ALMEEN PALMER VS. NEW JERSEY STATE PAROLE BOARD (NEW JERSEY STATE PAROLE BOARD)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2472-14T2
STATE OF NEW JERSEY and
NEW JERSEY DEPARTMENT OF
EDUCATION,
Plaintiffs-Appellants,
v.
STAR INSURANCE COMPANY and
MEADOWBROOK, INC.,
Defendants-Respondents.
______________________________
Argued March 8, 2016 – Decided June 10, 2016
Before Judges Reisner and Hoffman.
On appeal from the Superior Court of New
Jersey, Law Division, Mercer County, Docket
No. L-2923-12.
Carlton T. Spiller argued the cause for
appellants (Greenbaum, Rowe, Smith, & Davis,
L.L.P., attorneys; Mr. Spiller, of counsel
and on the briefs, Steven B. Gladis, on the
briefs).
Thomas E. Schorr argued the cause for
respondents (Smith, Stratton, Wise, Heher &
Brennan, L.L.P., attorneys; Mr. Schorr, on
the brief).
PER CURIAM
In this insurance coverage dispute, plaintiffs State of New
Jersey and New Jersey Department of Education (collectively, the
State), appeal from a December 17, 2014 order granting summary
judgment in favor of defendants Star Insurance Company and
Meadowbrook, Inc. (collectively, Star).
We review the grant of summary judgment de novo, using the
same legal standard as the trial court. Town of Kearny v.
Brandt, 214 N.J. 76, 91 (2013); see Brill v. Guardian Life Ins.
Co. of Am., 142 N.J. 520, 540 (1995). Like the trial court, we
consider whether there are material facts in dispute, and if
not, whether the undisputed facts, viewed most favorably 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.'" Town of Kearny, supra, 214 N.J. at 91
(quoting Brill, supra, 142 N.J. at 540). We owe no deference to
the trial court's legal interpretations, including its
construction of an insurance contract. See Selective Ins. Co.
of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597,
605 (2012) (citations omitted); Princeton S. Inv., LLC v. First
Am. Title Ins. Co., 437 N.J. Super. 283, 287 (App. Div. 2014).
Having reviewed the record with those standards in mind, we
agree with the trial court that the commercial general liability
policy, which Star issued to the Newark Public Schools (the
District), did not cover the State. Accordingly, we affirm the
order on appeal.
I
2 A-2472-14T2
The Star policy was issued on July 1, 2007. The
declarations page listed "Newark Public Schools" as the named
insured, and "2 Cedar Street Newark, NJ 07012" appeared as the
insured's address on both the policy and the application for
insurance. In addition to the named insured and its employees,
the policy provided coverage to anyone "acting as [a] real
estate manager" for the named insured. The policy did not
define the term "real estate manager." The policy did not list
the State as an additional insured, nor did it identify the
Newark Public Schools as a State-operated school district.
The coverage dispute concerned litigation arising from a
2007 incident in which six gang members attacked four
individuals who were sitting in a District school yard at night.
Aeriel v. State Operated School Dist. for the City of Newark,
No. ESX-L-4320-08. Three of the victims were killed and the
fourth was severely injured. In 2008, the surviving victim and
the administrators of the deceased victims' estates (the Aeriel
plaintiffs) filed a complaint against the attackers, the
District, and its State-appointed school superintendent, Dr.
Marion Bolden.1
1 When a local school district fails or is unable to provide a
thorough and efficient system of public education, the Education
Act (Act) authorizes the State Department of Education to
intervene by removing the local board of education and creating
a state-operated school district. See N.J.S.A. 18A:7A-1 to -52;
(continued)
3 A-2472-14T2
The Aeriel plaintiffs also sued the State, on the theory
that, because the District was under the State's control,
pursuant to the Education Act, the State was liable for failing
to maintain the school yard in a safe condition. In defending
against the Aeriel lawsuit, the State produced legally competent
evidence that it had no responsibility for managing or
maintaining the District's real estate. That evidence, which
included Dr. Bolden's sworn testimony, was later presented as
part of Star's summary judgment motion in the insurance coverage
case.
In the Aeriel lawsuit, Star defended and indemnified the
District as its named insured and the superintendent as a
District employee. In 2012, a few months before the scheduled
trial date, the State asserted for the first time that it was
(continued)
Contini v. Bd. of Educ. of Newark, 286 N.J. Super. 106, 128-29
(App. Div. 1995), certif. denied, 145 N.J. 372 (1996). However,
"[a] school district placed under full or partial State
intervention" does not thereby become a State agency; rather it
"shall remain a corporate entity." N.J.S.A. 18A:7A-37. The
State intervened in the District in 1995. See Contini, supra,
286 N.J. Super. at 113. Due to its intervention, the State was
authorized to appoint a State district superintendent to
"[p]erform all acts and do all things, consistent with law and
the rules of the State board, necessary for the lawful and
proper conduct, equipment and maintenance of the public schools
of the district." N.J.S.A. 18A:7A-38. A superintendent
appointed under the Act is paid by the District and is
considered a District employee, not a State employee, but is
entitled to tort immunity as though she were a State officer.
