Case Name: ESTA HORESH, PLAINTIFF-RESPONDENT, CROSS-APPELLANT, v. STATE FARM FIRE & CASUALTY COMPANY, DEFENDANT-APPELLANT, CROSS-RESPONDENT
Court: New Jersey Superior Court, Appellate Division
Jurisdiction: New Jersey
Decision Date: 1993-05-27
Citations: 265 N.J. Super. 32
Docket Number: 
Parties: ESTA HORESH, PLAINTIFF-RESPONDENT, CROSS-APPELLANT, v. STATE FARM FIRE & CASUALTY COMPANY, DEFENDANT-APPELLANT, CROSS-RESPONDENT.
Judges: 
Reporter: New Jersey Superior Court Reports
Volume: 265
Pages: 32–46

Head Matter:
625 A.2d 541
ESTA HORESH, PLAINTIFF-RESPONDENT, CROSS-APPELLANT, v. STATE FARM FIRE & CASUALTY COMPANY, DEFENDANT-APPELLANT, CROSS-RESPONDENT.
Superior Court of New Jersey Appellate Division
Argued March 30, 1993
Decided May 27, 1993.
Pressler, P.JA.D., filed dissenting opinion.
Before Judges PRESSLER, R.S. COHEN and KESTIN.
Craig M. Terkowitz argued the cause for appellant, cross-respondent (Vitiello, Seltzer, Terkowitz & Vitiello, attorneys, Kenneth A Seltzer of counsel and on the brief).
David L. Ploshnick argued the cause for respondent, cross-appellant (Baer, Arbeiter & Ploshnick, attorneys, Mr. Ploshnick of counsel and on the brief).

Opinion:
The opinion of the court was delivered by
R.S. COHEN, J.A.D.
Plaintiffs husband started an action to recover for an injury to their infant son. Defendants filed a third-party complaint against plaintiff for contribution and indemnification. State Farm was the family's homeowners' insurer. Plaintiff requested State Farm to defend her, but it declined to do so. State Farm took the position that the claim was excluded by the terms of the insurance policy. Plaintiff then sought a declaratory judgment that State Farm both covered the third-party claim and was obliged to defend it. The Law Division ruled that the claim was not covered, but that State Farm nevertheless had the duty to defend plaintiff against it. State Farm appealed the ruling that it had to defend; as to it, we reverse. Plaintiff cross-appealed the ruling that there was no coverage; as to it, we affirm.
Plaintiff was walking with her son through a store. According to the complaint filed against the owner and operator of the store, defendants negligently "allowed a free standing display to fall and strike the infant plaintiff." Defendants denied negligence and filed a third-party complaint against the mother (plaintiff here) for indemnification and contribution. They first alleged that plaintiff breached her duty to exercise reasonable care for the safety of her son. Then, defendants charged that plaintiff breached her duty to supervise her son "in that she wilfully and with wanton carelessness failed to watch over and supervise her child." The harsh allegations against plaintiff were doubtless designed to satisfy the rule of Foldi v. Jeffries, 93 N.J. 533, 461 A.2d 1145 (1983), which limits the tort liability of a parent for failure to supervise his or her child to cases in which the parent "has willfully or wantonly failed to watch over [the] child." Id. at 547, 461 A.2d 1145.
When plaintiff sought coverage and a defense, State Farm's position was that, although plaintiff was an insured for liability, so was her infant son, and the policy excluded liability claims of one insured against another insured. In other words, State Farm said there was no coverage for intra-family tort claims.
Coverage L of the policy states:
If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, we will
1. pay up to our limit of liability for the damages for which the insured is legally liable; and
2. provide a defense at our expense by counsel of our choice.
Immediately following the quoted provision is a list of exclusions, which includes:
Coverage L and Coverage M do not apply to:
*
h. bodily injury to you or any insured within the meaning of part a. or b. of the definition of insured.
In pertinent part, the definition of "insured" includes:
"you and if residents of your household:
a. your relatives;
b. any other person under the age of 21 who is in the care of a person described above."
Homeowners' insurance policies commonly exclude bodily injury claims by resident relatives. The reason is that insurers fear collusive intra-family claims they believe put them at a serious disadvantage. It is a hard job to defend a claim when plaintiff and defendant agree that defendant was very negligent and plaintiff was terribly injured.
Recognizing this problem, we validated a policy exclusion just like the present one in Foley v. Foley, 173 N.J.Super. 256, 414 A.2d 34 (App.Div.1980). There, a wife sued her husband for injuries resulting from his negligence and assault. The homeowners' insurer disclaimed on the basis of an exclusion for "bodily injury to any insured." The wife argued that the exclusion violated public policy because Merenoff v. Merenoff, 76 N.J. 535, 388 A.2d 951 (1978), had recently ended interspousal tort immunity for personal injuries arising from a domestic or household accident.
We disagreed. We said that there is no legal requirement that a homeowners' policy have a particular range of coverages, or, indeed, that a homeowner carry any insurance. On that basis, we distinguished cases which invalidated automobile liability policy exclusions of claims for injuries to an insured. Auto policies are mandated, are heavily regulated and are required by law to contain particular coverages. The exclusion of auto injuries to an insured is not permitted by law. Kish v. Motor Club of Am. Ins. Co., 108 N.J.Super. 405, 261 A.2d 662 (App.Div.), certif. denied, 55 N.J. 595, 264 A.2d 68 (1970).
