Court Opinion

ID: 4199229
Source: CourtListenerOpinion
Date Created: 2017-08-26 02:16:38.322163+00
Date Added: 2024-06-11T14:41:20.655045
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                                  SUPERIOR COURT OF NEW JERSEY
                                  APPELLATE DIVISION
                                  DOCKET NO. A-2472-14T2

STATE OF NEW JERSEY and
NEW JERSEY DEPARTMENT OF
EDUCATION,

     Plaintiffs-Appellants,

v.

STAR INSURANCE COMPANY and
MEADOWBROOK, INC.,

     Defendants-Respondents.
______________________________

         Argued March 8, 2016 – Decided June 10, 2016

         Before Judges Reisner and Hoffman.

         On appeal from the Superior Court of New
         Jersey, Law Division, Mercer County, Docket
         No. L-2923-12.

         Carlton T. Spiller argued the cause for
         appellants (Greenbaum, Rowe, Smith, & Davis,
         L.L.P., attorneys; Mr. Spiller, of counsel
         and on the briefs, Steven B. Gladis, on the
         briefs).

         Thomas E. Schorr argued the cause for
         respondents (Smith, Stratton, Wise, Heher &
         Brennan, L.L.P., attorneys; Mr. Schorr, on
         the brief).

PER CURIAM

     In this insurance coverage dispute, plaintiffs State of New

Jersey and New Jersey Department of Education (collectively, the

State), appeal from a December 17, 2014 order granting summary
judgment   in    favor   of    defendants       Star    Insurance     Company       and

Meadowbrook, Inc. (collectively, Star).

      We review the grant of summary judgment de novo, using the

same legal standard as the trial court.                     Town of Kearny v.

Brandt, 214 N.J. 76, 91 (2013); see Brill v. Guardian Life Ins.

Co. of Am., 142 N.J. 520, 540 (1995).                  Like the trial court, we

consider whether there are material facts in dispute, and if

not, whether the undisputed facts, viewed most favorably 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.'"        Town    of    Kearny,    supra,   214   N.J.     at    91

(quoting Brill, supra, 142 N.J. at 540).                 We owe no deference to

the   trial      court's      legal        interpretations,      including          its

construction of an insurance contract.                  See Selective Ins. Co.

of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597,

605 (2012) (citations omitted); Princeton S. Inv., LLC v. First

Am. Title Ins. Co., 437 N.J. Super. 283, 287 (App. Div. 2014).

      Having reviewed the record with those standards in mind, we

agree with the trial court that the commercial general liability

policy, which Star issued to the Newark Public Schools (the

District), did not cover the State.               Accordingly, we affirm the

order on appeal.

                                       I

                                           2                                 A-2472-14T2
       The   Star     policy       was   issued        on     July    1,     2007.         The

declarations page listed "Newark Public Schools" as the named

insured, and "2 Cedar Street Newark, NJ 07012" appeared as the

insured's address on both the policy and the application for

insurance.       In addition to the named insured and its employees,

the    policy    provided        coverage      to    anyone    "acting      as   [a]     real

estate    manager"     for       the   named       insured.     The    policy     did      not

define the term "real estate manager."                      The policy did not list

the State as an additional insured, nor did it identify the

Newark Public Schools as a State-operated school district.

       The coverage dispute concerned litigation arising from a

2007     incident      in    which       six        gang    members        attacked      four

individuals who were sitting in a District school yard at night.

Aeriel v. State Operated School Dist. for the City of Newark,

No. ESX-L-4320-08.            Three of the victims were killed and the

fourth was severely injured.                In 2008, the surviving victim and

the administrators of the deceased victims' estates (the Aeriel

plaintiffs)       filed      a    complaint         against     the    attackers,          the

District,       and   its    State-appointed          school    superintendent,            Dr.

