Court Opinion

ID: 8210727
Source: CourtListenerOpinion
Date Created: 2022-09-30 14:08:42.494188+00
Date Added: 2024-06-11T16:41:55.027592
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NOT FOR PUBLICATION WITHOUT THE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-2835-20

REPUBLIC FRANKLIN
INSURANCE COMPANY,

          Plaintiff-Respondent,

v.

FICKE & ASSOCIATES, LLC,

          Defendant-Appellant,

and

SITLAX REALTY, LLC,

     Defendant-Respondent.
____________________________

                   Submitted September 19, 2022 – Decided September 30, 2022

                   Before Judges Mawla and Smith.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Middlesex County, Docket No. L-3406-19.

                   The Killian Firm, PC, attorneys for appellant Ficke &
                   Associates, LLC (Eugene Killian, Jr. and Dimitri
                   Teresh, on the briefs).
            Marshall, Dennehey, Warner, Coleman & Goggin,
            attorneys for respondent Republic Franklin Insurance
            Company (David D. Blake and Walter F. Kawalec, III,
            on the brief).

PER CURIAM

      Appellant Ficke & Associates, LLC (Ficke) appeals from two April 27,

2021 orders granting respondent Republic Franklin Insurance (RFI) summary

judgment and denying Ficke's cross-motion for summary judgment, and a May

3, 2021 order denying Ficke's motion to compel discovery. We affirm.

      Sitlax Realty, LLC is a real estate company.        Ficke is an insurance

brokerage that provided Sitlax with coverage. Beginning in 2007, RFI issued

Ficke a series of claims made errors and omissions (E&O) professional

negligence policies. The period in question pertains to the 2016 and 2019 policy

period. RFI issued policies to Ficke from January 22, 2016 through January 22,

2017, and again from January 22, 2019 to January 22, 2020.

      RFI's 2016 policy read as follows:

            SECTION I – DEFINITIONS

            ....

            2. "Claim" means a written demand or written notice,
            including service of a subpoena, "suit" . . . received by
            one or more insureds which alleges a "wrongful act" or
            asks for money or services.

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....

8. "Loss" means any amount which an insured becomes
legally obligated to pay as damages for any "claim"
arising out of a "wrongful act" to which this insurance
applies    and     shall  include    judgments      and
settlements. . . .

....

11. "Suit" means a civil proceeding in which damages
because of "loss" are alleged. . . .

....

13. "Wrongful act" means any negligent act, negligent
error, negligent omission, or "personal injury"
committed by an insured in the lawful performance of
their duties for you.

SECTION II – COVERAGE

1. Insuring Agreement

       a. We will pay on behalf of the insured all "loss"
       to which this insurance applies.

       We will have the right and duty to defend the
       insured against any "suit" seeking such "loss"
       even if the allegations of the "suit" are
       groundless, false, or fraudulent. However, we
       will have no duty to defend an insured against
       any "suit" to which this insurance does not
       apply. . . .

....

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                            3
       c. A "claim" will be considered first made at the
       earliest of the following times:

             (1) When notice of such "claim" is received
             and recorded by any insured or by us,
             whichever comes first.

             (2) When we make settlement                in
             accordance with paragraph 1.a. above.

             (3) On the date during the "policy period"
             when the first written notice of any facts or
             circumstances which may subsequently
             give rise to a "claim" which would be
             insured hereunder is received by us from an
             insured. Any "claim" made against an
             insured arising out of such facts or
             circumstances after the date of receipt of
             such notice by us will be considered to
             have been made on the date we received the
             first notice of facts or circumstances. Only
             the policy in force on that date and no other
             shall apply to all "claims" from such facts
             or circumstances.

       d. All "claims" based on or arising out of a single
       "wrongful act" or all "interrelated wrongful acts"
       of one or more insureds shall be deemed to be one
       "claim" and to have been made at the time the
       first of those "claims" is made against any
       insured.

....

