NOT FOR PUBLICATION WITHOUT THE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.
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