THERESA WEAR VS. SELECTIVE INSURANCE COMPANY WOODBURY MEDICAL CENTER ASSOCIATES, LLP VS. SELECTIVE INSURANCE COMPANY (L-1583-13, GLOUCESTER COUNTY AND STATEWIDE)(CONSOLIDATED)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5526-15T1
A-0033-16T1
THERESA WEAR and RICHARD
WEAR,

Plaintiffs/Intervenors-
Appellants, APPROVED FOR PUBLICATION

v. July 20, 2018

APPELLATE DIVISION
SELECTIVE INSURANCE COMPANY,

Defendant-Respondent.
________________________________

WOODBURY MEDICAL CENTER
ASSOCIATES, LLP,

Plaintiff-Respondent,

v.

SELECTIVE INSURANCE COMPANY,

Defendant-Appellant.
________________________________

Argued April 18, 2018 – Decided July 20, 2018

Before Judges Koblitz, Manahan and Suter.

On appeal from Superior Court of New Jersey,
Law Division, Gloucester County, Docket No.
L-1583-13.

Bruce H. Zamost argued the cause for
appellants Theresa Wear and Richard Wear (in
A-5526-15) and respondents (in A-0033-16)
(Helmer, Conley & Kasselman, PA, attorneys;
Bruce H. Zamost, of counsel and on the
brief).
 Richard J. Mirra argued the cause for
respondent Selective Insurance (in A-5526-
15) and appellant in (A-0033-16) (Hoagland,
Longo, Moran, Dunst & Doukas, LLP,
attorneys; Richard J. Mirra, of counsel and
on the briefs; John C. Simons, on the
briefs).

Mitchell H. Kizner argued the cause for
respondent Woodbury Medical Center
Associates, LLP (Flaster Greenberg, PC,
attorneys; Mitchell H. Kizner, of counsel
and on the brief).

The opinion of the court was delivered by

MANAHAN, J.A.D.

The instant case presents another example of the

complexities sometimes involved with the resolution of insurance

coverage disputes based upon exceptions to coverage. The

principal issue is whether exclusionary language in a policy

issued to Woodbury Medical Center Associates, LLP (Woodbury

Medical) by Selective Insurance Company (Selective) precluded

coverage for an environmental personal injury claim by Theresa

Wear and a per quod claim by Richard Wear (collectively the

Wears).

Having considered the record in light of controlling law,

we affirm in part and reverse in part.

2 A-5526-15T1
 I.

Woodbury Medical is the owner of an office building in

Woodbury, New Jersey. Theresa Wear worked in the building as a

registered nurse (RN) for Underwood Medical Center. She claimed

to suffer injuries due to exposure to alleged toxic conditions

in the building. In their complaint against Woodbury Medical,

the Wears averred that Theresa was injured due to "exposure to

mold and the HVAC [(heating, ventilation and air conditioning)]

filter fragments from when the HVAC system was activated in the

basement of the property." The Wears further averred that

Woodbury Medical had a duty to keep the premises safe from: "1)

hazardous toxic condition[s]; 2) dangerous air pollutants; 3)

aspergillus fungus/mold hazards; and 4) other environmental

dangers."

Selective issued a commercial umbrella and business owners

insurance policy (the policy) to Woodbury Medical, which was in

effect at the time of the Wears' claim. The policy provided

Woodbury Medical with "protection for business liability for any

bodily injury 'to which this insurance applies.'" The policy

included a fungi or bacteria exclusion:

A. The following exclusion is added to
Paragraph B.1., Exclusions – Application To
Business Liability Coverage:

3 A-5526-15T1
 q. Fungi or Bacteria

(1) "Bodily injury[,"] "property
damage" or "personal and
advertising injury" which would
not have occurred, in whole or in
part, but for the actual, alleged
or threatened inhalation of,
ingestion of, contact with,
exposure to, existence of, or
presence of, any "fungi" or
bacteria on or within a building
or structure, including its
contents, regardless of whether
any other cause, event, material
or product contributed concurrently
or in any sequence to such injury
or damage.

(2) Any loss, cost or expenses
arising out of the abating,
testing for, monitoring, cleaning
up, removing, containing,
treating, detoxifying,
neutralizing, remediating or
disposing of, or in any way
responding to, or assessing the
effects of, "fungi" or bacteria,
by an insured or by any other
person or entity.

. . . .

B. The following definition is added [to]
Paragraph F. Liability And Medical Expenses
Definitions:

1. "Fungi" means any type or form
of fungus, including mold or
mildew and any mycotoxins, spores,
scents or by-products produced or
release [sic] by fungi.

[(Emphasis added).]

4 A-5526-15T1
 Woodbury Medical notified Selective of the Wears' claim in

May 2011. In August 2012, after conducting an investigation,

Selective issued a denial of coverage letter referencing the

exclusionary language in the policy. The letter stated that the

"policy in effect for Woodbury does not provide coverage for any

and all bodily injuries alleged by Theresa Wear arising out of

her exposure to mold, mildew, fungi or bacteria or medical

expenses" as they were, among other unrelated reasons, "excluded

by virtue of Fungi or Bacteria Exclusion Endorsement Forms . . .

contained in the policies." Selective did not issue a

reservation of rights letter as it took the position that the

anti-concurrent and anti-sequential language in the exclusion

precluded coverage even if there were other causes which may

have contributed to the injury.

