BOB MEYER COMMUNITIES, INC. VS. OHIO CASUALTY INSURANCE COMPANY (L-1750-16, BURLINGTON 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NOT FOR PUBLICATION WITHOUT THE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-4526-18T3
BOB MEYER COMMUNITIES,
INC.,
Plaintiff-Appellant,
v.
OHIO CASUALTY INSURANCE
COMPANY, and AMERICAN FIRE
AND CASUALTY COMPANY,
Defendants-Respondents,
and
HARLEYSVILLE INSURANCE
COMPANY,
Defendant.
______________________________
Argued telephonically September 14, 2020 –
Decided October 5, 2020
Before Judges Messano and Smith.
On appeal from the Superior Court of New Jersey, Law
Division, Burlington County, Docket No. L-1750-16.
Ryan Milun argued the cause for appellant (The Killian
Firm, PC, attorneys; Ryan Milun, on the briefs).
John T. Coyne argued the cause for respondents
(McElroy, Deutsch, Mulvaney & Carpenter, LLP,
attorneys; John T. Coyne, on the brief).
PER CURIAM
This dispute is before us for a third time. Plaintiff was the general
contractor for several homes that suffered water infiltration and damages after
construction. Bob Meyer Cmtys., Inc. v. James R. Slim Plastering, Inc., No. A-
5581-12 (App. Div. July 21, 2015) (slip op. at 2) (hereinafter Bob Meyer I).1
Defendants American Fire and Casualty Company and Ohio Casualty Insurance
Company issued plaintiff three commercial general liability (CGL) insurance
policies that provided coverage between May 2001 and July 2004. The
homeowners filed suit against plaintiff, who sought defense and indemnification
from defendants. Defendants denied coverage, and the trial court concluded
"there was no 'property damage' caused by an 'occurrence,' as defined by the
1
Although citing an unpublished opinion is generally forbidden, we do so here
to provide a full understanding of the issues presented and pursuant to the
exception in Rule 1:36-3 that permits citation "to the extent required by res
judicata, collateral estoppel, the single controversy doctrine or any other similar
principle of law[.]" See Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121, 126
n.4 (App. Div. 2012), aff'd, 220 N.J. 544 (2015).
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policies." Id. at 3. We reversed the trial court’s grant of summary judgment to
defendants. Id. at 8.
In doing so, we relied upon our then recent decision in Cypress Point
Condominium Ass'n v. Adria Towers, LLC, 441 N.J. Super. 369 (App. Div.
2015), to find that damages allegedly caused by a subcontractor’s faulty
workmanship could constitute an "occurrence" resulting in "property damage"
that was covered by the policies. Bob Meyer I, at 3–6. We specifically "d[id]
not decide whether plaintiff [was] ultimately entitled to insurance coverage
under the policies[,]" noting that "[o]n remand, defendants may raise . . .
arguments . . . to show 'that plaintiff's claims are otherwise excluded under the
terms of the policy.'" Id. at 7 (quoting Cypress Point, 441 N.J. Super. at 375).
Recognizing that it "ha[d] never addressed questions of coverage for
consequential damages caused by faulty workmanship under the . . . standard
form CGL polic[ies]" at issue, the Court subsequently affirmed our judgment in
Cypress Point. Cypress Point Condo. Ass'n v. Adria Towers, LLC, 226 N.J.
403, 421, 432 (2016).
We . . . hold that the consequential damages caused by
the subcontractors' faulty workmanship constitute
"property damage" and the event resulting in that
damage—water from rain flowing into the interior of
the property due to the subcontractors' faulty
A-4526-18T3
3
workmanship—is an "occurrence" under the plain
language of the CGL policies at issue here.
[Id. at 408 (quoting Cypress Point, 441 N.J. Super. at
376).]
