ESSEX INSURANCE COMPANY VS. NEW JERSEY PAN-AFRICAN CHAMBER OF COMMERCE & INDUSTRY, INC. VS. SCOTTSDALE INSURANCECOMPANY(L-2320-08, MONMOUTH COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-1237-14T3

ESSEX INSURANCE COMPANY,

Plaintiff,

v.

NEW JERSEY PAN-AFRICAN CHAMBER
OF COMMERCE & INDUSTRY, INC.;
VACCARO ASSOCIATES, LLC; HAROLD
BERLOW, individually and in his
official capacity as owner of
700 BANGS AVENUE LLC; 700 BANGS
AVENUE LLC; MLB CONSTRUCTION AND
CONSULTING, INC.; FRENCH &
PARRELLO ASSOCIATES, P.A.; GRAY,
WATT & PARTNERS; COLLECTIVE
CONCRETE, INC.; ATLANTIC SHEET PILE,
INC., NOREAST, INC.; STEVEN A. TARDY,
individually and in his official
capacity as agent/employee of FRENCH
& PARRELLO ASSOCIATES, P.A.; JAMES
WATT, individually and in his
official capacity as agent/employee
of GRAY, WATT & PARTNERS; DAVID
ZOLTAK, individually and in his
official capacity as agent/employee
of NOREAST, INC; MELBER GEOVANNY
TINITANA; WORK ARCHITECTURE AND
DESIGNS, INC.; CONCRETE CONSTRUCTION
AND COUNSELING, INC.; APPLEGATE
ENGINEERING SERVICE, INC.; and
CERTIFIED TESTING AND INSPECTIONS,
INC.,

Defendants,
and

NAVIGATORS SPECIALTY INSURANCE
COMPANY,

Defendant/Third-Party Plaintiff-
Respondent/Cross-Appellant,

v.

SCOTTSDALE INSURANCE COMPANY,

Third-Party Defendant-Appellant/
Cross-Respondent.

———————————————————————————————

Argued March 6, 2017 – Decided September 14, 2017

Before Judges Sabatino, Nugent, and Haas.

On appeal from the Superior Court of New
Jersey, Law Division, Monmouth County, Docket
No. L-2320-08.

Gary S. Kull argued the cause for
appellant/cross-respondent (Carroll, McNulty
& Kull LLC, attorneys; Mr. Kull and Blake
Palmer, of counsel and on the brief).

Michael A. Gorokhovich argued the cause for
respondent/cross-appellant (Gorokhovich
Insurance & Commercial Litigation LLC,
attorneys; Mr. Gorokhovich, of counsel and on
the brief).

PER CURIAM

This is a declaratory judgment action to determine insurance

coverage for a property damage claim and a personal injury claim,

both of which accrued when a building collapsed. The plaintiffs

in those actions alleged construction activity on adjacent land

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caused the collapse. On this appeal, Scottsdale Insurance Company,

the insurer of a subcontractor who drove piling at the construction

site, appeals from three orders that, collectively, required

Scottsdale to reimburse defense costs to Navigators Specialty

Insurance Company, the insurer of the general contractor at the

construction site. In issuing its orders, the court rejected,

among other Scottsdale arguments, that a "Subsidence Exclusion"

in its policy excluded coverage. We find the subsidence exclusion

clause unambiguous and applicable. We thus reverse the summary

judgment order.

The material facts are undisputed. Construction was underway

on 700 Bangs Avenue, LLC's Asbury Park property, which was adjacent

to New Jersey Pan-African Chamber of Commerce & Industry, Inc.'s

building, the building that partially collapsed during the

construction. 700 Bangs had contracted with a general contractor

insured by Navigators to build a condominium complex. The general

contractor sub-contracted the timber and sheet metal pile work to

a pile company insured by Scottsdale. As required by the sub-

contract, the pile company and Scottsdale named the general

contractor as an additional insured on Scottsdale's Commercial

General Liability policy.

During construction - after the pile subcontractor had driven

timber and sheet pile with a pile driving machine but before the

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subcontractor had removed certain sheet piles - the Pan-African

building partially collapsed, injuring a construction worker. As

a result of the collapse, the Pan-African building had to be

demolished. The Pan-African Chamber of Commerce commenced a

property damage action and the construction worker commenced a

personal injury action.

The plaintiff in this declaratory judgment action, Essex

Insurance Company, had issued a commercial general liability

policy to 700 Bangs. Essex filed this action seeking an order

declaring it owed no obligation to defend or indemnify, among

others, the general contractor. Essex also sought a declaration

that the general contractor's insurance company, Navigators, was

obligated to defend and indemnify 700 Bangs. Navigators filed a

third-party complaint against Scottsdale, alleging, among other

things, that Scottsdale was obligated to provide a defense to the

general contractor.

Essex successfully moved for summary judgment.1 On cross-

motions for summary judgment filed by Navigators and Scottsdale,

the trial court entered an order of partial summary judgment for

Navigators, declaring that Scottsdale had a duty to defend the

1
We affirmed the trial court's grant of summary judgment to
Essex. Essex Ins. Co. v. New Jersey Pan-African Chamber of
Commerce & Indus., No. A-1178-11 (App. Div. Aug. 27, 2013).

