Court Opinion

ID: 4175496
Source: CourtListenerOpinion
Date Created: 2017-06-08 14:12:42.505041+00
Date Added: 2024-06-11T14:39:22.535235
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-0170-15T1

SCHULTZ FURRIERS, INC.,

        Plaintiff-Appellant,

v.

TRAVELERS CASUALTY INSURANCE
COMPANY OF AMERICA,

     Defendant-Respondent.
________________________________

              Argued April 25, 2017 – Decided May 3, 2017

              Before Judges Yannotti, Fasciale and
              Sapp-Peterson.

              On appeal from Superior Court of New Jersey,
              Law Division, Essex County, Docket No. L-2281-
              13.

              Mauro C. Casci argued the cause for appellant
              (Law Offices of Mauro C. Casci, attorneys; Mr.
              Casci, on the brief).

              Christopher S. Finazzo argued the cause for
              respondent   (Finazzo, Cossolini,  O'Leary,
              Meola & Hager, L.L.C., attorneys; Rachel R.
              Hager, on the brief).

PER CURIAM

        In   this   insurance     declaratory     judgment    lawsuit,    Schultz

Furriers, Inc. (plaintiff) appeals from two July 24, 2015 orders:
one granting Travelers Casualty Insurance Company of America's

(defendant) motion for summary judgment; and the other denying

plaintiff's cross-motion for summary judgment.           We affirm.

     Plaintiff leased the premises and operated a business selling

luxury outerwear and fur garments, in addition to garment cleaning,

storage, and repair services.        Plaintiff obtained a commercial

insurance policy from defendant covering certain losses pertaining

to that business.     The effective date of the insurance policy was

from October 31, 2011 to October 31, 2012.

     In   October   2012,   Superstorm     Sandy     knocked   down   certain

electrical transformers, which disrupted the power supply, and

caused plaintiff    to close its business.             Plaintiff filed an

insurance claim with defendant seeking coverage associated with

its business interruption.       Defendant disclaimed coverage, and

plaintiff filed this complaint.

     In   pre-trial     discovery,       plaintiff     produced   documents

establishing that its business was closed due to the power outage

from October 29, 2012 through November 5, 2012. Defendant, relying

on a "Power Pac Endorsement" in the insurance policy, tendered

plaintiff $2500 for the business loss.         Although plaintiff sought

coverage for more than $2500, defendant concluded that this payment

constituted the maximum amount of insurance coverage for the

business interruption.      In issuing the orders under review, the

                                     2                                A-0170-15T1
judge agreed with defendant's interpretation of the insurance

policy and rendered a comprehensive written decision in which he

analyzed the pertinent policy language.

     On appeal, plaintiff argues the language of the insurance

policy is ambiguous; the insurance policy is an "all risk" policy

and the burden of proving an exclusion rests with defendant;

plaintiff    is   entitled   to    insurance   coverage    under   the     civil

authority    section   of    the   policy;   and   defendant   breached       its

covenant of good faith and fair dealing.

     Summary      judgment   may    be   granted   when,    considering       the

evidence in the light most favorable to the non-moving party,

there is no genuine issue of material fact and the moving party

is entitled to judgment as a matter of law.                R. 4:46-2(c); see

also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540

(1995).     When reviewing an order granting summary judgment, this

court applies "the same standard governing the trial court." Oyola

v. Liu, 431 N.J. Super. 493, 497 (App. Div.), certif. denied, 216
N.J. 86 (2013).

     The interpretation of insurance contracts is a matter of law

and subject to de novo review.           Sealed Air Corp. v. Royal Indem.

Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196
N.J. 601 (2008).       This court owes no deference to the motion

judge's conclusions on issues of law.           Manalapan Realty, L.P. v.

                                         3                               A-0170-15T1
Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).                  Here, the

question on appeal is a legal issue pertaining to the insurance

policy language.

     "Insurance      policies     are   construed    in     accordance     with

principles    that   govern     the   interpretation   of     contracts;    the

parties' agreement 'will be enforced as written when its terms are

clear in order that the expectations of the parties will be

fulfilled.'"    Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J.
512, 525 (2012) (quoting Flomerfelt v. Cardiello, 202 N.J. 432,

441 (2010)).     "The terms of insurance contracts are given their

'plain and ordinary meaning,' with ambiguities resolved in favor

of the insured."      Ibid. (quoting Flomerfelt, supra, 202 N.J. at

441).      Therefore,    insurance      policies    "should    be   construed

liberally in [the insured's] favor to the end that coverage is

afforded to the full extent that any fair interpretation will

allow."    Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990)

(alteration in original) (quoting Kievit v. Loyal Protective Life

Ins. Co., 34 N.J. 475, 482 (1961)).

     "Although courts should construe insurance policies in favor

of the insured, they 'should not write for the insured a better

policy of insurance than the one purchased.'"                 Ibid. (quoting

Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529

(1989)).     "[I]nsurance contracts are to be construed in a manner

                                        4                             A-0170-15T1
that   recognizes      the   reasonable   expectation   of   the   insured."

Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 429 (App.

