLD) EXCLUSION ENDORSEMENT," replaced paragraph i., above, with an exclusion pertaining only to wet or dry rot. However, the rider also modified paragraph 2 of "SECTION I - LOSSES NOT INSURED" so that it read:

2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of ay combination of these:

. . . .

g. Fungus, including:

. . . .

(2) any remediation of fungus from covered property or to repair, restore or replace that property;

Nonetheless, limited coverage for damage caused by fungus was restored by Rider FE-5443, entitled "FUNGUS (INCLUDING MOLD) LIMITED COVERAGE ENDORSEMENT," which provided:

Loss Not Insured 2.g., Fungus, . . . endorsed to your policy in the FUNGUS (INCLUDING MOLD) EXCLUSION ENDORSEMENT, does not apply to the extent coverage is provided by this endorsement.


The following is added:

Remediation of Fungus.

a. If fungus is the result of a covered cause of loss other than fire or lightning, we will pay for:

. . . .

(2) any remediation of fungus, including the cost or expense to:

(a) remove the fungus from covered property or to repair, restore or replace that property[.]

The policy's Declarations Page disclosed "FUNGUS (INCLUDING MOLD) LIMITED COVERAGE" in the amount of $50,000.

As stated, the policy also provided coverage for personal property, as follows:


We insure for accidental direct physical loss to property described in Coverage B caused by the following perils, except as provided in SECTION I - LOSSES NOT INSURED.

. . . .

2. Windstorm or hail. This peril does not include loss to property contained in a building caused by rain, snow, sleet, sand or dust. This limitation does not apply when the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.

A property damage claim was made, and on January 23, 2006, following an inspection of the premises, State Farm issued a draft to plaintiffs in the amount of $15,646. Additionally, by drafts issued in January, May and August 2006, State Farm paid its policy limits of $50,000 pursuant to the fungus endorsement to the policy. It has also paid a substantial sum for plaintiffs' living expenses pursuant to a claim that has now been resolved. It appears that work on the house ceased in the summer of 2006.

In August 2006, plaintiffs retained Gillespie Engineering Inc. to perform a visual inspection of the house. In a report dated August 29, 2006, the company's principal, Valerie K. Gillespie, P.E., opined that: "Storm water remediation was not performed in a timely manner and as a result mold formed and attacked finish materials and underlying timber structural members." She noted that mold remediation had been performed two times, and although most of the surface mold has been removed, mold spores remained. Gillespie stated that the purpose of her site visit was "to determine if the timber structure had been damaged or compromised beyond repair due to the water infiltration and subsequent mold infestation within the building. Gillespie summarized her findings with respect to the timber structure as follows:

The surface mold on the timber beams, studs, and other structural members has been removed; however, the wood is damaged.

Decay fungi grow when wood members are exposed to chronic moisture. Decay fungi attack beyond the surface of the wood into the structural polymers of the fiber, reducing its strength. . . .

The Petrick residence has had remediation without success two times. General guides would dictate that porous and semi-porous materials that contain a carbon source are easily accessible to mold and should be removed.

Once the fungus is in the wood, it will take some time for the wood to deteriorate to a level whether the damage is visually obvious. However, the strength of the wood will start to diminish almost immediately without visual signs of distress or damage. Retaining affected timber presents problems for the structural integrity of the building and falling debris can be a hazard to occupants and others if decay progresses.

As the result of her findings, Gillespie recommended replacing of "all affected wood structural members," treating the masonry foundation walls, and casting a concrete slab in the crawl space with a moisture barrier. To do this work, she stated: "Economically, it will be more cost effective to demolish the structure to foundation, remove 3 inches of soil from the crawl space, place a vapor barrier on the compacted soil, cast a 3" thick concrete slab and then rebuild the house." Gillespie's report was supplied to State Farm, but in a letter dated September 27, 2006, the company denied further coverage, stating that insurance available pursuant to the policy's fungus endorsement had been exhausted.

On December 18, 2006, counsel for plaintiffs filed suit against State Farm. In a single-count complaint, plaintiffs alleged property damage to their dwelling, and they demanded judgment "[h]olding that there is coverage under the dwelling portions of the policy allowing for indemnification of the Plaintiffs up to the policy limits for the removal and rebuilding of the residence structure."

On February 20, 2007, State Farm moved for summary judgment, which was denied without prejudice after partial argument before the court. On May 22, 2007, State Farm renewed its motion, and plaintiff cross-moved to amend its complaint to assert a claim for living expenses. Both motions were granted following oral argument on August 3, 2007. In granting summary judgment to State Farm on Count I of plaintiffs' complaint, the motion judge found that coverage for the damages sought by plaintiffs was clearly limited to $50,000, and that amount had been paid.

Following the entry of an order of partial summary judgment on August 3, 2007 and an amended order on August 17, 2007, discovery proceeded in the matter, with considerable motion practice occasioned by the failure of plaintiffs to comply with discovery obligations. During this period, plaintiffs' counsel was suspended from the practice of law and eventually disbarred.