In the interim, faced with defendants' denial of coverage, plaintiff settled
claims made by seven individual homeowners and sought to recover defense
costs and indemnification from defendants. Bob Meyer Cmtys., Inc. v. Ohio
Cas. Ins. Co., No. A-2171-17 (App. Div. May 25, 2018) (slip op. at 2–3)
(hereinafter Bob Meyer II). Because multiple insurance policies, including one
issued by Harleysville Insurance Company, were implicated, the timing of any
"occurrence" and the nature and cause of any damages became critical in
determining coverage under defendants' policies, and defendants successfully
barred plaintiff's expert's opinion on those issues as a net opinion. 2 Bob Meyer
I at 4–6.
We granted plaintiff leave to appeal and again reversed the Law Division.
Bob Meyer II at 9–10. We concluded that although the expert's opinion about
when the homes' external sheathing became non-functional was a "net
opinion[,]" "there [was] no reason to limit [the expert's] testimony about other
2
We are advised that plaintiff settled with Harleysville Insurance Company, a
defendant in the original declaratory judgment action.
A-4526-18T3
4
damage that occurred to the sheathing or any part of an exterior wall system in
any of the subject homes, and when such damage took place." Ibid.
Plaintiff and defendants thereafter filed motions for summary judgment.
Among other things, plaintiff sought a declaration that "all of [defendants']
policies . . . [were] triggered for coverage," and "there was property damage
caused by an occurrence within [defendants'] policy periods." Plaintiff also
sought reimbursement "for the reasonable settlements it entered into with the
homeowners . . . [totaling] $994,490." Relying primarily on Griggs v. Bertram,
88 N.J. 347, 364 (1982), plaintiff contended that because defendants
"wrongfully refused coverage[,]" causing plaintiff to defend itself against claims
covered by the policy and ultimately settle those claims, defendants were liable
for the entire settlement amounts if they were "reasonable and . . . made in good
faith[.]"
In a thorough oral decision, the judge granted in part and denied in part
plaintiff's motion. Relying on our decision in Air Master & Cooling, Inc. v.
Selective Insurance Co. of America, 452 N.J. Super. 35 (App. Div. 2017), she
concluded that defendants' policies were implicated and their coverage
A-4526-18T3
5
triggered.3 However, declining to "read Griggs quite as broadly as plaintiff[,]"
the judge concluded there were material factual disputes as to the reasonableness
of the settlements, both as to the "various liabilities of the insurers [,]" and
whether defendants were "entitled to a diminution of" their share of the
settlements "based on covered claims as opposed to uncovered claims." Plaintiff
moved for reconsideration, which the judge denied in an oral opinion.
Thereafter, the parties entered into a "high-low" settlement agreement.
Pursuant to a June 12, 2019 consent order for judgment, plaintiff reserved the
right to appeal the summary judgment and reconsideration orders "to the extent
those orders permit[ted defendants] to seek substantive and temporal allocation
of [defendants'] coverage obligations," and, hence, defendants' indemnification
obligations for the settlements plaintiff entered into with the homeowners.
Pursuant to the consent judgment, if we affirm the judge's ruling in whole or in
part, defendants must pay the lower amount to plaintiff, and if we reverse the
ruling in its entirety, defendants must pay plaintiff the higher amount .
3
In Air Master, we held that "a 'continuous trigger' theory of insurance coverage
may be applied . . . to third-party liability claims involving progressive damage
to property caused by an insured's allegedly defective construction work[,]" and
"the 'last pull' of that trigger—for purposes of ascertaining the temporal end
point of a covered occurrence—happens when the essential nature and scope of
the property damage first becomes known, or when one would have sufficient
reason to know of it." 452 N.J. Super. at 38.
A-4526-18T3
6
Plaintiff describes the appeal as asking us to decide a purely legal
question: "the single issue for consideration . . . is what are [defendants']
coverage obligations related to the settlements entered by [plaintiff] with the
various homeowners." In other words, having denied coverage, must defendants
pay the full settlement amounts if reasonable and entered in good faith? Or,
despite their denial of coverage under the policies, are defendants entitled to an
allocation determination, both temporally and substantively, i.e., whether the
homeowners' claims were for "property damage" covered under the policies?