Div. 2004).      Moreover, "[w]hen an insurance carrier puts in issue

its coverage of a loss under a contract of insurance by relying

on an exclusionary clause, it bears a substantial burden of

demonstrating that the loss falls outside the scope of coverage."

United Rental Equip. Co. v. Aetna Life & Cas. Ins. Co., 74 N.J.
92, 99 (1977).

       Pursuant to the Business Income and Extra Expense section of

the insurance policy, defendant would have been obligated to pay

for actual loss of business income caused by the direct physical

loss of or damage to the property at the described premises.

Plaintiff alleged, however, that the business loss resulted from

the downed transformers offsite, not direct physical damage to the

leased premises.

       Moreover, the insurance policy also expressly excluded loss

or damage caused "directly or indirectly" by the "failure or

fluctuation" of power or other utility services "if the cause of

the    failure    or   fluctuation   occurs   away   from    the   described

premises."       The policy stated in relevant part:

            B. EXCLUSIONS

            1. We will not pay for loss or damage caused
            directly or indirectly by any of the
            following.  Such loss or damage is excluded

                                      5                              A-0170-15T1
            regardless of any other cause or event that
            contributes concurrently or in any sequence
            to the loss. These exclusions apply whether
            or not the loss event results in widespread
            damage or affects a substantial area.

            . . . .

            e. Utility Services

            The failure or fluctuation of power or other
            utility service supplied to the described
            premises, however caused, if the cause of the
            failure or fluctuation occurs away from the
            described premises.

            But if the failure or fluctuation of power or
            other utility service results in a Covered
            Cause of Loss, we will pay for the loss or
            damage resulting from that Covered Cause of
            Loss.

As a result, these provisions in the insurance policy specifically

excluded the claimed loss.

     Plaintiff argues that it was entitled to insurance coverage

under the extension for Equipment Breakdown Coverage language of

the policy.     However, this language also provides no basis for

coverage.     The pertinent sections of the insurance policy as to

this argument include:

            7. Coverage Extensions

            . . . .

            i. Equipment Breakdown

            (1) When a Limit of Insurance is shown in the
            Declarations for Building or Business Personal
            Property at the described premises, you may

                                  6                          A-0170-15T1
         extend that insurance to apply to direct
         physical loss of or damage to Covered Property
         at the described premises caused by or
         resulting from a "breakdown" to "covered
         equipment[."]

         With respect to otherwise covered Business
         Income and Extra Expense, "breakdown" to
         "covered equipment" will be considered a
         Covered Cause of Loss.

         If an initial "breakdown" causes other
         "breakdowns", all will be considered one
         "breakdown[."] All "breakdowns" that manifest
         themselves at the same time and are the result
         of the same cause will also be considered one
         "breakdown[."]

         (2) Under this Coverage Extension,         the
         following coverages also apply:

         . . .

         (c) Service Interruption

         When the Declarations show that you have
         coverage for Business Income and Extra
         Expense, you may extend that insurance to
         apply to loss caused by or resulting from a
         "breakdown" to equipment that is owned,
         operated or controlled by a local public or
         private utility or distributor that directly
         generates, transmits, distributes or provides
         the following utility services:

         (i) "Water Supply Services";
         (ii) "Communication Supply Services"; or
         (iii) "Power Supply Services[."]

    The policy defines "breakdown" and "power supply services"

as follows:

         G. Property Definitions

                               7                          A-0170-15T1
2. "Breakdown"

a. Means:

(1) Failure of pressure or vacuum equipment;

(2) Mechanical failure, including rupture or
bursting caused by centrifugal force; or

(3) Electrical failure including arcing;
that causes physical damage to "covered
equipment" and necessitates its repair or
replacement; and

b. Does not mean:

(1) Malfunction, including but not limited to
adjustment, alignment, calibration, cleaning
or modification;

(2) Leakage at any valve, fitting, shaft seal,
gland packing, joint or connection;

(3) Damage to any vacuum tube, gas tube, or
brush;

(4) Damage to any structure or foundation
supporting the "covered equipment" or any of
its parts;

(5) The functioning         of   any   safety   or
protective device; or

(6) The cracking of any part on any internal
combustion gas turbine exposed to the products
of combustion.

. . .

22. "Power Supply Services"

a. Means the following types of property
supplying electricity, steam or gas to the
described premises:

                        8                            A-0170-15T1
         (1)   Utility generating plants;
         (2)   Switching stations;
         (3)   Substations;
         (4)   Transformers; and
         (5)   Transmission lines; and

         b. Does not mean overhead transmission lines.

