Court Opinion

ID: 4197469
Source: CourtListenerOpinion
Date Created: 2017-08-21 13:07:59.159567+00
Date Added: 2024-06-11T09:23:47.887733
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                 APPROVAL OF THE APPELLATE DIVISION

                                        SUPERIOR COURT OF NEW JERSEY
                                        APPELLATE DIVISION
                                        DOCKET NO. A-4516-12T1

TEMPLO FUENTE DE VIDA CORP.
and FUENTE PROPERTIES, INC.,

           Plaintiffs-Appellants,

v.

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, P.A.,

          Defendant-Respondent.
___________________________________

           Argued: May 21, 2014 – Decided: June 6, 2014

           Before Judges Fuentes, Fasciale and Haas.

           On appeal from the Superior Court of New
           Jersey, Law Division, Hudson County, Docket
           No. L-2975-11.

           Mitchell B. Seidman argued the cause for
           appellants    (Seidman   &    Pincus,   LLC,
           attorneys; Mr. Seidman and Andrew J. Pincus,
           on the brief).

           Andrew L. Indeck argued the cause for
           respondent    (Weber     Gallagher Simpson
           Stapleton Fires and Newby, LLP, attorneys;
           Mr. Indeck, of counsel and on the brief;
           Jessica V. Henry, on the brief).

PER CURIAM

      Plaintiffs Templo Fuente De Vida Corp. (Templo) and Fuente

Properties, Inc. (Fuente) (collectively plaintiffs) appeal from

the   February   27,   2013   orders   of   the   Law   Division   granting
defendant National Union Fire Insurance Company of Pittsburgh,

P.A.'s      motion    for    summary     judgment        and        denying      plaintiffs'

motion for partial summary judgment.                          Plaintiffs also appeal

from the court's May 15, 2013 order denying their motion for

reconsideration.          We affirm.

       The facts underlying this appeal are not disputed.                                 Templo

is a New Jersey corporation that operates a church and child day

care center.         In early 2002, Templo decided to relocate and to

construct a new church and day care center and, in June 2002, it

entered     into     an   agreement     with      Morris      Mortgage,          Inc.      (MMI),

under which MMI agreed to secure the loans Templo needed to

purchase the land and complete the project.                                 Templo created

Fuente to acquire the property.

       In September 2002, plaintiffs entered into a contract to

purchase      property       in     North      Bergen         for     the     project          for

$3,200,000.        They made a $320,000 down payment.                            MMI did not

promptly      secure      the    necessary       financing          and,    as       a   result,

plaintiffs paid the seller an additional $130,000 to extend the

mortgage commitment deadline.                    In February 2003, MMI alleged

that   it    had     obtained      funding       for    the    project        through        Merl

Financial      Group,       Inc.     (Merl),      which       agreed        to       provide      a

$15,900,000        loan     to     plaintiffs      in     return       for       a       $159,000

commitment fee.           Merl later increased the loan commitment to

                                             2                                           A-4516-12T1
$20,900,000       and      plaintiffs   paid       Merl      an     additional      $50,000

commitment fee.            In September 2003, the loan commitment was

again revised so that plaintiffs could obtain "early funding of

the     loan    proceeds"       in   order       to    close        on    the      property.

Plaintiff's paid Merl $209,000 as an early commitment fee.

      By this time, the seller of the property had issued a "time

is of the essence" notice to plaintiffs, which obligated them to

close on the property by October 8, 2003.                      However, Merl advised

plaintiffs that it could not secure the necessary funds until

November 24, 2003.           Plaintiffs then paid the seller $100,000 to

extend the closing deadline.

      Without       notifying    plaintiffs,          Merl    assigned       the    loan   to

Heritage       Capital     Corporation    (Heritage           Capital),         which   then

assigned       it     to     Independent          Capital         Credit        Corporation

(Independent).           Both   of   these       entities      were      affiliated     with

Merl,    although        Merl   told    plaintiffs           they     were      independent

companies.          Neither of these companies provided the promised

loan funds to plaintiffs and, as a result, the seller refused to

extend the closing date and plaintiffs were unable to complete

the   purchase.          Plaintiffs     asserted        that      they     expended     over

$1,000,000 in attempting to purchase the property.