Marion Bolden.1

1 When a local school district fails or is unable to provide a
thorough and efficient system of public education, the Education
Act (Act) authorizes the State Department of Education to
intervene by removing the local board of education and creating
a state-operated school district. See N.J.S.A. 18A:7A-1 to -52;
                                                     (continued)

                                               3                                     A-2472-14T2
    The Aeriel plaintiffs also sued the State, on the theory

that,   because   the   District   was    under      the   State's   control,

pursuant to the Education Act, the State was liable for failing

to maintain the school yard in a safe condition.                 In defending

against the Aeriel lawsuit, the State produced legally competent

evidence   that   it    had   no   responsibility          for   managing     or

maintaining the District's real estate.               That evidence, which

included Dr. Bolden's sworn testimony, was later presented as

part of Star's summary judgment motion in the insurance coverage

case.

    In the Aeriel lawsuit, Star defended and indemnified the

District   as   its   named   insured    and   the    superintendent     as    a

District employee.      In 2012, a few months before the scheduled

trial date, the State asserted for the first time that it was

(continued)
Contini v. Bd. of Educ. of Newark, 286 N.J. Super. 106, 128-29
(App. Div. 1995), certif. denied, 145 N.J. 372 (1996). However,
"[a] school district placed under full or partial State
intervention" does not thereby become a State agency; rather it
"shall remain a corporate entity."      N.J.S.A. 18A:7A-37. The
State intervened in the District in 1995.    See Contini, supra,
286 N.J. Super. at 113. Due to its intervention, the State was
authorized to appoint a State district superintendent to
"[p]erform all acts and do all things, consistent with law and
the rules of the State board, necessary for the lawful and
proper conduct, equipment and maintenance of the public schools
of the district." N.J.S.A. 18A:7A-38.          A superintendent
appointed under the Act is paid by the District and is
considered a District employee, not a State employee, but is
entitled to tort immunity as though she were a State officer.
N.J.S.A. 18A:7A-35(b).

                                    4                                 A-2472-14T2
entitled    to     coverage       under        the       Star     policy.       Star    denied

coverage, and in December 2012, the State filed the insurance

coverage lawsuit that gave rise to this appeal.                                 In 2013, the

Aeriel    lawsuit    was    settled       mid-trial,             with    Star    paying      two

million     dollars        on     behalf           of      the        District     and       the

superintendent, and the State paying three million dollars.

                                           II

    On this appeal, as in the trial court, the State claims

coverage    under    three      theories:            the    State       should    be    deemed

covered    under     the    policy        as       the     District's         "real     estate

manager"; the State was an additional insured because the listed

insured's name - "the Newark Public Schools" - was ambiguous and

should be construed as covering the State; and the State was an

"implied insured" under the policy.                      We find no merit in any of

those contentions.

    Relying on First National Bank of Palmerton v. Motor Club

of America Insurance Company, 310 N.J. Super. 1 (App Div. 1997),

the State contends that it is entitled to coverage under the

policy definition of "an insured," which includes "[a]ny person

(other than your employee), or any organization while acting as

your real estate manager."

    In     Palmerton,       the     bank,          which        was     the   mortgagee       in

possession of an apartment complex, sought defense and indemnity

under the mortgagor's insurance policy, after someone fell and

                                               5                                       A-2472-14T2
was injured on the complex premises.                  In that case, the mortgage

documents required the mortgagor to insure the property, and

provided that, "in the event of default, the Bank could take

possession of the premises," id. at 3, and could also "assume

operation of the property, including leasing, collecting rent,

repairing, and maintaining the premises."                    Id. at 4.

           The mortgagor's insurance policy contained the same clause

as    in    this   case,    extending     coverage      to    the    insured's      "real

estate manager."           However, the policy also clearly acknowledged

the   existence      of    the   mortgage       and   specifically       "allowed     the

mortgagee to receive loss payments after the commencement of a

foreclosure."       Ibid.     Under those circumstances, we held that

              [w]hether plaintiff was a "real estate
              manager" is to be determined by the language
              of the mortgage and security agreement, and
              the   language    of  the   insurance   policy.
              Pursuant    to   the  mortgage   and   security
              agreement, in the event of a default, the
              mortgagors consented to plaintiff having the
              right    to    take  possession    and   assume
              operation of the property, and for plaintiff
              to   act    in   the   mortgagors'   place.   A
              reasonable interpretation of the insurance
              policy is that a "real estate manager" would
              include a mortgagee in possession such as
              plaintiff.

