Volume 91

INSURANCE LAW UPDATE

In a highly productive motion day, Donald Mahoney obtained grants of summary judgment in two separate cases involving dog bites by pit bulls living on property owned by insured landlords and leased to tenants that owned those pit bulls. Two separate judges hearing the cases on the same motion date concluded that the property owners were not aware of the vicious propensities of the dogs that were present on the insured property. In one of the cases, the incident involved a second facial bite in a period of three weeks.

CASES OF SIGNIFICANCE TO THE INSURANCE INDUSTRY

1. Rowe v. Bell & Gossett Co., 235 N.J. 467 – Are interrogatory answers and deposition testimony of settled defendants admissible to prove a prima facie case of fault and allocation of fault? Was the trial court correct to allow the jury to decide apportionment of fault to include the fault of the settled defendants?

2. Orientale v. Jennings, 239 N.J. 569 – When a Court considers additur or remittitur, must both parties consent to the judge’s finding before that decision is binding on both parties?

3. Shields v. Ramslee Motors, 2020 N.J. LEXIS 17 – Do commercial landlords have a non-delegable duty to keep their premises free of snow and ice when a lease provision specifically delegates the obligation for snow and ice removal to the tenant?

4. New Jersey Transit Corp v. Certain Underwriters at Lloyd’s London, 461 N.J. Super 440 – Does a sublimit in an insurance policy apply to damage claims arising from damages claims from Superstorm Sandy? Does an insurer have the right to reformation of its policy based on a claim of equitable fraud?

5. Louis v. City of Newark, 2019 N.J. Super. Unpub. LEXIS 1968 – Is a Declarations Page which gives an insured a certain expectation of coverage binding upon the carrier or must other factors be considered?  

6. DiMaria v. Travelers Ins. Group, 2019 N.J. Super. Unpub. LEXIS 2050 – In a UIM claim, does an insured have a responsibility to protect an insurer’s subrogation rights before the two-year statute of limitations expires?

7. Treadwell v. Hammond, 2019 N.J. Super. Unpub. LEXIS 2058 – Does the “exceptional circumstances” standard apply to an extension of discovery application when arbitration has been scheduled? Can a trial judge deny a motion to extend discovery without hearing oral argument?

8. G. Matts Hospitality, LLC v. Scottsdale Ins. Co., 2019 U.S. Dist. LEXIS 167795 – Was an insured bound by their insurance policy’s statute of limitations and when did the time period within which to bring suit begin to accrue?

9. Gryger v. Perkins Center for the Arts, 2019 N.J. Super. Unpub. LEXIS 2180 – Does the New Jersey Charitable Immunity Act apply to a fee-paying attendee of the charitable organization’s program?

10. Rivas v. H&M&A Dishi Yehezkel, 2019 N.J. Super. Unpub. LEXIS 2524 – Did plaintiff meet her burden of proof in an action brought under the New Jersey Tort Claims Act ? Was the court correct in limiting discovery under the “exceptional circumstances” standard?

11. Estate of Chetwynd v. Diversified Rack & Shelving, Inc. 2019 N.J. Super. Unpub. LEXIS 2587 – Did the court properly dismiss an expert report as a net opinion? Is a principal liable in negligence for the actions of its independent contractor?”

12. Cignarella v. Fitness Int’l, 2020 N.J. Super. Unpub. LEXIS 64 – What is the proper standard to apply in considering punitive damages claims? Was the trial court correct in granting summary judgment to the defendants on plaintiff’s claims for punitive damages?  

Rowe v. Bell & Gossett Co., New Jersey Supreme Court – Published Opinion

The Supreme Court decided evidentiary issues in a case that arose out of an asbestos claim brought by the plaintiff after he developed mesothelioma. In the Law Division, eight of the original defendants settled with the plaintiff before the trial. Defendant Universal Engineering Co. was the only defendant still in the case at the commencement of trial.

At trial, the defendant argued that the depositions and interrogatory answers of the settled defendants should be admitted as evidence either as testimony from prior proceedings, statements by a party-opponent, or statements against interest.

The trial court allowed into evidence excerpts from the interrogatory answers and the depositions of six of the settled defendants’ corporate representatives. The court also allowed the jury to assign a percentage of fault to the settled defendants.

