JACQUELYN FERENTZ v. MAYOR HERBERT FREDERICK BOROUGH OF WEST WILDWOOD VS. MUNICIPAL EXCESS LIABILITY JOINT INSURANCE FUND (L-0140-15 AND L-0797-08, CAPE MAY COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5628-17T2
JACQUELYN FERENTZ,
Plaintiff,
v.
MAYOR HERBERT FREDERICK,
individually and in his official
capacity, and THE BOROUGH
OF WEST WILDWOOD,
Defendants.
________________________________
BOROUGH OF WEST WILDWOOD,
Plaintiff-Appellant,
v.
MUNICIPAL EXCESS LIABILITY
JOINT INSURANCE FUND,
Defendant-Respondent.
________________________________
Submitted July 8, 2019 - Decided July 15, 2019
Before Judges Yannotti and Haas.
On appeal from the Superior Court of New Jersey, Law
Division, Cape May County, Docket Nos. L-0140-15
and L-0797-08.
Jacobs & Barbone, PA, attorneys for appellant (Louis
M. Barbone, on the brief).
Methfessel & Werbel, attorneys for respondent (Eric L.
Harrison, of counsel and on the brief; Adam N.
Levitsky, on the brief).
PER CURIAM
In this liability insurance coverage case, plaintiff Borough of West
Wildwood (Borough) filed a declaratory judgment against its insurer, defendant
Municipal Excess Liability Joint Insurance Fund (Fund), seeking an order
requiring the Fund to provide the Borough with a defense and indemnification
in a pending action brought against the Borough by one of its employees under
the New Jersey Conscientious Protection Act (CEPA), N.J.S.A. 34:19-1 to -14.
On appeal, the Borough challenges the Law Division's April 25, 2018 order
granting summary judgment to the Fund and dismissing its complaint because
the Borough deliberately breached the cooperation clause contained in its
insurance policy. We affirm.
As a threshold matter, we note that the Borough's amended notice of
appeal states that it is only appealing from the trial court's July 23, 2018 order
denying its motion for reconsideration of the April 25, 2018 summary judgment
A-5628-17T2
2
order, rather than from the summary judgment order itself. "[O]nly the judgment
or orders designated in the notice of appeal . . . are subject to the appeal process
and review[.]" 1266 Apartment Corp. v. New Horizon Deli, Inc., 368 N.J.
Super. 456, 459 (App. Div. 2004). It is well established that "if the notice
designates only the order entered on a motion for reconsideration, it is only that
proceeding and not the order that generated the reconsideration motion that may
be reviewed." Pressley & Verniero, Current N.J. Court Rules, cmt. 6.1 on R.
2:5-1(e)(1) (2019) (citing W.H. Indus. v. Fundicao Balancins, Ltda, 397 N.J.
Super. 455, 458-59 (App. Div. 2008)).
Thus, the April 25, 2018 summary judgment order is not properly before
us on appeal. Nevertheless, because the Fund has not raised this jurisdictional
issue or objected to our review of this order, we will consider the merits of the
summary judgment motion. 1 W.H. Indus., 397 N.J. Super. at 459.
1
The Borough's brief does not specifically address the July 23, 2018 order
denying its motion for reconsideration. Thus, we deem this issue to have been
abandoned. Grubb v. Borough of Hightstown, 353 N.J. Super. 333, 342 n.1
(App. Div. 2002) (explaining that an issue raised in a notice of appeal but not
briefed is abandoned). In any event, we discern no basis for disturbing the trial
court's denial of the Borough's motion for reconsideration, which essentially
repeated the same arguments the court previously considered and rejected in
granting the Fund's motion for summary judgment. Cummings v. Bahr, 295 N.J.
Super. 374, 384 (App. Div. 1996) (citing D'Atria v. D'Atria, 242 N.J. Super.
392, 401-02 (Ch. Div. 1990)).
A-5628-17T2
3
The material facts of this case are fully detailed in Judge James H.
Pickering, Jr.'s comprehensive written decision granting the Fund's motion and,
therefore, we recite only the most salient facts here. The Borough has a
"commission form of government." as permitted under the Walsh Act, N.J.S.A.