We conclude plaintiff misconstrues longstanding precedent and affirm. 4
"Neither the duty to defend nor the duty to indemnify 'exists except with
respect to occurrences for which the policy provides coverage.'" Wear v.
Selective Ins. Co., 455 N.J. Super. 440, 455 (App. Div. 2018) (quoting Hartford
Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22 (1984)).
"By permitting the dispute of uncovered claims, courts protect both parties by
ensuring that the insurer does not incur responsibility for uncovered claims, and
that the insured is entitled to both defense and indemnity if the dispute is
4
A consent judgment is generally not appealable. Winberry v. Salisbury, 5 N.J.
240, 255 (1950). However, our review of an interlocutory order may be
permitted as of right if an "economic stake" hinges on resolution of the appeal,
see Janicky v. Point Bay Fuel, Inc., 410 N.J. Super. 203, 207 (App. Div. 2009),
as it does in this case.
A-4526-18T3
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resolved in its favor." Passaic Valley Sewerage Comm'rs v. St. Paul Fire &
Marine Ins. Co., 206 N.J. 596, 617 (2011) (citing N.J. Mfrs. Ins. Co. v. Vizcaino,
392 N.J. Super. 366, 370 (App. Div. 2007)).
Before us, as it did before the motion judge, plaintiff relies upon Griggs.
There, "[t]he principal issue . . . [was] whether the insurance carrier, having
failed for a substantial period of time to notify its insured of the possibility of
noncoverage, was estopped to deny coverage of the claim against its insured."
Griggs, 88 N.J. at 355. The Court held that "[u]nreasonable delay in disclaiming
coverage, or in giving notice of the possibility of such a disclaimer, even before
assuming actual control of a case or a defense of an action, can estop an insurer
from later repudiating responsibility under the insurance policy." Id. at 357.
After concluding that the insurer had unreasonably delayed informing its
insured that it was denying coverage, the Court addressed "whether [the insurer]
is responsible under the policy for the payment of the settlement between [the
third-party claimant and the insured] since [the insurer] did not participate in the
settlement negotiations." Id. at 364. The Court reiterated:
Where an insurer wrongfully refused coverage and a
defense to its insured, so that the insured is obliged to
defend himself in an action later held to be covered by
the policy, the insurer is liable for the amount of the
judgment obtained against the insured or of the
settlement made by him. The only qualifications to this
A-4526-18T3
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rule are that the amount paid in settlement be
reasonable and that the payment be made in good faith.
[Ibid. (quoting Fireman's Fund Ins. Co. v. Sec. Ins. Co.
of Hartford, 72 N.J. 63, 71 (1976).]
The Court concluded that even though the personal injury action against its
insured "was not one later found to be covered by the policy," the insurer was
"estopped on equitable grounds from denying policy coverage[.]" Ibid.
Plaintiff seizes on the language we block quoted above and claims that
defendants were obligated to provide full reimbursement for the settlements
plaintiff reached with the affected homeowners, subject only to a judicial
determination that the settlements were reasonable and entered in good faith.
However, plaintiff fails to realize the narrow holding in Griggs. Unlike the
insurer in Griggs, defendants here issued a timely denial of coverage citing
specific provisions of the policies upon which the decision was based.
Defendants were initially successful in their argument, leading to a grant of
summary judgment. In Bob Meyer I, we specifically left open the issue of
whether there was, in fact, coverage under the policies. In short, there was no
basis to apply equitable principles of estoppel to bar defendants' challenge to
coverage, including a temporal and substantive allocation of covered and
uncovered claims. See Wear, 455 N.J. Super. at 458 ("[A] good-faith challenge
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9
to coverage is not a breach of an obligation to defend." (citing Passaic Valley,
206 N.J. at 617)). Defendants were entitled "to dispute coverage based upon the
language" of the policies. Ibid. (citing Vizcaino, 392 N.J. Super. at 369–70).