The jury found in favor of the plaintiff, but Universal’s liability was reduced by the settling co-defendant’s percentage of fault. Plaintiff appealed and the Appellate Division reversed stating that the admission of the depositions and interrogatory answers was error and the case was remanded for a new trial on the allocation of fault. The New Jersey Supreme Court granted certification and ruled that the remaining defendant was required to present evidence supporting a prima facie case of fault against the settled defendants. The Supreme Court also found that the statements made in depositions and answers to interrogatories were statements against interest and thus admissible as an exception to the hearsay rule. The statements were also not required to address all the elements of a cause of action and did not need to involve a party to the suit. The Court also held that it was the jury’s prerogative to evaluate the defendant’s proofs for apportionment of fault.

Orientale v. Jennings, New Jersey Supreme Court – Published Opinion

This case arises out of a car accident in which plaintiff was permanently injured. The plaintiff settled for the full amount of defendant’s liability coverage of $100,000. Plaintiff then sought underinsured motorists benefits from her own insurance company for her damages in excess of the $100,000. At trial, a jury only awarded her $200. Since the award did not exceed $100,000, the UIM carrier, Allstate, was not required to pay plaintiff. Plaintiff moved for a new damages trial or an additur. The trial judge granted an additur, but it still did not exceed the $100,000 policy limits, and Allstate was once again not required to pay plaintiff.

On the initial appeal, the Appellate Division held that the additur was sufficient and upheld the award.

The procedural question considered by the New Jersey Supreme Court was whether additur and remittitur violate an individual’s constitutional right to a jury trial. The Court noted that traditionally, both additur and remittitur provide only one party the ability to avoid a new trial, leaving the other party bound by the judge’s decision and unable to obtain a new trial. The disadvantaged party’s only option was to appeal. Citing the New Jersey court rules, the Court ruled that both parties have the right to get a new jury trial on damages, and thus the practice of having only one party approve an additur or remittitur was unfair.

The Court further held that when a jury’s award of damages is considered a miscarriage of justice triggering a new trial, the damages amount decided by the judge must be consented to by both parties. If either party does not consent to the additur or remittitur, a new trial on damages must be granted. Likewise, the judge in an additur or remittitur must come to a fair and reasonable award that is neither the highest amount a reasonable jury would award nor the lowest amount a reasonable jury would award. The Court noted that making the award acceptable to both parties encourages settlement.

Shields v. Ramslee Motors – New Jersey Supreme Court Opinion

This case arose from a Federal Express driver’s slip and fall on ice on a driveway when delivering an envelope to Defendant car dealership. Defendant car dealership, Ramslee Motors, leased the property from 608 Tonnelle Avenue, LLC. The lease stated that Ramslee Motors, as the tenant, would maintain the premises as if it were the de facto owner of the premises. The lease also gave the landlord the right to enter the property under certain circumstances. Additionally, Ramslee Motors’ owner testified that he was responsible for clearing snow and ice and that he had the equipment to do so.

At the trial level, the plaintiff settled with Ramslee Motors and the landlord filed a motion for summary judgment. The trial court ruled that the lease made Ramslee Motors responsible for maintaining the property and that the duty to clear snow and ice could be delegated from the landlord to Ramslee Motors. The Appellate Division disagreed, saying that the lease did not specifically address snow and ice and that there was no distinction between the driveway and the sidewalk, and that as such the landlord had a non-delegable duty to clear the driveway of snow and ice.

The New Jersey Supreme Court reviewed prior case law on snow and ice removal as falling under the definition of “maintain” and “maintenance.” The Court found that the lease’s provision allowing landlord to enter the property to make repairs did not make landlord obligated to make repairs. The Court also concluded that the lease clearly assigned responsibility to Ramslee Motors to clear snow and ice.

The Court also differentiated responsibility for the driveway from responsibility for the sidewalk, noting that maintaining the driveway was a private duty and thus not in line with precedent regarding sidewalk maintenance, and that the fence separating the sidewalk from the driveway illustrates the difference in duties. The Court found that the landlord gave Ramslee Motors exclusive possession of the property, making it unfair to hold the landlord responsible for snow and ice clearance. Likewise, the landlord’s lack of control over the property showed that the landlord did not have a duty of care over the property.