      On November 24, 2003, Merl transferred its interests to

First Independent Financial Group (First Independent) and Merl

                                             3                                      A-4516-12T1
continued its operations under First Independent's name.                                         In

late     2005,    defendant          issued    an       insurance     policy        to        First

Independent for a policy period that ran from January 1, 2006

until January 1, 2007.                This policy provided First Independent

with    liability    insurance         for     losses      caused     by     the    "wrongful

acts" of its directors, officers, and employees, except to the

extent    that    First        Independent         indemnified       these    individuals.

The    term    "wrongful       acts"    was    defined         in   the    policy        as    "any

breach     of     duty,        neglect,       error,      misstatement,            misleading

statement,       omission       or    act     by    any    such      Insureds       in        their

respective capacities as such, or any matter claimed against

such Insured solely by reason of their status as directors,

officers or [e]mployees" of First Independent.

       To be eligible for coverage under the policy, the losses

had to arise from a claim first made "during the Policy Period

or the Discovery Period (if applicable) and reported to the

Insurer       pursuant    to    the    terms       of   this    policy."           The    notice

provisions of the policy stated that:

               (a) The Company or the Insureds shall, as a
               condition precedent to the obligations of
               the Insurer under this policy, give written
               notice to the Insurer of any Claim made
               against an Insured as soon as practicable
               and either:

               (1) anytime during the Policy Period or
               during the Discovery Period (if applicable);
               or

                                               4                                         A-4516-12T1
             (2) within [thirty] days after the end of
             the Policy Period or the Discovery Period
             (if applicable), as long as such Claim is
             reported no later than [thirty] days after
             the date such Claim was first made against
             an Insured.

             [(Emphasis added).]

       On November 22, 2005, plaintiffs filed a complaint alleging

breach of contract and tort claims in the Law Division against

MMI,    MMI's      principal,      Merl,        Merl's       affiliates,      including

Heritage Capital, and their principals.                   Plaintiffs never served

this    complaint.        On   December        2,    2005,    plaintiffs      filed   an

amended complaint adding two John Doe defendants.

       Plaintiffs served the amended complaint, and the corporate

entities     and    individuals         allegedly        covered     by     defendant's

insurance       policy     with     First        Independent        (the      insureds)

acknowledged receipt of it on February 21, 2006.                          However, they

did    not   provide     notice    of    the    complaint      to   defendant     until

August 28, 2006.

       Defendant     thereafter         sent     the     insureds     three     letters

disclaiming coverage.             The first letter, dated September 11,

2006,   advised     the   insureds       that       plaintiffs'     allegations    were

directed to Heritage Capital and its affiliates and principals,

and that such claims were specifically excluded from coverage

under the terms of the policy.             The letter further stated:

                                           5                                   A-4516-12T1
               The purpose of this correspondence is
          to advise you that [the Policy] does not
          provide coverage for this claim.         This
          coverage   evaluation  may  be   subject   to
          amendment and/or supplementation because the
          applicability of certain exclusions, terms
          and conditions cannot be fully determined
          until the facts are more fully developed.
          [Defendant] reserves all rights, defenses
          and privileges under the Policy, at law or
          in equity, including the right to disclaim
          or   otherwise   amend  or   supplement   our
          coverage analysis as forthcoming information
          dictates.

              . . . .

               Given our position as outlined above,
          we   have  not   addressed  certain  other
          provisions of the Policy which may also
          limit and/or preclude coverage for this
          claim.

    In a second disclaimer of coverage letter, issued on March

6, 2007, defendant advised the insureds that the exclusion noted

in the September 2006 letter did not apply, but that there were

other reasons for denying coverage.     The letter specifically

referred to the requirement that claims must be received within

the policy period and that an insured must provide notice of the

claim to defendant "as soon as practicable."     The letter also

stated:

          With regard to the notice requirements of
          the Policy, it appears that the claims in
          the Amended Complaint were reported to
          [defendant] on or about August 28, 2006 and,
          therefore, the claims were reported to
          [defendant] during the period of the Policy.
          More than this notice is required to

                               6                          A-4516-12T1
           establish coverage under this claims-made
           Policy, however.   A covered claim also must
           have been "first made" against an insured
           during the period of the Policy . . . .