N.J.S.A. 18A:7A-35(b).
4 A-2472-14T2
entitled to coverage under the Star policy. Star denied
coverage, and in December 2012, the State filed the insurance
coverage lawsuit that gave rise to this appeal. In 2013, the
Aeriel lawsuit was settled mid-trial, with Star paying two
million dollars on behalf of the District and the
superintendent, and the State paying three million dollars.
II
On this appeal, as in the trial court, the State claims
coverage under three theories: the State should be deemed
covered under the policy as the District's "real estate
manager"; the State was an additional insured because the listed
insured's name - "the Newark Public Schools" - was ambiguous and
should be construed as covering the State; and the State was an
"implied insured" under the policy. We find no merit in any of
those contentions.
Relying on First National Bank of Palmerton v. Motor Club
of America Insurance Company, 310 N.J. Super. 1 (App Div. 1997),
the State contends that it is entitled to coverage under the
policy definition of "an insured," which includes "[a]ny person
(other than your employee), or any organization while acting as
your real estate manager."
In Palmerton, the bank, which was the mortgagee in
possession of an apartment complex, sought defense and indemnity
under the mortgagor's insurance policy, after someone fell and
5 A-2472-14T2
was injured on the complex premises. In that case, the mortgage
documents required the mortgagor to insure the property, and
provided that, "in the event of default, the Bank could take
possession of the premises," id. at 3, and could also "assume
operation of the property, including leasing, collecting rent,
repairing, and maintaining the premises." Id. at 4.
The mortgagor's insurance policy contained the same clause
as in this case, extending coverage to the insured's "real
estate manager." However, the policy also clearly acknowledged
the existence of the mortgage and specifically "allowed the
mortgagee to receive loss payments after the commencement of a
foreclosure." Ibid. Under those circumstances, we held that
[w]hether plaintiff was a "real estate
manager" is to be determined by the language
of the mortgage and security agreement, and
the language of the insurance policy.
Pursuant to the mortgage and security
agreement, in the event of a default, the
mortgagors consented to plaintiff having the
right to take possession and assume
operation of the property, and for plaintiff
to act in the mortgagors' place. A
reasonable interpretation of the insurance
policy is that a "real estate manager" would
include a mortgagee in possession such as
plaintiff.
[Id. at 5.]
We also considered that the insurance company was well
aware that the insured had a mortgage, and the policy included
coverage for mortgagees. In that context, there was "no added
6 A-2472-14T2
risk" involved in deeming the mortgagee in possession to be a
real estate manager:
In a situation such as this, where an
insurer issues a policy knowing that the
property is subject to a mortgage, and in
fact the policy itself contains a standard
mortgage clause extending coverage to
mortgage holders, there is no added risk.
At the time the policy was issued, it was
foreseeable that a mortgagee could take
possession and control of the property in
the event of default. We perceive no
meaningful distinction between the role of a
receiver, real estate manager, or that of a
mortgagee in possession.
[Id. at 9-10 (citations omitted).]
We agree with the trial judge that Palmerton is not on
point here. Unlike Palmerton, the insurance policy here did not
acknowledge the District's relationship with the State or put
the insurer on notice that it might be called upon to insure the
State as well as the District.
Moreover, we conclude that it is too great a stretch to
consider the State as the District's "real estate manager" based
on Bolden's general statutory authority as superintendent under
the Education Act. In support of its argument, the State cites
the superintendent's "power to perform all acts and do all
things that the [State Education] commissioner deems necessary
for the proper conduct, maintenance and supervision of the
schools in the district." N.J.S.A. 18A:7A-35(e). The State also
argues that, under the Act, the State district superintendent
7 A-2472-14T2
"may be given the power to . . . [p]erform all acts and do all
things, consistent with law and the rules of the State board,
necessary for the lawful and proper conduct, equipment and
maintenance of the public schools of the district." N.J.S.A.
18A:7A-38(b).
However, the aim of the Act is not to make the
superintendent into a real estate manager, or its equivalent,
but to put the superintendent in charge of the District's
educational policies and practices. N.J.S.A. 18A:7A-35, -49;
see also Contini, supra, 286 N.J. Super. at 128-29. By
contrast, a mortgagee's central and predictable purpose in
taking possession of a foreclosed property is to manage the real
estate. For that reason, Palmerton found "no meaningful
distinction" between a receiver, a real estate manager, and a
mortgagee in possession.2 See Palmerton, supra, 310 N.J. Super.
at 9-10.