4 A-1237-14T3
general contractor in the underlying property damage and personal

injury actions. In doing so, the court rejected Scottsdale's

argument that its policy's subsidence exclusion excluded coverage.

The trial court denied Scottsdale's motion for reconsideration and

later entered an order requiring Scottsdale to reimburse

Navigators $210,021.49, the cost of Navigators' defense of its

insured, the general contractor. The court denied Navigators'

application for fees. Scottsdale filed an appeal and Navigators

filed a cross appeal.

Scottsdale raises five arguments on appeal: its policy's

subsidence clause excluded coverage; coverage under its additional

insured endorsement was limited to the general contractor's

vicarious liability; the additional insured endorsement naming the

general contractor did not become effective until after the acts

for which Scottsdale's insured, the pile subcontractor, were

allegedly liable; the general contractor did not qualify as an

additional insured under the Scottsdale policy; and the Scottsdale

policy's residential exclusion precluded coverage. Navigators

contests these arguments in its cross-appeal, alternatively argues

the Scottsdale policy should be reformed to void its residential

exclusion, and also argues the trial court erroneously denied its

fee application.

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 We review a trial court's order granting summary judgment de

novo, applying the same standard the trial court applies, namely,

the standard set forth in Rule 4:46-2(c). Conley v. Guerrero, 228

N.J. 339, 346 (2017). Mindful of this standard, we first address

whether Scottsdale had a duty to defend the general contractor in

light of its policy's subsidence exclusion. The exclusion states:

This policy does not apply to "bodily injury"
or "property damage" caused by, resulting
from, attributable or contributed to, or
aggravated by the subsidence of land as a
result of landslide, mudflow, earth sinking
or shifting, resulting from operations of the
named insured or any subcontractor of the
named insured.

In rejecting Scottsdale's contention the subsidence clause

excluded coverage, the trial court acknowledged the exclusion was

presumptively valid. The court noted, however, the complaints

in the underlying actions alleged the subcontractor's conduct

caused vibrations and erosions to the surrounding land. The court

reasoned that for the exclusion to apply, Scottsdale was required

to prove "that the subsidence was caused by an earth movement,

which includes earth rising, sinking, shifting, or subsiding,

landslide, or mudflow." Thus, the court framed the issue as

"whether vibrations caused by [the pile subcontractor's] operation

caused one of these specific events." The court concluded,

"[r]easonable minds can disagree as to whether vibrations mean

6 A-1237-14T3
earth shifting or sinking. The policy does not provide for a

definition of earth shifting. Additionally, the policy does not

negate coverage for all 'earth movements,' which would have

encompassed vibrations."

Denying Scottsdale's motion for reconsideration, the court

reiterated that "[w]hether vibrations can be considered a type of

earth shifting is a matter of contention. Thus, the subsidence

exclusion is an ambiguous one and Scottsdale is not entitled to

reconsideration on this issue."

Scottsdale contends the trial court erred when it determined

"Scottsdale must prove that the subsidence was caused by an earth

movement. . . ." Scottsdale asserts it was instead required

"merely [to] show that the allegations of the [u]nderlying

[a]ctions fall within the language of the exclusion." According

to Scottsdale, the allegations in the underlying actions'

complaints fall squarely within its policy's subsidence exclusion,

which was unambiguous.

Navigators contends the trial court correctly concluded the

Scottsdale policy's subsidence exclusion is ambiguous. According

to Navigators, because the clause consists of "four sub-clauses

strung together by [three] causal relationships in reverse order,

where the first listed causal relationship is broader than the two

7 A-1237-14T3
subsequent causal links which require only a 'resulting from'

relationship," the clause is hopelessly obtuse.

Navigators and Scottsdale dispute whether Scottsdale owed

Navigator's insured and Scottsdale's additional insured — the

general contractor — a duty to defend. "The duty to defend comes

into being when the complaint states a claim constituting a risk

insured against." Voorhees v. Preferred Mut. Ins. Co., 128 N.J.

165, 173 (1992) (quoting Danek v. Hommer, 28 N.J. Super. 68, 77

(App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954)). Thus, a court

determines "[w]hether an insurer has a duty to defend . . . by

comparing the allegations in the complaint with the language of

the policy. When the two correspond, the duty to defend arises,

irrespective of the claim's actual merit." Ibid.

Here, Scottsdale contends the property damage and personal

injury complaints did not state a claim against a risk it insured

because the claim fell within its policy's subsidence exclusion.

Exclusions in insurance policies are presumptively valid and

enforceable "if they are 'specific, plain, clear, prominent, and

not contrary to public policy.'" Flomerfelt v. Cardiello, 202

N.J. 432, 441 (2010) (quoting Princeton Ins. Co. v. Chunmuang, 151

N.J. 80, 95 (1997)). In contrast, courts will find "a genuine

ambiguity to arise where the phrasing of the policy is so confusing

8 A-1237-14T3
that the average policyholder cannot make out the boundaries of

coverage." Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979).