40:70-1 to 40:76-27. The three members of its Board of Commissioners (Board)
are elected to serve concurrent four-year terms. In turn, the commissioners elect
one of the members as the Borough mayor.
From 1996 through June 2008, Christopher Fox served as the Bo rough
mayor. Fox's brother worked as the Borough's chief of police during this same
period. In addition, Jacquelyn Ferentz, who had lived with Fox for many years,
and who has been described as Fox's "close personal friend, political ally[,] and
supporter of the Fox administration[,]" was appointed as a police officer in 2000.
She was later promoted to the rank of lieutenant, which was the next highest
position under Fox's brother.
New commissioners were elected to the Board in 2008. 2 A majority of the
Board members chose Herbert Frederick, a political opponent of Fox, as the new
mayor. Frederick also served as the Director of Public Safety. Shortly
thereafter, Fox's brother took an extended medical leave from the police
2
Fox did not run for reelection in the 2008 election.
A-5628-17T2
4
department and ultimately retired. In the brother's absence, Ferentz assumed
day-to-day responsibilities over the department.
Frederick attempted to reform the Borough government, including the
police department. Ferentz objected to these changes and, in July 2008, filed
several complaints with county and State law enforcement agencies accusing
Frederick of official misconduct.
In December 2008, Ferentz filed a CEPA complaint in the Law Division
against the Borough and Frederick. Among other things, Ferentz asserted that
Frederick had retaliated against her by conducting an internal investigation of
her conduct after she reported his alleged misconduct.
The Fund was the Borough's insurer for lawsuits like the one Ferentz filed.
Its policy with the Borough included a standard cooperation clause, which in
pertinent part stated:
SECTION IV – CONDITIONS
4. DUTIES IN THE EVENT OF POTENTIAL OR
ACTUAL CLAIM
c. You and any other involved Insured must:
....
(3) Cooperate with us in the
investigation, settlement or defense
of the covered Claim, and not do
A-5628-17T2
5
anything that may prejudice the
[Fund] or its potential or actual
rights of recovery.
....
(d) You agree not to settle any Claim, incur
any Defense Costs or otherwise assume
any contractual obligation or admit any
liability with respect to any claim without
the [Fund's] written consent. The [Fund]
shall not be liable for any settlement,
Defense Costs, assumed obligation or
admission to which it has not consented.
Trusting that the Borough would comply with the cooperation clause, the Fund
undertook the defense of Ferentz's lawsuit on behalf of the Borough and
Frederick.
In September 2009, Frederick completed his internal affairs investigation
of Ferentz, and a notice of disciplinary action was filed against her. The notice
charged Ferentz with a number of offenses, including making false statements
regarding the training of a law enforcement officer; unauthorized use of the
"Acting Chief of Police" and "Chief of Police" titles; and unauthorized absences
from work. The Board engaged an independent hearing officer to conduct
Ferentz's hearing and, over the next fourteen months, the hearing officer listened
to ninety-one hours of testimony over twenty-three dates, and assembled a
voluminous evidentiary record, which included 161 documents and 142 audio
A-5628-17T2
6
recordings. In July 2011, the hearing officer rendered a sixty-three-page written
decision sustaining most of the charges and recommending the termination of
Ferentz's employment. After adopting the hearing officer's recommendation,
the Board fired Ferentz in August 2011.
Ferentz responded by filing an action in lieu of prerogative writs in the
Law Division challenging her removal. The Fund did not represent the Borough
in that action because the lawsuit was not covered under the Borough's insurance
policy.
In 2012, Fox and two of his political allies won all three seats on the Board
and Fox once again assumed the position of Borough mayor. Once the Fox team
returned to office, the Borough's new solicitor contacted the Fund's attorney in
May 2012 to advise of the possibility that the newly elected Board members
might dismiss all of the charges against Ferentz. In response, the Fund's attorney
sent a letter to the solicitor reminding her that the Borough was required to
cooperate with the Fund and was barred from taking any action in the
disciplinary action against Ferentz that might prejudice the Fund's defense of
the Borough regarding Ferentz's CEPA claims. The letter also warned the
Borough that failing to consult with the Fund could result in the termination of
coverage.