SECTION VI – CONDITIONS

1. Duties In The Event Of Wrongful Act, Claim Or Suit

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                            4
       a. You must see to it that we are notified in
       writing as soon as practicable of any "wrongful
       act" which may result in a "claim." To the extent
       possible, notice should include:

             (1) How, when and where the "wrongful
             act" took place;

             (2) The names and addresses of persons
             involved in the "wrongful act" and
             witnesses; and

             (3) The nature of the harm resulting from
             the "wrongful act".

       b. If a "claim" is received by an insured, you
       must:

             (1) Immediately record the specifics of the
             "claim" and the date received; and

             (2) Notify us as soon as practicable.

             You must see to it that we receive written
             notice of the "claim" as soon as practicable.

       c. You and any other involved insured must:

             (1) Immediately send us copies of any
             demands, notices, summonses, subpoenas
             or legal papers received in connection with
             the "claim" or "suit";

....

       d. No insured will, except at that insured's own
       cost, voluntarily make a payment, assume any

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                            5
                  obligation, or incur any expense without our
                  consent.

      In 2010, Sitlax leased property to DAF Greenwood USA, LLC, (DAF).

The lease contained a provision requiring DAF to maintain $1 million of

property insurance.

      Ficke advised Sitlax it procured the necessary insurance for DAF through

Sentinel Insurance Company, naming Sitlax as the additional insured under the

lease terms. Ficke gave Sitlax a Certificate of Insurance indicating $300,000

for "damage to rented premises." It also provided insurance from Hartford

Insurance Company of the Midwest and advised Sitlax the necessary insurance

was procured for DAF to conform with the lease requirements.

      In 2013, DAF breached the lease and Sitlax evicted it. Sitlax discovered

DAF caused damage to the property during the tenancy. During this period,

Sitlax had representatives visit the property and knew about the damage. Ficke

repeatedly advised Sitlax the damage was covered.

      Sitlax sold DAF's equipment remaining on the property to cover the

damage but did not recover the entirety of the losses. Therefore, Sitlax turned

to its insurance, seeking coverage from Sentinel and Hartford. Sentinel and

Hartford declined coverage in 2015 and 2016, respectively.

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      On November 9, 2016, Sitlax sued Sentinel, Hartford, DAF, and Ficke. In

addition to the claims raised against the other parties, Sitlax alleged professional

negligence against Ficke, including for failing to "procure proper insurance

coverage for Sitlax . . . to protect Sitlax in the event of damage to the [p]roperty

caused by DAF . . . ." Sitlax also alleged a breach of fiduciary duty against

Ficke "by failing to act in a manner consistent with the best interests of Sitlax[,]"

and unjust enrichment in the form of "fees, commissions or other compensation"

Ficke received by inducing Sitlax to entering the insurance agreements .

      Ficke did not answer the complaint, allowing Sitlax to obtain a default

judgment and then a writ of execution and levy against Ficke's bank account.

Ficke moved to vacate the default judgment and extend the time to file an

answer. In support of the motion, Ficke's owner, Arun Parikh, certified to his

"personal friendship with [Sitlax's owner] Jitendra Sitarambahi Patel . . . ."

Parikh acknowledged he was served with the complaint at Ficke's office via

certified mail.

      After receiving the complaint, Parikh claimed he spoke with Patel who

"agreed that Ficke was named in the [c]omplaint only because it was the

brokerage company involved in the subject transaction of the lawsuit, not

because . . . Patel was seeking any legal recourse against Ficke." Parikh claimed

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he and Patel understood Hartford would be handling the defense, and so he did

not take further action regarding the lawsuit. Parikh recalled being served with

other legal documents after this meeting, but he did not remember the nature of

the documents or when they were served.

      Parikh stated after default judgment was entered, he called Patel who

stated "he had no intention of having the [judgment amount] withdrawn from

Ficke's bank account," and Parikh should "let the process run its course." Based

on these representations, Parikh "did not believe [he] needed to seek legal advice

or otherwise respond to Sitlax's [c]omplaint, the request for default judgment,

or any other legal documentation . . . received in the mail." Parikh further

certified he spoke to Patel in September 2018 and Patel agreed to vacate the

default judgment.

      In October 2018, Patel submitted a certification in support of Sitlax's

opposition to Ficke's motion to vacate default judgment. He stated he told

Parikh about the damage to the property during DAF's tenancy and Parikh

visited the property to see the damage himself. He stated Parikh assured him

the damage was covered.