Lastly, the Court applied the Hopkins factors to show that the landlord had no duty to clear snow and ice on the driveway. Specifically, the Court ruled that the plaintiff had no relationship with the landlord, that fairness placed the responsibility to address the risk on Ramslee Motors, that it would be impractical to make landlord responsible for property it did not control given that it had no presence on the property and no way to monitor the property’s conditions, and that there was no public interest factor that would create a duty.

New Jersey Transit Corp. v. Certain Underwriters at Lloyd’s London New Jersey Appellate Division – Published Opinion

The plaintiff New Jersey Transit Corp. suffered water damage due to Super Storm Sandy. New Jersey Transit had several layers of insurance coverage totaling $400 million. The standard policy form limited liability for flood losses to $100 million per occurrence. However, another part of the layered insurance scheme included the term “named windstorm” in order to define coverage within the $400 million limit.

After inspecting the damage, certain excess carriers decided that the $100 million sublimit applied for Sandy, the named windstorm. Only one carrier agreed to pay a proportional share of losses over $100 million. New Jersey Transit filed suit against the other carriers to recover over the amount of the sublimit. The Law Division judge granted New Jersey Transit’s motion for summary judgment.

On appeal, the Appellate Division interpreted the policies as covering flooding and storm surge as separate coverages according the plain language of the policies. By defining “named windstorm,” the policy was interpreted to mean that named windstorms were to be treated differently than floods. The Appellate Division also applied the proximate cause doctrine, finding that an exclusion barring coverage for losses caused by a particular event, will only apply if the event was the proximate cause of the loss. Likewise, if an event is specifically insured against, and that event sets off a series of losses, the insured event is the proximate cause of the total loss. Also, since New Jersey Transit’s policies did not specifically exclude the possibility of a series of losses, the policy’s single loss clause did not bar the proximate cause doctrine.

One insurer, Torus Specialty Insurance Company, argued that their policy should be subject to reformation due to equitable fraud. Equitable fraud applies in cases where there is either mutual mistake, or a mistake by one party accompanied by fraud or unconscionable conduct of the other party. Torus claimed that another insurer, Marsh USA, persuaded Torus to include the “named windstorm” definition for the sake of concurrency in the policies. Torus also claimed that their underwriter was misled by Marsh to think that the windstorm definition would not affect the sublimit.

The Appellate Court disagreed, stating that Marsh USA had no duty to disclose the effect of the windstorm definition and also did not make any false statements.

Therefore, summary judgment in favor of New Jersey Transit was upheld.

Louis v. City of Newark, New Jersey Appellate Division – Unpublished Opinion

A defendant insured, Nayyar Ahmed, filed a declaratory judgment seeking two million dollars of insurance coverage after a fire at his apartment building killed several tenants. The trial court ruled in favor of the insured finding that the proper amount of coverage was $2,000,000 and the insurer appealed.

Ahmed relied on his interpretation of the declarations page in his insurance policy, which listed the limits of insurance as $1,000,000/$2,000,000. Ahmed argued that the declarations page did not specifically indicate $1,000,000 per occurrence. The Appellate Division reversed pointing to a warning on the declarations page that instructs the reader of the policy to reference a specific section of the policy, which clearly spelled out that the $1,000,000 was per occurrence.

The Appellate Division further stated that the insured failed to prove that his expectation of coverage was objectively reasonable through communications about the coverage with the broker, the insurer, or the insurer’s agent. Indeed, his insurance application clearly stated that the coverage was $1,000,000 per occurrence.

DiMaria v. Travelers Insurance Group, New Jersey Appellate Division

– Unpublished Opinion

This case arose out of a car accident between an emergency vehicle driven by James Ryan DiMaria and a private individual, Michelle Rodriguez. DiMaria alleged permanent head and neck injuries and sought workers compensation benefits. Ms. Rodriguez was believed to have insurance with Farmers Insurance, which denied coverage. The city’s insurance did not have UM coverage, while DiMaria’s personal insurance, Travelers, did. However, DiMaria’s attorneys did not notify Travelers of his Uninsured Motorist claim until over two years after the accident. This placed any claim against Rodriguez beyond the statute of limitations. Travelers denied the Uninsured Motorist claim since the delay in notice prevented them from seeking subrogation through a suit against Rodriguez. DiMaria filed a declaratory judgment action against Travelers and both parties filed for summary judgment. The trial court found for Travelers due to the loss of their subrogation rights and Travelers’ inability to investigate the accident.