A-5628-17T2
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In spite of these warnings, the new Board members, with Fox abstaining,
proceeded to pass a series of resolutions in June 2012 castigating the former
Board members for taking disciplinary action against Ferentz, declaring her
termination to be null and void, dismissing all of the disciplinary charges against
her, reinstating her to the police department, and appointing her as the new chief
of police.
The Borough provided no notice to the Fund prior to issuing these
resolutions, did not consult with the Fund's attorney, and did not submit the
resolutions for the Fund's review prior to their issuance. Nevertheless, the Fund
did not disclaim coverage of the CEPA claim at that time. The Fund's attorney
explained in his testimony that the Board had the authority to take these actions
concerning Ferentz's employment because the CEPA and employment cases
were two separate matters.
Certainly, the Board members' decision to restore Ferentz to her former
position, and to make a number of derogatory comments against the prior
members' actions, did not help the Fund's defense of the Borough against
Ferentz's CEPA claim. That being said, the Fund would still be able to point to
the fact that Frederick and the 2008-2012 Board had relied upon a
comprehensive report prepared by an independent hearing officer, who
A-5628-17T2
8
determined that the charges lodged against Ferentz were appropriate. Further,
the Fund believed it could readily demonstrate at trial that the new Board
members' decision to rescind Frederick's actions against Ferentz was itself
politically motivated in an effort to reward Fox's housemate, long-term friend,
and political ally by returning her to her former position. In short, so long as
the Fund could continue to point to the fact that Frederick conducted an
investigation that resulted in charges that were upheld by a hearing officer, the
Fund believed it would still be able mount a viable defense against Ferentz's
CEPA claim.
The Board members soon shattered that possibility. Without consulting
with the Fund, the Borough entered into a "Negotiated Settlement and General
Release" (Release) with Ferentz in October 2012. In the Release, Ferentz agreed
to dismiss her prerogative writ action against the Borough in exchange for the
Borough's agreement to reimburse her for back pay, and other benefits from the
time she was out of work. The Release did not resolve Ferentz's pending CEPA
claim and, in fact, it expressly stated that the resolution of the employment case
"in no way affects [Ferentz's] ability to pursue her remedies" in the CEPA action.
Significantly, Paragraph 6 of the Release stated:
As part of this Negotiated Settlement Agreement
and General Release, [the Borough] agree[s] not to use
A-5628-17T2
9
in any negative manner the disciplinary [action] which
is, was or could have been the subject of this proceeding
. . . against [Ferentz] in any other civil proceeding.
The only "civil proceeding" still pending between the Borough and Ferentz a t
that time was the CEPA case.
Thus, by agreeing to the Release, the Borough ensured that the Fund could
no longer use any aspect of the disciplinary charges in defense of Ferentz's
CEPA claim, and was now barred from referring at trial to: the hearing officer's
decision; the testimony and exhibits from the disciplinary hearings; the
testimony of Frederick; or anything else regarding the disciplinary action against
Ferentz. In short, the Fund could no longer assert that Frederick and the 2008-
2012 Board had a demonstrable, non-retaliatory, and legitimate basis for the
disciplinary actions taken against Ferentz.
The Borough solicitor never advised the Fund's attorney of the Release.
Instead, the Fund learned about it only after it made a document request in
January 2013 for pertinent information under the Open Public Records Act,
N.J.S.A. 47:1A-1 to -13. Once it knew of the Board's actions, the Fund's
attorney promptly advised the Borough that the Fund was disclaiming coverage
because the Borough had violated the policy's cooperation clause by destroying
the only viable defense the Borough had to the CEPA claim.
A-5628-17T2
10
The Borough's solicitor executed a substitution of attorney and indicated
that the Borough would not challenge the disclaimer of coverage if the Fund
continued to defend Frederick. The Fund agreed to do so. However, Ferentz
then voluntarily dismissed Frederick from the case. In March 2015, the Borough
filed this declaratory action against the Fund seeking coverage under the policy
for Ferentz's CEPA claim.
Before the declaratory action could be resolved, Ferentz's CEPA claim
went to trial and, relying on the Release, the trial court permitted Ferentz to
testify about her termination and the hardships she allegedly suffered before she
was reinstated, and barred the Borough from asserting that the disciplinary
action was justified based on the results of Frederick's investigation, and t he
independent hearing officer's report. Not surprisingly, the jury returned a
verdict in favor of Ferentz, and the court later entered a judgment against the
Borough in the amount of $1,766,687.40 for damages, counsel fees, and costs.