      After Hartford and Sentinel denied coverage, Patel told Parikh counsel

advised him to file a lawsuit against the carriers and Ficke, and Parikh should

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get an attorney. Patel claimed Parikh said, "do what you have to do." He denied

ever telling Parikh he would not pursue the claims against Ficke. Patel refuted

Parikh's assertion Hartford would handle the claim because Patel "hired an

attorney to pursue the carriers for breach of contract and . . . Ficke, for broker

malpractice."

      Patel maintained he did not advise Parikh not to answer the complaint or

respond to legal correspondence, but instead consistently advised him to get an

attorney, and Parikh always claimed Hartford would handle the dispute. He told

Parikh the sheriff executed the judgment and "the judgment was running through

the process." Patel further authorized his attorney to file the necessary motions

to execute the judgment. When Parikh called Patel asking him not to execute

on the funds in Ficke's bank account, Patel advised him to contact his attorney.

      Patel stated Parikh admitted he did not pay attention to any of the letters

sent by Patel's attorney during this period. He certified "from talking with

Parikh that Parikh received all correspondence from [Patel's] attorney and chose

to ignore both the letters and orders. . . . His actions (or lack thereof) and

decisions on how to respond to this lawsuit are all his own."

      The court granted Sentinel and Hartford summary judgment dismissing

them from the litigation. The court also granted Ficke's motion to vacate the

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                                        9
default judgment but denied its subsequent motion to dismiss Sitlax's complaint

with prejudice for failure to state a claim.

      The parties stipulated to dismissal of Sitlax's complaint against Ficke

without prejudice. Sitlax refiled its complaint, alleging professional negligence

and breach of fiduciary duty. RFI filed a complaint for declaratory judgment

against Ficke and Sitlax for an order declaring it had no duty to defend or

indemnify Ficke in the Sitlax lawsuit. RFI cited the coverage and conditions

section of its policy and claimed Ficke's failure to provide it with notice of the

lawsuit for more than two years after service of the suit precluded RFI's

obligation to defend and indemnify Ficke. The complaint noted RFI retained

counsel to defend Ficke, subject to a reservation of rights (ROR) pending a

decision in the declaratory judgment action.

      The parties conducted discovery, after which each filed motions for

summary judgment. Ficke also filed a motion to compel discovery. RFI's

summary judgment motion enclosed an ROR letter and copies of the signed

certified mail receipts verifying service of the complaint and the letter on Ficke.

In response, Ficke filed a certification from Parikh alleging he never saw the

ROR letter and the signature on the certified mail receipt did not belong to a

Ficke employee.

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                                        10
      RFI alleged it first received notice of Sitlax's 2016 lawsuit against Ficke

in a January 2019 email, and received official notice on March 25, 2019, when

Ficke filed a notice of loss. Meanwhile, from 2016-18, Ficke submitted three

renewal applications for insurance to RFI. The 2016 application asked: "Within

the last [five] years, . . . have any [E&O] claims or incidents been made against

the agency, any of its past or present personnel, or any predecessor agency?";

"Are there any known circumstances or incidents that may result in an [E&O]

claim being made against the agency or agency personnel?"; "Within the last

[five] years, have any past or present agency personnel been the subject of

complaints filed, investigations, and/or disciplinary action undertaken by any

insurance or other regulatory authority or been convicted of a felony?" Ficke

answered "no" to each question.        The November 2017 and 2018 renewal

applications asked: "Is the agency management or ownership aware of any

circumstance, allegation or incident which may result in an E&O claim made

against the agency but not yet reported to your E&O carrier?" Ficke again

indicated "no."

      RFI's ROR letter stated it retained counsel for Ficke but "will continue to

investigate whether [RFI had] been prejudiced by the late notice of [the 2016]

lawsuit." The letter further stated:

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                                       11
             [RFI] reserves all of its rights and defenses under and
             pursuant to the policy of insurance upon which these
             claims have been made. We specifically reserve our
             right to rely upon any and all terms, provisions,
             limitations or exclusions contained in the policy of
             insurance, as well as any other disclaimers or
             affirmative defenses which may exist under the contract
             or at law, whether stated herein or not.