New counsel entered an appearance for plaintiffs on June 7, 2008. On April 2, 2009, plaintiffs filed a notice of motion to vacate the order of partial summary judgment entered in favor of State Farm in the matter and, in the alternative, to permit plaintiffs to amend their complaint to assert a claim for structural damage caused by water intrusion excluding mold damage in the mount of $49,500 and for loss of personal property in the amount of $377,830. In support of the property damage claim, plaintiffs offered an construction estimate by Dennis Rockerfellar General Contracting LLC, dated December 7, 2008, that included items such as disconnecting the existing deck and installing copper flashing, adding soffits and gutters, removing and replacing sliding doors and windows, replacing all vinyl siding, wrapping the house with a tyvek-type paper, and replacing damaged sheetrock. The estimate, issued three years after the event, did not state which repairs related solely to damage caused by water infiltration on November 10, 2005. State Farm responded by filing an additional motion for summary judgment.

In an order dated May 28, 2009, the judge denied without prejudice plaintiffs' motion to amend Count I of their complaint to assert a structural water damage claim, finding the claim to be moot as the result of State Farm's prior payment for water damage and the lack of competent proof that its payment was insufficient to cover that damage. However, he held: "If you can come forward and show me that I'm somehow wrong and have misconstrued the circumstances, I'll certainly reconsider." No additional proofs were offered. The judge granted plaintiff's motion to amend Count II to assert a personal property claim and carried State Farm's motion for summary judgment to give the parties an opportunity to address the issue of coverage of plaintiffs' personal property claims.

On June 26, 2009, the judge granted summary judgment to State Farm on the claim for personal property as the result of the absence of evidence that wind or hail had caused an opening in the building's roof or a wall through which the water had entered. This appeal followed.

On appeal, plaintiffs present the following arguments:

POINT ONE: The Summary Judgment motion granted on June 26th, 2009 in favor of Defendant State Farm Insurance was improper because Defendant State Farm's insurance policy with insured Appellants provides for payment resulting from damaged personalty.

POINT TWO: Defendant State Farm Insurance's non-payment of claims for loss of personalty is beyond the legitimate and reasonable expectations of the insured Appellant.

POINT THREE: The Summary Judgment motions granted on August 3, 2007 and August 17, 2007 in favor of Defendant State Farm were improperly granted because the structural damages incurred as a result of the Wind-Driven Rainstorm were actual and legitimate damages.

POINT FOUR: The Court below improperly denied Plaintiff-appellant's motion to amend complaint as to proposed Count 1 of Amended Complaint which sought to specifically include structural water damage on May 28, 2009.

We affirm.


In plaintiffs' first argument, they challenge the motion judge's grant of summary judgment on their claim for loss of personalty. In reviewing the record in the matter we, like the trial judge, must determine whether "the competent evidential materials presented, when viewed in the light most favorable to the [plaintiffs], are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see also Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998) (applying the Brill standard to our appellate review). We review the judge's legal conclusions de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

As we have stated previously, Coverage B, relating to personal property, excludes "loss to property contained in a building caused by rain" unless "the direct force of wind . . . damages the building causing an opening in a roof or wall and the rain . . . enters through this opening." At oral argument, plaintiffs' counsel conceded that plaintiffs did not know how the water had entered the house. They did not claim that a hole in the roof existed, and they had no repair records or estimates to demonstrate that an opening had been repaired after the storm. Nonetheless counsel took the position that, because water entered the home, there must have been an opening somewhere, and because the policy did not define "opening," evidence of water infiltration was sufficient to trigger coverage. "The water could not have breached [plaintiffs'] home and caused damage in the first place without the existence of an 'opening' or 'openings.'"

In this case, plaintiffs bear the burden of establishing that their claim came within the policy's terms. Cobra Prods. v. Federal Ins. Co., 317 N.J. Super. 392, 401 (App. Div. 1998) (citing Diamond Shamrock Chems. Co. v. Aetna Cas. & Sur. Co., 258 N.J. Super. 167, 216 (App. Div. 1992), certif. denied, 134 N.J. 481 (1993)), certif. denied, 160 N.J. 89 (1999). The insurer bears the burden of establishing the applicability of an exclusion. Ibid. (citing Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 26 (1984)).

Plaintiffs claim to have met their burden in a post hoc fashion by demonstrating that, because moisture intruded into their house, there must have been an "opening." Then, they seek to relieve themselves of locating the opening by stating that "opening" is undefined, and therefore could have been something as miniscule as a crack incapable of ready detection. However, plaintiffs have misperceived their burden. In accordance with the policy, they must establish that the opening was caused by a direct force of wind. They have not done so.