                No information has been provided to
           [defendant]  which  evinces   when  written
           notice   of   the  Complaint   and  Amended
           Complaint first was received by any of the
           foregoing.

The letter concluded with the following reservation of rights:

           If you have any questions concerning this
           disclaimer of coverage, or if you have
           additional information which you would like
           to bring to the attention of [defendant]
           with regard to [its] coverage position,
           please    do   not    hesitate   to    contact
           [defendant,    whose]     review    of    this
           information shall be without waiver of
           [defendant's] denial of coverage and will be
           made    under   a    full    reservation    of
           [defendant's] right to alter or amend the
           within disclaimer of coverage.

    Finally, on March 30, 2009, defendant sent the insureds a

third    letter   disclaiming   coverage     as   to   three   individuals

allegedly associated with First Independent.           This letter stated

that the claims were not covered because plaintiffs' amended

complaint did not set forth claims against these individuals in

their role as officers of First Independent.           However, defendant

requested additional information concerning one of the officers.

    On    June    29,   2007,   plaintiffs    filed    a   second   amended

complaint, adding additional defendants and claims.                 For the

first time, the complaint noted that Merl was a subsidiary and

                                    7                               A-4516-12T1
affiliate of First Independent.                 On October 2, 2007, plaintiffs

amended their complaint to specifically add First Independent as

a defendant.1

      On   June    5,    2009,     plaintiffs      entered      into      a   settlement

agreement    with       the    insureds.        The   parties        agreed       that   the

insureds    were    liable       to   plaintiffs      for   $3,613,220.52,            which

included    the     expenditures          plaintiffs    made         to     acquire      the

property;    a     sum    for     lost     appreciation         of    the     land;      and

$2,100,000 "representing the value of the child day care center

[p]laintiffs lost as a result of the" insureds' actions.                                 The

insureds agreed to pay plaintiffs $102,750 of this liability and

assign their claims against defendant for coverage to plaintiffs

for the remaining amount due.

      On   June    2,    2011,     plaintiffs      filed    a    complaint         against

defendant seeking a declaratory judgment granting them coverage

under the policy.             On December 14, 2012, plaintiffs moved for

partial summary judgment, and defendant filed its own motion for

summary judgment on January 15, 2013.                   Following oral argument

on   February     8,     2013,    Judge    Patrick     Arre     issued        a   thorough

written     decision          granting    defendant's       motion        for      summary

judgment and denying plaintiffs' motion.

1
  Plaintiffs subsequently made additional amendments to its
complaint, which are not relevant to the issues presented in
this appeal.

                                            8                                      A-4516-12T1
    The judge found that the insureds did not provide defendant

with notice of plaintiffs' claim "as soon as practicable" and,

therefore, coverage was barred under the specific terms of the

policy.      The    policy   period    ran   from   January   1,   2006   until

January 1, 2007.         The insureds were served with plaintiffs'

first amended complaint on February 21, 2006, but they did not

provide defendant with notice of the claim until August 28,

2006, over six months after plaintiffs served them with the

complaint.       No explanation for this lengthy delay was provided.

    The judge noted that, in Associated Metals & Minerals Corp.

v. Dixon Chemical & Research, Inc., 82 N.J. Super. 281, 316-17

(App. Div. 1963), certif. denied, 42 N.J. 501 (1964), we held

that a delay of five and one-half months in notifying an insurer

was not "as soon as practicable" under the terms of a similar

policy    and,    therefore,   the    insurer   properly   denied   coverage.