RFI issued a second ROR letter refuting Ficke's assertion that RFI was obligated

to pay attorney's fees to Sitlax associated with the motion to vacate the default

judgment, noting pursuant to the first ROR letter, RFI had "no obligation to pay

for any fees ordered prior to its first notice of the claim."

      Ficke argued its claim did not ripen until the dispute with Sentinel and

Hartford was adjudicated. The judge rejected this argument finding "it's not

[Ficke's] right under the policy to make that determination. It's the carrier.

That's why they want to have control as early on as possible to determine how

best to defend this. It's not up to the insured to make such a determination."

The judge further noted there was no dispute Ficke failed to disclose the

existence of a claim to RFI for more than two years. The judge concluded

summary judgment in RFI's favor was appropriate, notwithstanding that

discovery was not concluded, because there was no issue of material fact

requiring resolution that would change the outcome.

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                                        12
      The judge also found the ROR letters were proper and the certified mail

receipts objectively proved service of the letters on Ficke. The judge concluded

Ficke's claim accrued in 2016 and Parikh made misrepresentations on the

renewal applications by indicating there were no claims accrued from 2017-19.

      The motion judge granted RFI summary judgment and denied Ficke's

cross-motion for summary judgment. He denied Ficke's motion to compel

discovery as moot.

      Ficke raises the following arguments on appeal:

            I. RFI IS ESTOPPED FROM DISCLAIMING
            COVERAGE AS A MATTER OF LAW.

                  a. The ROR Letter In The Instant Matter Was Not
                  Properly Served on Ficke.

                  b. Ficke Did Not Expressly Agree To The ROR
                  Letter As To Allow RFI To Disclaim Coverage.

                  c. Additional Genuine Issues Of Material Fact
                  Exist As To Notice Provided To RFI By Ficke.

                        1. The claims against Ficke accrued after
                        summary judgment was granted in 2016
                        Sitlax litigation.

                        2. Sitlax advised Ficke of no ripe claims in
                        the 2016 Sitlax litigation.

                  d. Outstanding Discovery Remains Which
                  Required The Dismissal of RFI's Motion For
                  Summary Judgment.

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                                      13
                                          I.

        Summary judgment is appropriate "if the pleadings, depositions, answers

to interrogatories and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact challenged and that

the moving party is entitled to a judgment or order as a matter of law." R. 4:46-

2(c).    The determination requires the motion judge consider "whether the

competent evidential materials presented, when viewed in the light most

favorable to the non-moving party, are sufficient to permit a rational factfinder

to resolve the alleged disputed issue in favor of the non-moving party." Brill v.

Guardian Life Ins. Co., 142 N.J. 520, 540 (1995). "[W]hen the evidence 'is so

one-sided that one party must prevail as a matter of law,' . . . the trial court

should not hesitate to grant summary judgment." Ibid. (quoting Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). "[W]e review a trial court's

grant of summary judgment de novo[,] under the same standard as the trial

court." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189,

199 (2016).

                                         II.

        Ficke disputes the motion judge's findings that it failed to give RFI timely

notice of the claims brought against Ficke. It argues the dispute regarding the

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                                        14
notice provision in the policy was a general issue of material fact and summary

judgment was improperly granted.

      As a general proposition, courts should give an insurance policy's words

"their plain, ordinary meaning." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595

(2001). "If the language is clear[,]" the inquiry ends there. Chubb Custom Ins.

Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008). "[I]n the absence

of an ambiguity, a court should not 'engage in a strained construction to support

the imposition of liability' or write a better policy for the insured than the one

purchased." Ibid. (quoting Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260,

272-73 (2001)).

      If contract terms are susceptible to at least two reasonable interpretations,

the terms are ambiguous. Ibid. "[A]mbiguous language in an insurance policy

is often construed in favor of the insured." President v. Jenkins, 180 N.J. 550,

563 (2004) (citing Doto v. Russo, 140 N.J. 544, 556 (1995)). The "fundamental

rules of insurance contract interpretation require [the court] to read coverage

provisions broadly, and to interpret ambiguities 'to comport with the reasonable

expectations of the insured, even if a close reading of the written text reveals a

contrary meaning . . . .'" Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc.,

                                                                             A-2835-20
                                       15
181 N.J. 245, 269 (2004) (quoting Zacarias, 168 N.J. at 595) (internal citations

omitted).