              [Id. at 5.]
       We    also considered       that    the    insurance         company   was    well

aware that the insured had a mortgage, and the policy included

coverage for mortgagees.            In that context, there was "no added

                                            6                                  A-2472-14T2
risk" involved in deeming the mortgagee in possession to be a

real estate manager:

            In a situation such as this, where an
            insurer issues a policy knowing that the
            property is subject to a mortgage, and in
            fact the policy itself contains a standard
            mortgage   clause   extending  coverage   to
            mortgage holders, there is no added risk.
            At the time the policy was issued, it was
            foreseeable that a mortgagee could take
            possession and control of the property in
            the event of default. We perceive no
            meaningful distinction between the role of a
            receiver, real estate manager, or that of a
            mortgagee in possession.

            [Id. at 9-10 (citations omitted).]

      We agree with the trial judge that Palmerton is not on

point here.    Unlike Palmerton, the insurance policy here did not

acknowledge the District's relationship with the State or put

the insurer on notice that it might be called upon to insure the

State as well as the District.

      Moreover, we conclude that it is too great a stretch to

consider the State as the District's "real estate manager" based

on Bolden's general statutory authority as superintendent under

the Education Act.      In support of its argument, the State cites

the   superintendent's   "power   to    perform   all   acts   and   do    all

things that the [State Education] commissioner deems necessary

for   the   proper   conduct,   maintenance   and   supervision      of    the

schools in the district."       N.J.S.A. 18A:7A-35(e). The State also

argues that, under the Act, the State district superintendent

                                    7                                A-2472-14T2
"may be given the power to . . . [p]erform all acts and do all

things, consistent with law and the rules of the State board,

necessary     for    the     lawful     and       proper    conduct,       equipment      and

maintenance of the public schools of the district."                                N.J.S.A.

18A:7A-38(b).

      However,       the     aim   of     the       Act     is    not      to    make     the

superintendent into a real estate manager, or its equivalent,

but   to   put     the     superintendent          in    charge     of    the   District's

educational policies and practices.                        N.J.S.A. 18A:7A-35, -49;

see   also    Contini,       supra,     286       N.J.     Super.    at    128-29.         By

contrast,     a     mortgagee's       central       and     predictable         purpose    in

taking possession of a foreclosed property is to manage the real

estate.      For    that     reason,      Palmerton          found       "no    meaningful

distinction" between a receiver, a real estate manager, and a

mortgagee in possession.2             See Palmerton, supra, 310 N.J. Super.

at 9-10.

       Moreover, the undisputed record evidence in this case is

that Bolden did not take over the District's function of keeping

up its property, but she instead left that responsibility in the

2 In context, we understand the term "receiver" to refer to a
rent receiver, typically appointed by the court to manage real
property where a mortgagor is in default but the mortgagee does
not wish to take possession of the premises.     See Kaufman v.
Duncan Inv'rs, L.P., 368 N.J. Super. 501, 506 (App. Div. 2004);
Mony Life Ins. Co. v. Paramus Parkway Bldg., Ltd., 364 N.J.
Super. 92, 97 n.1 (App. Div. 2003).

                                              8                                    A-2472-14T2
hands of the District's employees.                Further, although she took

direction from the State, by law Bolden was an employee of the

District    and     thus   was   covered       under   the    Star    policy     as    a

District employee.         Hence, even if she were also deemed to be a

"real estate manager," she was the District's manager and not

the State's manager.