The judge stated:

                 Applying Associated Metals to the facts
            of this case, the court has no choice but to
            find that the assigning insureds failed to
            provide written notice to [defendant] as
            soon as practicable, and therefore, were not
            entitled to coverage.       In the present
            case[,] the assigning insureds waited more
            than six months from service of the First
            Amended Complaint before finally putting
            [defendant] on notice of the claims against
            them.     Additionally,  as   in  Associated
            Metals, [plaintiffs have] failed to produce
            any evidence for the record explaining or
            attempting to justify this delay; and none

                                        9                             A-4516-12T1
              of the assigning insureds, nor anyone from
              [their law firm] have been deposed.    Thus,
              the undisputed facts before this court show
              that an unexplained six month delay exists
              between the time when the claims were first
              made   (February    21,   2006)   and   when
              [defendant] was [first given] written notice
              of the claims (August 28, 2006).    And just
              as the unexplained five and a half month
              delay in Associated Metals was unreasonable,
              so too is the six month delay present in
              this case. Therefore, this court finds as a
              matter of law [that] the assigning insureds
              did not provide written notice of the claims
              against them to [defendant] as soon as
              practicable, and therefore, are not entitled
              to coverage.      Furthermore, because the
              assigning insureds are not entitled to
              coverage under the Policy, [plaintiffs] — as
              the assignee[s]    — [have] no right to
              coverage either.

              [(Footnote omitted).]

      Judge     Arre     also      rejected       plaintiffs'         argument       that

defendant had to show that it was prejudiced by the insureds'

failure    to   notify    them     of   the    claim    as    soon    as    practicable

before    denying      coverage.        Relying    upon      the     Supreme     Court's

decision in Zuckerman v. National Union Fire Insurance Co., 100

N.J. 304, 324 (1985), the judge held that no prejudice needed to

be   shown.      On    February     27,   2013,        the   judge     issued     orders

granting      defendant's       summary       judgment       motion,       and   denying

plaintiffs' motion.

      Plaintiffs moved for reconsideration, asserting that the

judge had not considered their argument that defendant should be

                                          10                                     A-4516-12T1
estopped from denying coverage because it did not specifically

raise the insureds' failure to provide notice of the claim "as

soon as practicable" in its three disclaimer letters.                             Judge

Arre denied the motion in a thoughtful oral opinion.                         The judge

found   that       defendant    "responded     to   the    assigning      insured[s']

initial      claim    within    three    weeks    and     has   continually     denied

coverage since that time.                [Defendant] has never at any time

through its actions or inactions given [plaintiffs] reason to

believe that coverage existed" and, therefore, estoppel could

not be applied against defendant.                This appeal followed.

       On    appeal,       plaintiffs     renew     the    same     arguments      they

unsuccessfully presented to Judge Arre.                   They concede there are

no   disputed        material    facts   and     that,    under    our    holding     in

Associated         Metals,    the   insureds      did    not    provide      notice   of

plaintiffs' claim to defendant "as soon as practicable" under

the policy.         Nevertheless, they again assert that defendant can

not rely upon this provision to deny coverage unless it can show

that    it   was     prejudiced     by   the   insureds'        delay   in   providing

notice,      and    that     defendant   should     be    estopped      from   denying

coverage.

       We are not persuaded by plaintiffs' arguments and affirm

substantially for the reasons expressed by Judge Arre.                            There

was no dispute as to any of the material facts and, therefore,

                                          11                                   A-4516-12T1
this matter was clearly ripe for summary judgment.                             Brill v.

Guardian       Life   Ins.    Co.    of   Am.,    142   N.J.    520,     540    (1995).

Moreover, plaintiffs concede that, while the insureds provided

notice    of     plaintiffs'      claim    to    defendant     within    the     policy

period, they did not do so "as soon as practicable" as required

by the policy.          The policy defendants provided to the insureds

clearly required that notice be provided both within the policy

period and as soon as practicable.                "'[W]hen the language of an

insurance policy is clear, [appellate courts] must enforce its

terms as written.'"          Thompson v. James, 400 N.J. Super. 286, 291

(App.     Div.    2008)      (second      alteration    in     original)       (quoting

Conduit    &     Found.   Corp.     v.    Hartford   Cas.    Ins.    Co.,      329   N.J.

Super. 91, 99 (App. Div.), certif. denied, 165 N.J. 135 (2000)).