      Here, the dispute regards the language of RFI's "claims made" policy

provision, which required Ficke to notify RFI of a claim "as soon as practicable."

In discussing the important distinction of a claims made policy versus an

occurrence policy, our Supreme Court stated:

                   Both "claims made" and "occurrence" policies
            contain reporting requirements, but the importance and
            terms of those requirements differ. The distinctive
            roles that reporting requirements play in "claims made"
            versus "occurrence" policies not only addresses the
            basic difference between the two policies, but informs
            our judicial interpretation of those requirements.

            . . . . "Claims made" policies commonly require that
            the claim be made and reported within the policy
            period, thereby providing a fixed date after which the
            insurance company will not be subject to liability under
            the policy. [Sparks v. St. Paul Ins. Co., 100 N.J. 325,
            330-31 (1985)]; 7 Couch on Insurance 3d § 102:22
            (2013). "Claims made" policies also tend to have an
            additional "notice of claim" provision "phrased in terms
            of the insured notifying the insurer of a claim or
            potential claim 'promptly' or the like[.]" 13 Couch on
            Insurance 3d § 186:13 (2009).

            The prompt notice requirement and the requirement
            that the claim be made within the policy period in
            "claims made" policies "maximiz[e] the insurer's
            opportunity to investigate, set reserves, and control or
            participate in negotiations with the third party asserting
            the claim against the insured" and "mark the point at

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                                       16
              which liability for the claim passes to an ensuing
              policy, frequently issued by a different insurer, which
              may have very different limits and terms of coverage."
              Id.

              [Templo Fuente, 224 N.J. at 202-03 (alterations in
              original).]

        In reading a policy, we have stated "'as soon as practicable' means 'within

a reasonable time.' . . . [T]hat determination of what is 'as soon as practicable'

does not necessarily depend on mere time lapse but must be adjudged in the light

of the particular factual situation presented." Ebert v. Balter, 74 N.J. Super. 466,

472-73 (App. Div. 1962).

        We reject Ficke's reading of the policy. The policy states a claim includes

"a written demand or written notice, . . . service of a subpoena, 'suit' . . . received

by one or more insureds which alleges a 'wrongful act' or asks for money or

services." "Suit" is defined as "a civil proceeding in which damages because of

'loss' are alleged." "Wrongful act" is "any negligent act, . . . error . . . [or]

omission . . . ." A plain reading of the policy language reveals no credible

dispute whether the 2016 Sitlax complaint against Ficke met the definition of a

suit.

        Moreover, we reject Ficke's argument the policy language of "as soon as

practicable" means "as soon as is ripe." The policy states Ficke "must see to it

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                                         17
that [RFI is] notified in writing as soon as practicable of any 'wrongful act' which

may result in a 'claim.'"    The 2016 complaint clearly qualified as a claim

stemming from a wrongful act requiring Ficke to notify RFI of the suit in writing

as soon as practicable. The policy language is clear and unambiguous and

contains no language regarding the accrual of a claim before Ficke had to notify

RFI.

       Ficke failed to inform RFI of the claim against it within a reasonable time.

As the motion judge found, Ficke waited three years and renewed its insurance

three times, certifying there were no claims made against it.               Ficke's

unreasonable conduct is measured by the fact it acted only after a default

judgment entered, depriving RFI of its ability to conduct the defense. For these

reasons, the motion judge properly found summary judgment in favor of RFI

based on the policy's clear and unambiguous language.

                                        III.

       Ficke raises several arguments regarding the propriety of the ROR letter,

including: it never received the letter; RFI withheld the letter and only produced

during the summary judgment proceedings; the second ROR letter never

reasserted the terms of the first one; there was no agreement between RFI and

Ficke regarding the rights reserved by RFI; and the motion judge found facts

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                                        18
regarding the service of the letter based on a disputed factual record. We are

unpersuaded.