The Appellate Division interpreted DiMaria’s policy with Travelers by its plain meaning that obligated DiMaria to preserve Travelers’ right to subrogation even if it had not made a prior Uninsured Motorist payment. The court also placed the burden on DiMaria to prove that Travelers did not suffer prejudice through the delay. The Appellate Division further cited precedent which held that if an insurer’s right to subrogation and the right of intervention are lost, the insured is not covered by the insurer’s policy. The court held that DiMaria’s failure to preserve Travelers’ subrogation rights led to a loss of coverage in this case. The court did not address the prejudice issue or the issue of fault in the accident.

Treadwell v. Hammond, New Jersey Appellate Division – Unpublished Opinion

Plaintiff Treadwell was bitten by a dog owned by Hammond, who was a tenant of Robert and Rosetta Baity. The Baitys claimed that they were not aware of the dog’s presence in the home even though they had inspected the property. The Baitys were the only defendants to respond to the lawsuit brought by Treadwell.

The original discovery end date was May 9, 2018 with August 2, 2018 as the arbitration date. The court extended the discovery end date for the first time on May 25, 2018, placing the discovery end date at July 16, 2018. The court stated that once the arbitration date is set, an extension of the discovery end date can only occur under “exceptional circumstances,” which plaintiff proved through the need to get OPRA documents. In June 2018, the plaintiff moved for another extension of the discovery end date, which was denied. Plaintiff moved for reconsideration. Discovery expired and the Baitys moved for summary judgment and opposed the motion for reconsideration. The arbitration went forward, and the arbitrator assigned no fault to the Baitys. Plaintiff opposed the motion for summary judgment and provided an affidavit from a new witness claiming defendants knew about the dog. The motion for reconsideration was denied due to plaintiff’s failure to show due diligence in obtaining discovery. The trial judge remarked in her statement of reasons that since plaintiff had not been diligent, there were no exceptional circumstances to support an extension of the discovery end date. The plaintiff appealed, claiming that the discovery end date motion should have been ruled upon based on the “good cause” standard instead of the “exceptional circumstances” standard, and that he had met the exceptional circumstances standard. Plaintiff also claimed that the motion should not have been denied without oral argument.

The Appellate Division stated that the exceptional circumstances standard was proper based on Rule 4:24-1(c). Quoting precedent, the court presented a four-pronged inquiry for ruling on exceptional circumstances: (1) why discovery has not been completed in time and counsel’s diligence in obtaining discovery on time, (2) whether the additional discovery or disclosure counsel is looking for is essential, (3) why counsel failed to request an extension within the original time period, and (4) whether the circumstances presented were clearly beyond the moving attorney and litigant’s control.

The Appellate Court found that plaintiff was not diligent in pursuing discovery. The court also did not find an abuse of discretion in the trial court’s denial of oral argument on the motion, since the court has the authority to deny oral argument in motions involving pretrial discovery or if the motion is about the timing of things in the case. The summary judgment finding in the trial court was also upheld as the landlords did not know of the dog’s presence, or if they did know of its presence, they did not know of its violent propensities.

G. Matts Hospitality, LLC v. Scottsdale Ins. Co.,

United States District Court for the District of New Jersey – Unpublished Opinion

G. Matts Hospitality owned Sands Motel, which was damaged during Superstorm Sandy. G. Matts filed a claim with Scottsdale Insurance Company and Scottsdale investigated the claim. Scottsdale sent G. Matts a coverage determination letter on July 11, 2013 finding coverage for some but not all of the claimed damages. G. Matts filed a complaint against Scottsdale for failure to pay a covered loss pursuant to the policy. The suit was moved from state to federal court based on diversity jurisdiction.

Scottsdale claimed that G. Matts’ complaint was untimely under the insurance policy’s suit limitation provision, which gave G. Matts two years to file a complaint against it. Scottsdale argued that the two years began when the determination letter was sent, while G. Matts argued that the letter was ambiguous and that the two years began with Scottsdale’s reply in February 2017.