    An endorsement to the insurance policy, which was also issued

at the inception of the policy, stated:

         EQUIPMENT BREAKDOWN – SERVICE INTERRUPTION
         LIMITATION
         This endorsement modifies insurance provided
         under the following:
         BUSINESSOWNERS PROPERTY COVERAGE SPECIAL FORM

         A. The BUSINESSOWNERS PROPERTY        COVERAGE
         SPECIAL FORM is changed as follows:

         1. The following is added to paragraph A.7.
         Coverage Extensions i. Equipment Breakdown:

         (9) With respect to Service Interruption
         coverage, we will not pay under this Coverage
         Extension for loss or damage caused by or
         resulting from any of the following:

         (a) Fire;
         (b) Lightning;
         (c) Windstorm or hail;
         (d) Explosion (except for steam or centrifugal
         explosion);
         (e) Smoke;
         (f) Aircraft or vehicles;
         (g) Riot or civil commotion;
         (h) Vandalism;
         (i) Sprinkler Leakage;
         (j) Falling objects;
         (k) Weight of snow, ice or sleet;
         (l) Freezing; or
         (m) Collapse.

         [(Emphasis added).]

                                9                         A-0170-15T1
     The language relied upon by plaintiff covers business losses

resulting from the breakdown of equipment owned, operated or

controlled by a public utility.           Plaintiff, however, did not

produce any credible evidence to raise a factual dispute to

establish that its business losses were due to a breakdown of

equipment as the policy has defined that term.             Moreover, the

policy   expressly   excluded    business    losses   resulting   from    a

windstorm.

     On January 9, 2012, defendant modified the insurance policy

by attaching a "Power Pac Endorsement," on which defendant relied

to fully pay plaintiff's claim.         The parties dispute whether the

Power Pac Endorsement increased or limited insurance coverage

under the policy.    The Power Pac Endorsement states:

           This endorsement modifies insurance provided
           under the following:
           BUSINESSOWNERS PROPERTY COVERAGE SPECIAL FORM

           A. The BUSINESSOWNERS PROPERTY             COVERAGE
           SPECIAL FORM is changed as follows:

           . . .

           8. The    following   Coverage     Extensions   are
           added:

           . . .

           c. Utility Services – Time Element

           (1) When the Declarations show that you have
           coverage for Business Income and Extra

                                   10                             A-0170-15T1
              Expense, you may extend that insurance to
              apply to the loss of Business Income or Extra
              Expense caused by the interruption of service
              to the described premises. The interruption
              must result from direct physical loss or
              damage by a Covered Cause of Loss to the
              following property not on the described
              premises:

              (a) "Water Supply Services";
              (b) "Communication Supply Services"; or
              (c) "Power Supply Services[."]

              (2) We will pay the actual loss sustained from
              the initial time of service(s) failure at the
              described premises but only when the service
              interruption at the described premises exceeds
              24 hours immediately following the direct
              physical loss or damage.    Coverage does not
              apply to any reduction of income after service
              has been restored to your premises.

              (3) The most we will pay for loss under this
              Coverage Extension in any one occurrence is
              $2,500 at each described premises.

      We agree with defendant, as did the motion judge, that the

Power   Pac    Endorsement       extended       rather    than   limited    insurance

coverage.      Without this endorsement, plaintiff was not entitled

to insurance coverage for its power outage.                      That is so because

the   language      of   the    Equipment       Breakdown/Service        Interruption

Limitation unambiguously excluded coverage for loss or damage

caused by windstorms.

      The   Power    Pac   Endorsement          allowed    plaintiff's     claim   and

capped the amount of insurance coverage.                    It provided $2500 of

coverage      for    the       type   of    loss     sustained      by     plaintiff.

                                           11                                 A-0170-15T1
Consequently, defendant satisfied its obligation under the policy

by paying plaintiff $2500 for business interruption due to power

outage.

     We conclude that plaintiff's remaining arguments are without

sufficient merit to warrant discussion in a written opinion.      R.

2:11-3(e)(1)(E).   We add the following brief remarks.

     Plaintiff is not entitled to insurance coverage under the

Civil Authority Extension portion of the policy.         The civil

authority section allows coverage for losses "caused by action of

civil authority that prohibits access to the described premises."

Plaintiff concedes it would be required to show that access was

"totally and completely prevented, i.e. made impossible."      Such

is not the case here.    Plaintiff's owner testified that he had

accessed the building himself shortly after the storm and before

the streets were cleared of debris.    The town's fire department

also verified that although many trees fell and blocked roads,

there were alternate routes accessible if a road was completely

blocked.

     Finally, there exists no evidence that defendant breached its

covenant of good faith and fair dealing with plaintiff.      As we

have stated, the insured "must establish the merits of his or her

claim for benefits.    If there is a valid question of coverage,

i.e., the claim is 'fairly debatable,' the insurer bears no

                               12                          A-0170-15T1
liability for bad faith."      Wacker-Ciocco v. Gov't Emps. Ins. Co.,

439 N.J. Super. 603, 611 (App. Div. 2015) (quoting Pickett v.

Lloyd's,   131 N.J. 457,   473-74   (1993)).   Defendant    denied

plaintiff's claims beyond the $2500 cap in accordance with the

terms and conditions of the insurance policy. There is no evidence

of bad faith on behalf of defendant.

     Affirmed.

                                   13                          A-0170-15T1