In the absence of any statutory or substantial public policy requirement to cover liability for an insured's injury, a homeowners' insurance policy may exclude such liability from coverage, and courts have to enforce the exclusion. Plaintiff argues, however, that a claim for indemnification and contribution is something different, and is not what the policy excludes.
We disagree. Coverage for liability claims under the State Farm policy attaches when "a claim is made . against an insured because of bodily injury ." but it "does not apply to . bodily injury to you or any insured." A demand for indemnification and contribution by a party sued by an injured insured is the equivalent of a liability claim against one insured for the injuries to the other insured. That was our holding in Knoblock v. Prudential Prop. & Cas. Ins. Co., 260 N.J.Super. 127, 615 A.2d 644 (App.Div.1992). We said there:
In a personal injury action, indemnity claims of someone only vicariously liable and contribution claims of a joint tortfeasor are derived solely from the "bodily injury" claim of the injured person. Where that bodily injury is allegedly sustained by "any insured." the exclusion withdraws coverage. |M. at 130, 615 A2d 644],
We recognized in Knoblock that the purpose of excluding intrafamily tort claims was to diminish the risk to the insurer of collusive claims. That risk exists even where there is no direct claim between family members. Where a claimant and one of the possibly responsible people have a common purpose to do so, they can manipulate a lawsuit to produce a distorted outcome.
Plaintiff also argues that, although the exclusion for claims by insured persons may be clear, the extension of that exclusion to third-party claims is unclear and contrary to the reasonable expectations of the insured, and should therefore be ignored. The argument defeats itself. If the exclusion of a claim, by a defendant sued by an insured, for indemnification and contribution is unclear, so is coverage of all other claims for indemnification and contribution. Neither the exclusion nor the coverage is actually expressed in the policy. Nevertheless, we find coverage for indemnification and contribution in the words "a claim . for damages because of bodily injury ." If those words are sufficient to create coverage for third-party complaints, the exclusion of claims for "bodily injury to you or any insured" is sufficient to exclude coverage for third-party complaints where the injured person is an insured. It would not pass the red-face test to hold that essentially the same phrase is ambiguous and therefore means two opposite things in the same column on the same page.
Although the Law Division correctly ruled against coverage, it nevertheless held that State Farm had to defend plaintiff. We disagree.
The duty to defend is not a product of statute or common law, but is solely a contractual undertaking made in the insurance policy. Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22, 483 A.2d 402 (1984). Usually, as here, an insurer has the duty to defend whenever the claim against the insured alleges a basis for liability within the policy covenant to pay. Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 388-89, 267 A.2d 7 (1970). The duty to defend is broader than the duty to pay, NPS Corp. v. Insurance Co. of No. Amer., 213 N.J.Super. 547, 550-51, 517 A.2d 1211 (App.Div.1986), but only because the duty to defend, unlike the duty to pay, is not dependent upon the ultimately determined merits of the claim. The duty to defend is not broader in the sense that it extends to claims not covered by the covenant to pay.
Our dissenting colleague would stretch the duty to defend beyond covered claims, but cannot do so without running against the grain of almost forty years of settled authority. Voorhees v. Preferred Mutual Ins. Co., 128 N.J. 165, 173, 607 A.2d 1255 (1992); SL Inds. v. American Mot. Ins. Co., 128 N.J. 188, 197, 607 A.2d 1266 (1992); Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22, 483 A.2d 402 (1984); Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 388-89, 267 A.2d 7 (1970); Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 514, 210 A.2d 221 (1965); Lumbermen's Mut. Cas. Co. v. United Serv. Auto Ass'n, 218 N.J.Super. 492, 497, 528 A.2d 64 (App.Div.1987); NPS Corp. v. Insurance Co. of No. Amer., 213 N.J.Super. 547, 550, 517 A.2d 1211 (App.Div.1986); Danek v. Hommer, 28 N.J.Super. 68, 77-79, 100 A.2d 198 (App. Div.1953), affirmed ob., 15 N.J. 573, 105 A.2d 677 (1954).
If an excluded claim is made, the insurer has no duty to undertake the expense and effort to defeat it, however frivolous it may appear to be. We are aware that the cost of defeating a frivolous claim can be a substantial one to most homeowners. However, that does not justify shifting the cost to an insurance company just because it is an insurance company.
On the other hand, the law provides a remedy for the homeowner if the insurer for a party sued for a child's injuries involves the mother in bad faith and without any reasonable basis for a belief that she "willfully or wantonly failed to watch over . her child." The remedy is to award all reasonable litigation costs and attorney's fees incurred in defeating the frivolous claim. N.J.S.A. 2A:15~59.1. It is a particularly apt sanction if an insurer frivolously sues when it knows perfectly well that the effect will be to impose a heavy financial penalty on the family of the injured child. The remedy, however, is not to transfer the litigation burden to the homeowner's insurer, which merely asserts its settled right to exclude intra-family claims.
The judgment below is affirmed as to coverage and reversed as to defense.
The Law Division order for judgment contains a unique provision. It says that any party desiring to appeal may do so either within forty-live days of the entry of the order or forty-five days from the final disposition of the underlying liability case. We understand the intent of that provision, but a trial judge has no authority to extend the time to appeal. See R. 2:4-1 and -4.
Coverage M is for Medical Payments.
The only exceptions are that every policy must provide workers' compensation coverage for household employees, N.J.S.A. 17:36-5.29, and the fire insurance part of the policy must contain the standard provisions prescribed by NJ.S.A. 17:36-5.20.