Absent any equitable reason to bar defendants from asserting
contractual coverage defenses, plaintiff was required to prove not only that
defendants wrongfully denied coverage for the homeowners' damage claims, but
also that those claims were covered under the terms of the policy. See Polarome
Int'l, Inc. v. Greenwich Ins. Co., 404 N.J. Super. 241, 275 (App. Div. 2008)
("[I]f there is a factual dispute that, once resolved, may indicate that an
occurrence is not covered, and it is unlikely to be resolved at trial, an insurer
may deny coverage and await judicial resolution." (citing Heldor Indus., Inc. v.
Atl. Mut. Ins. Co., 229 N.J. Super. 390, 399 (App. Div. 1988))). Resolution of
that issue in plaintiff's favor would mean that defendants' obligations under the
insurance contract would translate into reimbursing plaintiff for its costs and the
settlement amounts, assuming they were reasonable and entered in good faith.
Vizcaino, 392 N.J. Super. at 370 (citing Burd v. Sussex Mut. Ins. Co., 56 N.J.
383, 388–90 (1970)).
Plaintiff claims in a footnote that the motion judge decided defendants
wrongfully denied coverage, citing a single sentence she uttered in her oral
A-4526-18T3
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decision denying reconsideration. We disagree with that interpretation.
Reading the judge's initial decision in its entirety, including the quotations we
noted above, it is quite clear she found that plaintiff had not proven, as a matter
of fact and law, that defendants had no defense to plaintiff's claims and
wrongfully denied coverage, at least with respect to damages attributable to
covered versus uncovered claims. As a result, after settling the case, plaintiff
filed this appeal specifically challenging the judge's denial of its summary
judgment motion and subsequent reconsideration motion. 5
When reviewing the grant of summary judgment, we apply the "same
standard as the motion judge." Globe Motor Co. v. Igdalev, 225 N.J. 469, 479
(2016) (quoting Bhagat v. Bhagat, 217 N.J. 22, 38 (2014)). That standard
mandates that summary judgment be granted "if the pleadings, depositions,
answers to interrogatories and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact challenged and
that the moving party is entitled to a judgment or order as a matter of law."
Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224
5
Denial of summary judgment is interlocutory and not appealable of right,
because the denial of summary judgment "decides nothing and merely reserves
issues for future disposition." Gonzales v. Ideal Tile Importing Co., 371 N.J.
Super. 349, 356 (App. Div. 2004). However, plaintiff sought leave to appeal on
an interlocutory basis and a panel of our colleagues denied that request.
A-4526-18T3
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N.J. 189, 199 (2016) (quoting R. 4:46-2(c)). Most importantly for the purposes
of this appeal,
when the movant is the plaintiff, the motion court must
view the record with all legitimate inferences drawn in
the defendant's favor and decide whether a reasonable
factfinder could determine that the plaintiff has not met
its burden of proof. If a reasonable factfinder could
decide in the defendant's favor, then the plaintiff has
not demonstrated that it is "entitled to a judgment or
order as a matter of law" and the court must deny the
plaintiff's summary judgment motion.
[Globe Motor Co., 225 N.J. at 481 (citations omitted)
(quoting R. 4:46-2(c)).]
As already noted, defendants were well within their rights to contest the
coverage issues. Here, we agree entirely with the motion judge's assessment of
the record. Although defendants never produced an expert, there were disputed
facts as to the nature, extent and timing of the damages caused by water
infiltration of the homes at issue. The facts were properly left for a factfinder
to conclusively resolve. Resolution of those factual issues was necessary to
determine coverage under the policies, and as a result, whether defendants'
denial of coverage was wrongful. Under controlling precedent and the facts of
this case, only defendants' wrongful denial of coverage would translate into a
duty to reimburse plaintiff for reasonable settlements it entered into with the
homeowners in good faith.
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Affirmed.
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