Further, an ambiguity exists only when the "phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 428-29 (App. Div. 2004) (citing Lee v. Gen. Accident Ins. Co., 337 N.J. Super. 509, 513 (App. Div. 2001)). However, research has disclosed no case in which this policy phrase, utilized frequently in windstorm insurance, has been found to be ambiguous. Indeed, in Brindley v. Firemen's Ins. Co. of Newark, 35 N.J. Super. 1, 8 (App. Div. 1955) we accepted as valid the distinction that plaintiffs seek to elide when we required proof of "openings in the roof or walls caused by the direct action of the wind" rather than "by seepage of wind-driven rain through preexisting interstices." Compare Victory Peach Croup, Inc. v. Greater N.Y. Mut. Ins. Co., 310 N.J. Super. 82, 89 (App. Div. 1998) (finding coverage when wind ripped protective tarpaulins off roof, permitting rain to enter openings in building caused by uncompleted repairs).

We further do not regard coverage for damage from seepage of wind-driven to have been reasonably contemplated by plaintiffs when they acquired their insurance. If that coverage were found to exist, State Farm would become the insurer of all water damage to personalty caused by inadequate or delayed maintenance of a premises. That is clearly a risk that the insurer did not agree and could not reasonably be found to have agreed to assume. We will not write for plaintiffs a better policy of insurance than the one purchased. Victory Peach, supra, 310 N.J. Super. at 90 (citing Voorhees v. Preferred Mut. Ins. Co., 121 N.J. 530, 537 (1990)).

We thus find applicable the policy's exclusion of "loss to property contained in a building caused by rain, snow, sleet, sand or dust." The Court has held that "exclusions 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, 85 (1997) (quoting Doto v. Russo, 140 N.J. 544, 559 (1995)). We find that the exclusion in this case satisfies those criteria.


Plaintiffs also argue that it was improper for the motion judge to grant summary judgment on their claim for property damage. In support of that position, plaintiffs rely on Gillespie's expert report, and they claim that because the mold infestation resulted from water infiltration, they were entitled to damages greater than those provided pursuant to the fungus endorsement. We do not accept this argument.

As we have previously noted, Gillespie's conclusion that plaintiffs' home should be razed was based upon an alleged lack of structural integrity caused by mold or fungus. The policy issued by State Farm included Rider FE-5440, which contained a sequential loss provision excluding damage caused by fungus regardless of "other causes of the loss" or "whether other causes acted concurrently or in any sequence with the excluded event to produce the loss." Although an exception to this exclusion was provided in Rider FE-5443's limited coverage endorsement for fungus, that endorsement limited coverage to $50,000, and that amount unquestionably has been paid.

The validity of sequential loss provisions has not been addressed in New Jersey, although in one decision, we made reference to such a provision and suggested that we would find it enforceable, as not violative of public policy. See Simonetti, supra, 372 N.J. Super. at 431. There, in the context of a mold claim allegedly caused by poor workmanship on the part of the builder, we stated:

The fact that two or more identifiable causes one a covered event and one excluded may contribute to a single property loss does not necessarily bar coverage. In the first place, the Selective policy does not contain an anti-concurrent or anti-sequential clause in Exclusion 2a dealing with faulty design, workmanship and maintenance, which would exclude coverage when a prescribed excluded peril, alongside a covered peril, either simultaneously or sequentially, causes damage to the insured. See Assurance Co. of America, Inc. v. Jay-Mar, Inc., 38 F. Supp. 2d 349, 352-354 (D.N.J. 1999). Significantly, however, Selective did include such an anti-sequential and anti-concurrent clause in Exclusion 1 for Earth Movement, etc., evidencing a clear intention to bar coverage in the latter, but not the former.


In the portion of the Jay-Mar decision to which we made reference in Simonetti, the federal district court discussed public policy objections to such clauses and, after recognizing the lack of statutory or judicial prohibitions against their existence in New Jersey and determining that the majority of the courts construing those clauses had found them enforceable, the court ruled:

Because the New Jersey Supreme Court has not given this Court reason to believe otherwise, this Court finds that New Jersey would follow the majority rule regarding loss due to sequential causes: there is no violation of public policy when parties to an insurance contract agree that there will be no coverage for loss due to sequential causes even where the first or the last cause is an included cause of loss.

[Assurance Co. of Am. v. Jay-Mar, 38 F. Supp. 2d 349, 354 (D.N.J. 1999).]

Plaintiffs have offered no argument to the contrary. As a result, we find the anti-sequential clause contained in State Farm's policy enforceable as not contrary to public policy particularly since another policy rider restored limited coverage for the risk.

We find no evidence in the record of structural damage attributable solely to water infiltration. Further, we discern nothing in the record that would suggest that compensation remained unpaid for any of plaintiffs' damages that were attributable only to water infiltration. As a consequence, we agree with the trial judge that no factual basis had been asserted that would have permitted an amendment to plaintiffs' complaint. We affirm his denial of that relief.



Moreover, it is not clear that the contractor would have been qualified to render such an opinion.





August 13, 2010