The court found that the suit limitation provision began to toll when the determination letter was sent since the provision tolls from the time the insured notifies the insurance of a claim until liability is formally declined, minus any time the insurance company uses to investigate the claim. Therefore, G. Matts’ complaint was outside the contracted statute of limitations.

G. Matts argued that the coverage determination letter was ambiguous, which the court denied. The court also held that the reservation of rights language in the letter was not enough to invalidate the fact that the letter was a denial of coverage. There were not enough additional circumstances to negate the tolling of the suit limitation provision.

Gryger v. Perkins Center for the Arts, New Jersey Appellate Division

– Unpublished Opinion

Plaintiff Margaret Gryger tripped and fell on Defendant Perkins Center for the Arts’ (PCA) property while on her way to a pottery class offered by PCA. She was not a member of PCA and had paid to attend the class. As such, Gryger claimed that she was not the beneficiary of PCA’s charitable activities, and that charitable immunity should not apply.

The trial court disagreed with Gryger and ruled that she was receiving a benefit from PCA even if she was a non-member paying a fee for the class. The trial court cited recent precedent finding that a beneficiary of a charitable organization can be someone who pays to take part in the charitable organization’s activity. The trial court cited the same precedent noting that one does not have to prove that she personally received a benefit from the charitable organization in order to be considered a beneficiary.

At the Appellate Division, Gryger argued that the standard should depend on whether PCA was acting towards its charitable objectives.

However, the Appellate Division upheld the trial court’s ruling and reasoning. The Appellate Division cited a recent case, Green II, which found that the charitable immunity test’s third prong mandated answers to two questions: (1) Whether the organization was performing according to the charitable objectives it was founded on when the injury occurred, and (2) whether the injured individual directly received the charitable organization’s “good works.” Since Gryger was taking part in an activity that advanced PCA’s charitable mission when she was injured, PCA was acting as a charity at the time. The fee paid did not make the pottery class a commercial or profit-making activity. Had the activity at issue been commercial, or even partially commercial or profit-making, immunity would not have been granted. As to the second question, the court cited Green II’s precedent to finding that the term beneficiary should be defined broadly and that non-beneficiaries are those who are ‘unconcerned in and unrelated to’ the charitable acts of the organization. The Court thus found that Gryger was a beneficiary of PCA’s charitable work when she was injured, and affirmed the trial court.

Rivas v. H&M&A Dishi Yehezkel, New Jersey Appellate Division

– Unpublished Opinion

This case arises out of a fall down on a street in West New York. Plaintiff alleged that she fell in an area with two water valve caps’ where each cap had a depression around it. Plaintiff did not know precisely where she fell. Plaintiff filed suit and discovery commenced. The court extended discovery twice, making the deadline for the expert reports December 31, 2017. A third extension was later granted but limited in scope to account for plaintiff’s surgery. Discovery deadlines were adjusted. Plaintiff later served a liability expert report in February 2018, which was barred since the discovery extension was only for plaintiff’s surgery, not expert reports.

Defendants Town of West New York and Suez Water New Jersey, Inc. filed for summary judgment. West New York’s summary judgment was granted since there was no disputed fact regarding whether West New York had actual or constructive notice of the depressions in the asphalt or that it did anything palpably unreasonable. Plaintiff did not know what depression caused her to fall, which prevented her from proving a dangerous condition. Suez’s summary judgment was granted because plaintiff did not provide expert testimony to show that the depressions were caused by the water valves and covers, that the depressions were a dangerous condition or that Suez knew of the depressions.

The Appellate Division agreed with the trial court that plaintiff failed to prove that Suez had a duty to maintain the area around the water caps, or that they were aware of the depressions around the caps. There was no proximate cause since the plaintiff did not know where she fell and did not have an expert to support her theory that the depressions around the water caps caused her to fall.

Since plaintiff could not identify what caused her fall, how long the depressions existed, whether the city was aware or should have been aware of them, and other elements of the Tort Claims Act, summary judgment was appropriate.

As to the discovery issues, plaintiff alleged that the discovery extension should not have been limited to her surgery, and that there were exceptional circumstances beyond her control preventing her from completing discovery on time.