Because     the       insureds      did    not   meet    both       of   the     notice

requirements that were unambiguously expressed in the policy, we

conclude that coverage was properly denied to the insureds and,

by extension, to plaintiffs as their assignees.

    Like the trial judge, we reject plaintiffs' argument that

defendant can only disclaim coverage if it can demonstrate that

it was prejudiced by the insureds' failure to provide notice as

soon as practicable.          There are two different types of insurance

policies:        "claims made" and "occurrence" policies, and they

differ based on how coverage is triggered.                     Under "claims made"

                                            12                                  A-4516-12T1
policies,      coverage    depends    on    when     the   insured    notified       the

insurer of the claim.            Med. Inter Ins. Exch. of N.J. v. Health

Care Ins. Exch., 278 N.J. Super. 513, 518, 521 (App. Div.),

certif. denied, 140 N.J. 329 (1995).                  Thus, the policy in this

case, which made coverage dependent on the insureds providing

defendant with notice of the claim within the policy period and

as soon as practicable, was clearly a "claims made" policy.

       Under "occurrence" policies, coverage depends on when the

act or omission giving rise to the claim occurred.                     Id. at 518.

For    occurrence      policies,     when    the     insured   does    not    provide

timely notice, the insurer must establish prejudice in order to

avoid coverage.         Cooper v. Gov't Emps. Ins. Co., 51 N.J. 86, 94

(1968).       However, that is not the case for claims made policies,

like the one involved in this case.                  In Zuckerman, the Supreme

Court distinguished between claims made policies and occurrence

policies, holding that for claims made policies, an insurer need

not    show    that   it   was    prejudiced    by    an   insured's       failure   to

provide notice "as soon as practicable."                   Zuckerman, supra, 100

N.J. at 324.            The Court stated that requiring an insurer to

make    such     a    showing     would     constitute      "an     unbargained-for

expansion      of     coverage,    gratis,      resulting      in    the    insurance

company's exposure to a risk substantially broader than that

expressly insured against in the policy."                  Ibid.; see also Med.

                                           13                                 A-4516-12T1
Inter. Ins. Exch., supra, 278 N.J. Super. at 520-21 (citing

Zuckerman      and      indicating        that     the     appreciable        prejudice

requirement does not apply to claims made policies).

       Plaintiffs ask us to distinguish Zuckerman or limit it so

that it does not reach the claims made policy involved in this

case.     We decline this invitation because we discern no basis

for distinguishing the Court's clear holding in Zuckerman from

the facts in this case.               Contrary to plaintiffs' contention, the

Court did not limit its holding to cases where notice first

occurred outside the policy period and it plainly stated that

"[t]he Cooper doctrine" that requires prejudice to be shown for

occurrence policies has "no application whatsoever to a 'claims

made'    policy   .     .   .    ."      Zuckerman,      supra,    100   N.J.   at    324

(emphasis added).           In a subsequent decision, the Court confirmed

"the total inapplicability of the Cooper doctrine to a true

'claims made policy[.]"               Sparks v. St. Paul Ins. Co., 100 N.J.

325,     342   (1985)       (emphasis      added).         "[A]s    an   intermediate

appellate      court,       we    are    bound    to     follow    and   enforce      the

decisions of the Supreme Court."                  Kaye v. Rosefielde, 432 N.J.

Super.    421,    470-71         (App.   Div.    2013).      We    do    so   here    and

therefore reject plaintiffs' contention that defendant had to

show prejudice in order to invoke the notification requirements

of this claims made policy.

                                            14                                  A-4516-12T1
    Finally,    plaintiffs   showed   no   grounds   for   estopping

defendant from denying coverage based on the insureds' failure

to provide notice of the claim as soon as practicable after its

receipt.   In its disclaimer letters, defendant never conceded

that the insureds met both of the notice requirements of the

policy and gave no indication whatsoever that the claim would

ever be granted.   We therefore agree with Judge Arre's decision

to reject this argument for the reasons expressed in his oral

opinion denying plaintiffs' motion for reconsideration.

    Affirmed.

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