Generally, exclusions are narrowly construed. Flomerfelt,

supra, 202 N.J. at 442. The insurer has the burden of bringing

the case within the exclusion. Am. Motorists Ins. Co. v. L-C-A

Sales Co., 155 N.J. 29, 41 (1998). Courts must be careful,

however, "not to disregard the 'clear import and intent' of a

policy's exclusion." Flomerfelt, supra, 202 N.J. at 442 (quoting

Westchester Fire Ins. Co. v. Cont'l Ins. Cos., 126 N.J. Super. 29,

41 (App. Div. 1973), aff'd o.b., 65 N.J. 152 (1974)). Far-fetched

interpretations of a policy exclusion are insufficient to create

an ambiguity requiring coverage. Stafford v. T.H.E. Ins. Co., 309

N.J. Super. 97, 105 (App. Div. 1998).

Whether the terms of an insurance contract are "clear or

ambiguous is . . . a question of law." Nester v. O'Donnell, 301

N.J. Super. 198, 210 (App. Div. 1997) (quoting Kaufman v. Provident

Life and Cas. Ins. Co., 828 F. Supp. 275, 282 (D.N.J. 1992), aff'd,

993 F.2d 877 (3d Cir. 1993)). For that reason, we owe no deference

to the trial court's decision about the issue. Manalapan Realty,

L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

In the case before us, the complaints' allegations fall within

the Scottsdale policy's subsidence exclusion. The first amended

property damage complaint — included in the summary judgment record

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— alleges during the excavation and construction of the footing

and foundation for 700 Bangs' new building, various entities

affiliated with the construction, among other activities, used

"heavy machine operation, like a pile driver or backhoe, upon or

near [Pan-African's] building." The complaint alleges defendants

- including Scottsdale's insured, the pile subcontractor - after

removing soil from excavated portions of their property, "did

force and drive into the bottom of the excavation timber pile

piers and at points along their east, north and west boundary

lines certain matched heavy steel sheet piling, which pilings

defendants proceeded to drive, by means of a heavy machine similar

to a piledriver, into the bottom of the excavation."

The complaint further alleges "[t]hese operations did jar and

cause the surrounding land to vibrate, which caused the soil

underlying the foundation of [the Pan-African] building to erode

and subside down into the excavation. The strong vibrations,

under and against [the Pan-African] building caused the building

to shake, the exterior walls to crack and the roof to become

uneven." The complaint attributes the building's collapse to

these and other construction activities on 700 Bangs' land.

The second amended personal injury complaint alleges the

"wall collapse and resultant personal injuries were caused" by,

among other acts and omissions, defendants "forc[ing] and

10 A-1237-14T3
[driving] timber pile piers and heavy steel sheet piling by means

of a heavy machine which caused the faring vibrations and erosion

to the surrounding land and its foundation of the [Pan—African]

building."

These complaints allege the pile-driving activity caused

vibrations which in turn caused the soil beneath the Pan-African

building's foundations to "erode and subside down into the

excavation"; and caused "erosion to the surrounding land." The

allegations fall within the clear import and intent of the

Scottsdale policy's exclusion for subsidence of land caused by

earth sinking or shifting, resulting from operations of the pile

subcontractor. Flomerfelt, supra, 202 N.J. at 441.

Although we do not necessarily disagree with the trial court's

observation that "[r]easonable minds can disagree as to whether

vibrations mean earth shifting or sinking," that statement is

incomplete. The property damage and personal injury complaints

did not merely allege vibrating sand or soil beneath the Pan-

African building's foundation caused the collapse. Rather, they

allege the vibrations generated by construction activity caused

the sand or soil to "erode and subside down into the excavation."

The earth's erosion and subsiding down into the excavation

constituted earth "sinking or shifting" and thus fell within the

policy's exclusion.

11 A-1237-14T3
 Navigators' lengthy argument to the contrary, with its

multiple charts, is the kind of strained interpretation that

overlooks the exclusion's clear import and intent. As we have

previously held, such interpretations are "[in]sufficient to

create an ambiguity requiring coverage." Stafford, supra, 309

N.J. Super. at 105.

Moreover, this is not a situation where "the entangled and

professional interpretation of an insurance underwriter is pitted

against that of an average purchaser of insurance." DiOrio v. New

Jersey Manufacturers Ins. Co., 79 N.J. 257, 270 (1979). To the

contrary, Navigators is itself an insurer that issues policies

consisting of multiple coverage clauses and exclusions, as

evidenced by the commercial general liability policy it issued to

the general contractor in this case. We are confident Navigators

had little difficulty understanding the import and intent of the

Scottsdale policy's subsidence exclusion.

In view of our disposition of the parties' dispute concerning

the subsidence exclusion, we need not address Scottsdale's

remaining arguments or the arguments on Navigators' cross appeal.

We reverse the orders resulting in the grant of summary judgment

to Navigators and remand for the entry of an order of summary

judgment in favor of Scottsdale.

Reversed and remanded. We do not retain jurisdiction.

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