    We likewise cannot agree with the State's claim that the

policy was ambiguous or that Star intended to write coverage for

the State as an additional insured.               Courts "conceive a genuine

ambiguity    to   arise      where   the    phrasing     of   the    policy     is    so

confusing    that    the     average    policyholder      cannot     make    out     the

boundaries of coverage."             Zacarias v. Allstate Ins. Co., 168
N.J. 590, 598 (2001) (citations omitted).                     "In that instance,

the policy should be construed to comport with the insured's

objectively reasonable expectations of coverage."                         Christafano

v. N.J. Mfr.'s Ins. Co., 361 N.J. Super. 228, 234 (App. Div.

2003).     "Conversely, in the absence of an ambiguity, we 'should

not write for the insured a better policy of insurance than the

one purchased,'"       but     should      instead     enforce      the   policy      as

written.    Id. at 234-35 (citations omitted).

    The State's citations to the record do not support its

claim that Star knew or should have known that it was writing

insurance that would cover the State, or that the District had a

reasonable expectation that the policy would cover the State.

                                           9                                  A-2472-14T2
To    the   contrary,        the   request       for    proposals        issued    by     the

District when it sought insurance for 2007 listed only "The

Newark Public Schools, the largest school district in the State

of New Jersey" as the proposed insured.                        Any reasonable reading

of the proposal would lead a bidder to understand that coverage

was being sought for the Newark public school district.                                 There

was   no    mention    that    bidders      were       also    being     asked    to    write

coverage      for    the     State   or   the      State       Education     Department.

Likewise, the first line of the insurance application, which the

District submitted to Star, states: "NAME OF SCHOOL DISTRICT:

Newark      Public    Schools."        We    perceive          no    ambiguity     in     the

applicant's name, and the application did not indicate that the

District sought coverage for the State.

       Nor does the record support the State's argument that Star

should have known that it was writing coverage for the State as

an additional insured, without the need for any specific notice

or     application.          The     undisputed          evidence         supports        the

certification submitted by Star's underwriter, attesting that

Star relied on the applicant to inform Star of any additional

insureds      for     whom    coverage      was        sought.         Star's     and    the

District's      records       both    indicate          that     where     the    District

intended to add an insured to one of its Star-issued insurance

policies,     it     specifically      applied         for     the   addition     of    that

entity, and the addition was reflected in the declarations page

                                            10                                     A-2472-14T2
of the policy. For example, the District applied to add the New

Jersey Schools Construction Corporation (NJSCC) as an additional

insured on one of its policies.                  Based on that application, Star

issued a policy listing NJSCC as an additional insured.

      Under the Act, the District remained a corporate entity,

N.J.S.A. 18A:7A-37.          It did not become synonymous with the State

by virtue of the State's intervention under the Act.                            In light

of   Star's     and   the     District's      documented       course     of    business

dealing, if the District intended to purchase coverage for the

State     or   the    State       Education      Department     as   an    additional

insured, it would have specifically requested that coverage.

      Nor can we accept the State's theory that it was an implied

insured.       The implied insured doctrine allows third parties to

be treated as beneficiaries of an insurance contract when "the

risk to the insurer is unchanged, and where a third party is

within the class intended to be benefitted by the parties to an

insurance      contract."          Stewart-Smith      Haidinger,        Inc.    v.   Avi-

Truck, Inc., 682 P.2d 1108, 1113 (Alaska 1984).                               The State

acknowledges      that      our    courts     have   not   adopted      that     theory.

However, even if we consider the argument, it is without merit.

As previously discussed, the factual record does not support the

State's argument that it was an intended beneficiary under the

policy.        Moreover,     Star    submitted       legally    competent       evidence

that under its underwriting guidelines, adding the State as an

                                            11                                   A-2472-14T2
insured would have been deemed an additional risk, and Star

would have charged an additional premium for adding the State as

an insured.    The State's additional arguments on this point are

without    sufficient   merit   to   warrant   discussion   in   a   written

opinion.    R. 2:11-3(e)(1)(E).

    Affirmed.

                                     12                              A-2472-14T2