      "Upon the receipt from its insured of a claim or notification of an incident

that may give rise to a claim, an insurer is entitled to a reasonable period of time

in which to investigate whether the particular incident involves a risk covered

by the terms of the policy." Griggs v. Bertram, 88 N.J. 347, 357 (1982). Once

the insurer investigates, it "is under a duty promptly to inform its insured of its

intention to disclaim coverage or of the possibility that coverage will be denied

or questioned." Ibid.

      "The classic mode of reservation is a nonwaiver agreement between the

insured and the insurer." Merchs. Indem. Corp. v. Eggleston, 37 N.J. 114, 126

(1962). An insurer's unilateral declaration of rights is not enough to establish

consent. Sneed v. Concord Ins. Co., 98 N.J. Super. 306, 314 (App. Div. 1967).

The letter must contain language "apprising the policy-holders . . . they were at

liberty to accept or reject the company's plan of procedure." Id. at 311. "The

agreement may appear in an exchange of letters" or "may also be inferred from

the insured's failure to reject the carrier's offer to defend with a reservation of

rights." Merchs. Indem. Corp., 37 N.J. at 126. "The rationa[]le is that, by reason

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of the relation of the parties, the insured is obliged to speak in response to the

offer, and hence . . . silence spells out consent." Ibid.

      It is "universally agreed . . . the defense of an action against the insured is

incompatible with a denial of liability unless the carrier has reserved the issue

of its liability by appropriate measures." Ibid. "Control of the defense is vitally

connected with the obligation to pay the judgment. Carriers contract for control,

and to that end require notice of [claims] and prompt submission of suit papers."

Id. at 127. "[I]f a carrier wishes to control the defense and simultaneously

reserve a right to dispute liability, it can only do so with the consent of the

insured." Ibid.

      An insurance carrier may be estopped from denying coverage despite a

clear policy provision excluding the claim from coverage. Griggs, 88 N.J. at

355-56.

            The strongest and most frequent situation giving rise to
            such an estoppel is one wherein a carrier undertakes to
            defend a lawsuit based upon a claim against its insured.
            If it does so with knowledge of facts that are relevant
            to a policy defense or to a basis for noncoverage of the
            claim, without a valid reservation of rights to deny
            coverage at a later time, it is estopped from later
            denying coverage.

            [Id. at 356.]

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"The rationale behind estoppel in this context is . . . once the insurer has

acknowledged the claim and assumes control of the defense, the insured is

justified in relying upon the carrier to protect it under its policy and to be

responsible for any judgment against it." Ibid.

      We are unconvinced estoppel applies here because RFI's ROR letter was

sufficient and Ficke consented by acquiescence. Indeed, the ROR letter read:

            The . . . [E&O] policy will afford protection for any
            claims that meet the definition of "wrongful acts,"
            "loss" and "suit" that are not otherwise excluded from
            coverage. However, [RFI] will not indemnify you for
            the allegation of unjust enrichment which is excluded
            from coverage based on the provisions outlined . . .
            above.

            [RFI] will offer to provide you a defense in this matter,
            and appoint Robert Gold of Gold Albanese Barletti &
            Locascio to defend you. You have the right to reject
            the offer and have counsel of your own choosing defend
            you, at your own expense.

            [(emphasis added).]

      RFI promptly informed Ficke of its intention to disclaim coverage. The

ROR letter clearly indicated it would defend Ficke, subject to reservation,

because Ficke violated the policy's notice provision. When Ficke officially filed

the notice of loss claim RFI sent a follow-up letter the next day expressly

referencing the disclaimer in the first ROR letter.

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                                       21
      RFI's ROR letter was not the sort of "unilateral declaration" discussed in

Sneed. Rather, the language informed Ficke of the right to reject the offer and

proceed "at [its] expense." Contrary to Ficke's argument, RFI did not assume

the defense and then cease defending, warranting estoppel.       Rather, Ficke

received proper notice and acquiesced to RFI's refusal of coverage.

      The remaining arguments raised on appeal lack sufficient merit to warrant

discussion in a written opinion. R. 2:11-3(e)(1)(E).

      Affirmed.

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