Moreover, the undisputed record evidence in this case is
that Bolden did not take over the District's function of keeping
up its property, but she instead left that responsibility in the
2 In context, we understand the term "receiver" to refer to a
rent receiver, typically appointed by the court to manage real
property where a mortgagor is in default but the mortgagee does
not wish to take possession of the premises. See Kaufman v.
Duncan Inv'rs, L.P., 368 N.J. Super. 501, 506 (App. Div. 2004);
Mony Life Ins. Co. v. Paramus Parkway Bldg., Ltd., 364 N.J.
Super. 92, 97 n.1 (App. Div. 2003).
8 A-2472-14T2
hands of the District's employees. Further, although she took
direction from the State, by law Bolden was an employee of the
District and thus was covered under the Star policy as a
District employee. Hence, even if she were also deemed to be a
"real estate manager," she was the District's manager and not
the State's manager.
We likewise cannot agree with the State's claim that the
policy was ambiguous or that Star intended to write coverage for
the State as an additional insured. Courts "conceive a genuine
ambiguity to arise where the phrasing of the policy is so
confusing that the average policyholder cannot make out the
boundaries of coverage." Zacarias v. Allstate Ins. Co., 168
N.J. 590, 598 (2001) (citations omitted). "In that instance,
the policy should be construed to comport with the insured's
objectively reasonable expectations of coverage." Christafano
v. N.J. Mfr.'s Ins. Co., 361 N.J. Super. 228, 234 (App. Div.
2003). "Conversely, in the absence of an ambiguity, we 'should
not write for the insured a better policy of insurance than the
one purchased,'" but should instead enforce the policy as
written. Id. at 234-35 (citations omitted).
The State's citations to the record do not support its
claim that Star knew or should have known that it was writing
insurance that would cover the State, or that the District had a
reasonable expectation that the policy would cover the State.
9 A-2472-14T2
To the contrary, the request for proposals issued by the
District when it sought insurance for 2007 listed only "The
Newark Public Schools, the largest school district in the State
of New Jersey" as the proposed insured. Any reasonable reading
of the proposal would lead a bidder to understand that coverage
was being sought for the Newark public school district. There
was no mention that bidders were also being asked to write
coverage for the State or the State Education Department.
Likewise, the first line of the insurance application, which the
District submitted to Star, states: "NAME OF SCHOOL DISTRICT:
Newark Public Schools." We perceive no ambiguity in the
applicant's name, and the application did not indicate that the
District sought coverage for the State.
Nor does the record support the State's argument that Star
should have known that it was writing coverage for the State as
an additional insured, without the need for any specific notice
or application. The undisputed evidence supports the
certification submitted by Star's underwriter, attesting that
Star relied on the applicant to inform Star of any additional
insureds for whom coverage was sought. Star's and the
District's records both indicate that where the District
intended to add an insured to one of its Star-issued insurance
policies, it specifically applied for the addition of that
entity, and the addition was reflected in the declarations page
10 A-2472-14T2
of the policy. For example, the District applied to add the New
Jersey Schools Construction Corporation (NJSCC) as an additional
insured on one of its policies. Based on that application, Star
issued a policy listing NJSCC as an additional insured.
Under the Act, the District remained a corporate entity,
N.J.S.A. 18A:7A-37. It did not become synonymous with the State
by virtue of the State's intervention under the Act. In light
of Star's and the District's documented course of business
dealing, if the District intended to purchase coverage for the
State or the State Education Department as an additional
insured, it would have specifically requested that coverage.
Nor can we accept the State's theory that it was an implied
insured. The implied insured doctrine allows third parties to
be treated as beneficiaries of an insurance contract when "the
risk to the insurer is unchanged, and where a third party is
within the class intended to be benefitted by the parties to an
insurance contract." Stewart-Smith Haidinger, Inc. v. Avi-
Truck, Inc., 682 P.2d 1108, 1113 (Alaska 1984). The State
acknowledges that our courts have not adopted that theory.
However, even if we consider the argument, it is without merit.
As previously discussed, the factual record does not support the
State's argument that it was an intended beneficiary under the
policy. Moreover, Star submitted legally competent evidence
that under its underwriting guidelines, adding the State as an
11 A-2472-14T2
insured would have been deemed an additional risk, and Star
would have charged an additional premium for adding the State as
an insured. The State's additional arguments on this point are
without sufficient merit to warrant discussion in a written
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
12 A-2472-14T2