The Appellate Division ruled that plaintiff never proved the circumstances preventing her from timely discovery. Given that the court had granted two other extensions, there was no abuse of discretion. The Appellate Division also found that there was no abuse of discretion in barring the liability report since it was served beyond the deadline for expert reports and after the court denied the motion to extend discovery. Lastly, the plaintiff’s motion for reconsideration repeated her previous arguments, thus the denial was proper and was not an abuse of discretion.

Estate of Chetwynd v. Diversified Rack & Shelving, Inc., New Jersey Appellate Division – Unpublished Opinion

In this case, Schreiber Foods hired Diversified Rack & Shelving to move some shelving from one property to another. Diversified Rack & Shelving hired Kat’z Transportation to transport the shelving, and J.C. Rack & Shelving to load and unload. J.C. Rack’s employee Jose Avalos unloaded the truck with a forklift and Kathleen Chetwynd died during the unloading. Plaintiffs argued that Avalos failed to ensure the area around the truck was clear when he operated the forklift. Plaintiff had previously obtained a default judgment against J.C. Rack and Rodriguez, and Avalos was dismissed from the case.

At trial, plaintiffs’ expert opinion was excluded as a net opinion. The Appellate Division found that the plaintiffs’ expert used OSHA classifications to label Schreiber as an exposing employer, a correcting employer, and a controlling employer. However, the expert failed to explain how the classifications created liability. Since there was not enough evidence to support the opinion, the Appellate Division affirmed the trial court’s ruling.

Plaintiffs also appealed the trial court’s decision that the plaintiff failed to establish that Diversified had hired an “incompetent contractor.” Hiring an “incompetent contractor” is one of the exceptions which makes a principal liable for the negligence of an independent contractor. In order to establish that the contractor was incompetent or unskilled to do the job he or she was hired to do, the plaintiff must prove that the harm was caused by the incompetence, and that the principal knew or should have known of the incompetence. The Appellate Division ruled that a principal may be liable if it should have known through reasonable care that the contractor was incompetent. Since unpacking was one of many duties J.C. Rack was hired for, and because Diversified made sure Rodriguez was certified to operate a forklift, it met its duty to ensure competence. The court found that Diversified did not have a duty to check all of J.C. Rack’s employees’ credentials.

Plaintiffs also argued that Diversified should be liable under general negligence. The Appellate Division denied that claim since there was no direct contact between Diversified and plaintiff, and since Diversified took action to ensure that the forklift drivers were certified to operate forklifts. Similarly, plaintiff further argued that the OSHA regulations should be considered in determining whether defendants were liable. The Appellate Division ruled that OSHA regulations are not enough on their own to determine liability.

Cignarella v. Fitness Int’l, LLC, New Jersey Appellate Division – Unpublished Opinion

Plaintiff was harmed by exposure to chlorine gas discharge at an LA Fitness pool. Plaintiff demanded punitive damages against defendant, whose employee caused the discharge. Plaintiff’s claim for punitive damages was dismissed prior to trial on summary judgment. The trial court found that the workers maintaining the pool on that particular day were given instructions not to worry about the chemicals and thus, there was no proof that the management acted intentionally or willfully and wantonly in the release of the gas.

On appeal, the plaintiff argued that the court should not have relied on the worker’s testimony since it contained hearsay, and that the court should have evaluated whether the defendant discharged its duty to protect plaintiff. The Appellate Division concluded that punitive damages are awarded based on “conscious wrongdoing” or wanton and willful disregard of those who might be harmed. The court noted that negligence by itself is not enough to establish punitive damages. There must be something beyond negligence involving “aggravation and outrage” to justify punitive damages.

The Appellate Division also found that because the workers had some training and were told not to handle the chemicals, there was no proof that harm was likely or imminent or that defendant was aware that harm was likely. The court also ruled that OSHA and health code violations did not prove willful or wanton conduct. There was no evidence that the workers were not properly instructed or that the workers would not likely follow the instructions. Thus, there was no right to punitive damages.

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It is noteworthy that our newsletter contains decisions supporting the defendants’ arguments and positions. However, it is too soon to tell if this is a trend and if so, whether it will have any momentum.

As always, we are grateful for our clients’ support and remain available to discuss any questions you may have.