Following the verdict, Judge Pickering addressed the Borough's claim that
it was entitled to indemnification and the costs of its defense under its insurance
policy with the Fund. In a thorough and thoughtful thirty-six-page written
decision, the judge rejected the Borough's legal arguments and found that it,
A-5628-17T2
11
through the new Board members, had deliberately breached the policy's
cooperation clause.
In so ruling, Judge Pickering carefully reviewed the governing case law,
which provides that in order for a breach of a cooperation clause to provide a
basis for disclaiming coverage, the "clause must be deliberately breached in a
material or essential particular." Pearl Assur. Co. V. Watts, 58 N.J. Super. 483,
490 (App. Div. 1959) (emphasis omitted). That was clearly the case here. The
Fund's attorney specifically directed the Borough's solicitor that the Fund had to
be consulted before the Board took any actions that would vitiate any defense
the Fund might use in the CEPA action. Judge Pickering found that the evidence
clearly showed that "[d]espite that knowledge, [the Borough] forged ahead
unilaterally to settle the disciplinary appeal without consulting [the Fund], and
without consulting [the Fund] on the terms of the Release" the Borough accepted
in Ferentz's prerogative writs action.
As Judge Pickering explained, once the Release was secretly agreed upon
by Ferentz and the Borough, the Fund "was not able to present a defense that the
suspension and termination [of Ferentz] was justified, made for good cause, or
even in good faith. The municipality could not refer to the charges of the
A-5628-17T2
12
disciplinary appeal, the evidence that supported those charges, and the Hearing
Officer's decision."
Judge Pickering also rejected the Borough's contention that its breach was
insignificant because by the time it negotiated the Release, it had already issued
the resolutions criticizing Frederick's actions during his 2008-2012 term. The
judge stated:
[P]aragraph 6 of the Release bargained away a
defense. The defense at issue is not what the [new
Board members] concluded to be true in 2012 and
thereafter [when they issued the resolutions supporting
Ferentz and attacking the prior administration], but
instead what Frederick believed to be true in 2009,
2010, and 2011. Evidence of Frederick's conduct, the
hearings, and the findings of the Hearing Officer, all go
to the issue of whether Frederick reasonably believed
Ferentz had acted wrongfully. Paragraph 6 of the
Release precluded that defense.
This appeal followed.
On appeal, the Borough raises the same arguments that Judge Pickering
carefully considered and rejected in his cogent written opinion. It again claims
that its unilateral decision to bargain away what was likely its only viable
defense to Ferentz's CEPA claim "was an immaterial and inconsequential matter
incapable of being a material and deliberate breach of the cooperation clause."
The Borough also asserts that the new Board members were merely taking
A-5628-17T2
13
corrective "governmental action" to remedy a wrong they believed Frederick
had done to Fox's housemate, long-term friend, and close political ally.
Our review of a ruling on summary judgment is de novo, applying the
same legal standard as the trial court, namely, the standard set forth in Rule 4:46-
2(c). Conley v. Guerrero, 228 N.J. 339, 346 (2017). Thus, we consider, as Judge
Pickering did, whether "the competent evidential materials presented, when
viewed in the light most favorable 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 v. Brandt, 214 N.J. 76, 91 (2013) (quoting
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).
If, as here, there is no genuine issue of material fact, we must then "decide
whether the trial court correctly interpreted the law." Dickson v. Cmty. Bus
Lines, 485 N.J. Super. 522, 534-35 (App. Div. 2019) (citing Prudential Prop. &
Cas. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998)). We accord no
deference to the trial judge's conclusions of law and review these issues de novo.
Nicholas v. Mynster, 213 N.J. 463, 478 (2013). However, this court should
affirm the judgment if it concludes that the trial court's conclusions of law were
correct. Henry v. N.J. Dept. of Human Servs., 204 N.J. 320, 330 (2010).
A-5628-17T2
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We have considered the Borough's contentions in light of the record and
applicable legal principles and conclude they are without sufficient merit to
warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E). We are
satisfied that Judge Pickering properly granted summary judgment to the Fund,
and affirm substantially for the reasons expressed in his April 25, 2018 written
opinion.
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