Court Opinion

ID: 9471536
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:35:03.868436+00
Date Added: 2024-06-11T17:42:27.472724
License: Public Domain

JOSEPH S. LORD, III, District Judge,
dissenting.
I agree with the conclusions of the majority (1) that we have no jurisdiction to consider First Jersey’s appeal; (2) that the indemnification clause covers breach of contract; (3) that First Jersey was under no duty to minimize its losses; (4) that the denial of leave to Dome to file a counterclaim was proper; (5) that there is no basis on this record for us to consider the merits of Dome’s subrogation claim.
However, I would deny plaintiff’s motion for summary judgment because I believe that there is a jury question as to whether Rotella’s and Ernst’s activities constituted “intentional and deliberate misconduct.”
The majority’s reliance on the standard enunciated in Lyons v. Hartford Insurance Group, 125 N.J.Super. 239, 310 A.2d 485 (App.Div.1973), cert. denied, 64 N.J. 322, 315 A.2d 411 (1974), in my judgment, is misplaced. In Lyons, the court reiterated the public policy of New Jersey that an insurer will not indemnify an individual for damages caused by his own intentional wrongdoing. The obvious purpose of this policy is to avoid any incentive to the insured to commit wrongful acts. A competing policy that runs throughout the Lyons opinion as well as that in Ambassador Insurance Company v. Montes, 76 N.J. 477, 388 A.2d 603 (1978), and which governs the results in those cases, is that insurance companies should provide broad coverage to innocent victims of insureds.
In order to reconcile these competing policies, the Lyons court articulated a definition of intent differing from that appearing in § 8A of the Restatement (Second) of Torts. Lyons held that even where there is an exclusionary clause for the intentional wrongdoing of the insured, insurance coverage exists for “the unintended results of an intentional act, but not for damages assessed because of an injury which was intended to be inflicted.” Thus, Judge Meanor in Lyons would not deny coverage to the innocent victim of an insured who fired a revolver with the intention to shoot over the victim’s head. In his concurring opinion in Ambassador, Justice Pashman explained that the heightened intent standard adopted by Judge Meanor in Lyons would grant insurance coverage to the victims of an insured who, having no subjective intent to injure the victims, set fire to his property in order to collect the insurance money, knowing that it was extremely likely that the victims were asleep in the building. Justice Pashman rejected the use of the Restatement’s definition of intent for insurance policy cases. He defended his use of the Lyons’ “intent” rather than the Restatement definition in insurance cases because the Lyons definition is the prevailing one used by the courts in that class of case and, *345more importantly, because the Lyons definition of intent furthers public policy. He stated:
Since one purpose of such insurance is to protect injured third parties, as between the liability insurer of a culpable actor and an innocent third party it is the better policy to place the risk of loss with the insurer where intent to injure is unclear.
Ambassador Insurance Co. v. Montes, 76 N.J. 477, 489, 388 A.2d 603, 609 (1978) (Pashman, J., concurring).
Justice Pashman’s reasoning and language clearly limit the use of the Lyons definition to cases involving the liability of insurance companies under insurance policies. The majority in Ambassador, although not adopting Justice Pashman’s opinion, stressed that its purpose for granting coverage was a public policy one — compensation of innocent third party victims where the insured, the wrongdoer, did not benefit from the protection afforded by the insurance. Ambassador Insurance Co. v. Montes, 76 N.J. 477 at 486, 388 A.2d at 606. We do not have the Ambassador situation in the case before us. In First Jersey there is no innocent third party who is an injured victim. Moreover, the very “wrongdoer” is the party seeking compensation. Therefore, extending New Jersey law to apply the Lyons definition of intent to this case will further no public policy. Moreover, such an extension would contravene the principle of freedom of contract.
The insurance industry and insurance coverage itself are suffused with public interest. Companies are regulated by the state; the language, coverages and exclusions are governed by state law. Insurance is generally a contract of adhesion and, most important, while ostensibly designed to protect the insured from harm, is in reality, to compensate an innocent and injured victim. In the interpretation of insurance policies, there is a public policy factor in the whole process. None of these considerations is present here.
In the case before us, there is an arm’s length contract between two entities of equal bargaining power. Nor does the state have any policy interest in the indemnity clause. In this situation, it is clear that the parties could choose to allocate the risk of loss to whichever party they pleased.1
Applying the principle of contract interpretation that words having “a generally prevailing meaning”, will be interpreted “in accordance with that meaning”, Restatement (Second) of Contracts § 202(3)(a), the exclusion of indemnification for losses resulting from “intentional and deliberate misconduct” on First Jersey’s part does not justify the application of the Lyons definition of intent.
First of all, the language in the clause in question here does not focus on the injury, but rather it requires that the misconduct be intentional and deliberate. Furthermore, even if there were a question as to whether the contract required that the injury be specifically intended, since First Jersey drafted the indemnification clause, any ambiguity must be construed against First Jersey. In re F.H. McGraw and Company, 473 F.2d 465, 469 (3d Cir.1973).
Consequently, I would apply the definition of intent normally employed in civil cases. As set forth in § 8A of the Restatement (Second) of Torts, the word “intent” is used “to denote that the actor desires to cause the consequences of his act, or that he believes that the consequences are substantially certain to result from it,” (emphasis added).
According to the Restatement definition, therefore, if a party knows that an intentional act will have a' given result or that the result is substantially certain, and that party nevertheless proceeds to act, a jury *346could find that the result was intentional. In the absence of the need to protect innocent third parties, I think that New Jersey would hold that the intentional act with foreseeable, if not foreseen consequences, falls within the exclusion in the contract.
It is clear that First Jersey stopped time-stamping the incoming tendered materials twice: once in the middle of the offer period and on May 26, 1981, the last day of the period. It is also undisputed that Jan Viise, the vice-president in charge of marketing plaintiff’s depositary services, told Anthony Rotella, the supervisor of floor operations on First Jersey’s depositary projects, that all tendered materials had to be timestamped. Rotella admits that he ordered his personnel to discontinue time-stamping on May 26, 1981. Teresa Ernst, a supervisor of the Dome depositary project, admits that she was aware that the time-stamping was stopped on May 26, and that State Street notified her before she mailed out the prorated checks on June 10, 1981 that it had a Brinks receipt dated May 26, 1981 to prove that more than 600,000 shares tendered by it had been rejected improperly. Furthermore, Ernst admitted that when she sent out the checks on June 10, 1981, she was aware of the consequences that would occur if State Street’s tenders were rejected improperly. Thus, Ernst knew that there would be an overpayment if State Street’s claim was valid, and she nevertheless mailed the checks. From these facts, a jury could conclude that she intended that there be an overpayment because she knew that overpayment was “substantially certain to result” from her intentional act of mailing out the payments. I believe that a jury should have the opportunity to determine First Jersey’s right to indemnity.

. There is ample legal precedent for treating insurance contracts differently from other contracts entered into by entities with equal bargaining power. “It is settled that any ambiguity or contradiction in an insurance policy must be construed against the insurer, and in a manner which is more favorable to coverage.” Buntin v. Continental Insurance Company, 583 F.2d 1201, 1207 (3d Cir.1978) (emphasis in original).