Woodbury Medical instituted an action against Selective,

later amended, seeking a declaration that Selective was required

to defend and indemnify Woodbury Medical in the Wears'

litigation. Woodbury Medical moved for partial summary

judgment. Selective filed a cross-motion for summary judgment

maintaining there was no coverage for the claims.

On January 9, 2015, the judge granted Woodbury Medical's

motion for partial summary judgment and ordered that Selective

immediately fund Woodbury Medical's defense in the underlying

5 A-5526-15T1
action, reimburse Woodbury Medical for expenses it already

incurred in the defense of the Wears' litigation, and pay

attorneys' fees incurred by Woodbury Medical in the declaratory

judgment action.1 In a separate order, also dated January 9,

2015, the judge denied Selective's cross-motion for summary

judgment. On January 22, 2015, in a supplemental order, the

judge clarified that the January 9, 2015 order was "to be

considered an interlocutory order applying ONLY to the defense

obligations of Selective . . . ." The supplemental order also

provided that the trial in the declaratory judgment action was

to be adjourned until a resolution was reached in the Wears'

litigation.

In reaching the determination on Selective's obligation to

defend, the judge stated:

The [c]ourt certainly reviewed the
factual basis as alleged by Ms. Ware, [sic]
who claims that she suffered bodily injury
as a result of exposure to hazardous
conditions.

I acknowledge that there is an
allegation that relates to the mold, but I
am in agreement with the plaintiff's

1
On July 17, 2015, the judge awarded $177,550 to Woodbury
Medical for reimbursement of past counsel fees and costs for the
time period of March 3, 2013 through April 2015, pursuant to the
January 9, 2015 order. The judge also awarded $83,635 to
Woodbury Medical for reimbursement of past counsel fees and
costs for the declaratory judgment action.

6 A-5526-15T1
 counsel. There also definitely is an
allegation that pertains to the fibers from
the filter, the air conditioning system, or
the filter fragments. It is an environmental
hazard that is claimed. It is something
besides the mold issue, the [c]ourt finds.

I understand your arguments. But I do
find that there has been an indication of
other environmental damages and based on the
case law, I find that there is a duty to
defend in this instance. I have examined the
complaint. I have reviewed the policy
limitations. But if there are any doubts,
they are to be resolved in favor of the
insured.

Based on the cases as cited by
plaintiff's counsel, I do find that the
insurance company is required to defend in
this instance.

[D]efendant does owe the plaintiff the
duty in the underlying lawsuit. It's
appropriate here because there is another
cause for Ms. Ware’s [sic] injuries.

Selective moved for leave to appeal, which we denied.

Selective then moved before the Law Division to stay the order

compelling it to fund Woodbury Medical's defense, which was

denied. Thereafter, Woodbury Medical moved to enforce

litigant's rights and Selective cross-moved for reconsideration

of both the order requiring Selective to provide a defense and

the order denying a stay. The judge granted Woodbury Medical's

motion to enforce litigant's rights and ordered Selective to pay

Woodbury Medical counsel fees for its defense in the Wears'

7 A-5526-15T1
litigation within thirty days. Selective again moved for leave

to appeal, which we denied.2

By agreement of the parties, the Wears' litigation was

submitted to arbitration. At the conclusion of the testimonial

hearing, the arbitrator rendered a one-page written award in

favor of the Wears for $300,000. The arbitrator noted that the

award was for a "claim by RN for workplace exposure to toxic

aspergillus mold."

After the rendering of the award, the Wears and Woodbury

Medical entered into a consent order amicably resolving the

Wears' litigation. The consent order contained the following

essential terms. A judgment would be entered in favor of the

Wears against Woodbury Medical in the amount of $300,000.

Woodbury Medical would assign its coverage rights to the Wears,

who then bore the burden of proceeding against Selective "with

respect to Selective's obligation to indemnify [Woodbury

Medical] for the claims brought and judgment obtained . . .

under liability insurance policies issued by Selective." The

Wears would "never . . . execute upon [Woodbury Medical] or its

assets, or those of its past, present and future principals

. . . in order to collect the [j]udgment, or . . . in any other

2
Selective did not comply with the order mandating payment of
counsel fees, nor has it done so to date.

8 A-5526-15T1
way seek payment of the [j]udgment or any other sum from

[Woodbury Medical] . . . ." The Wears relinquished all claims

against Woodbury Medical whether or not they were successful

against Selective. The order stated: "[N]o injury was suffered

by [the Wears] as a result of exposure to mold at premises owned

by [Woodbury Medical]."

The Wears moved to intervene as plaintiffs in the

declaratory action. Among other arguments, the Wears asserted

Selective was obligated to pay the $300,000 judgment premised

upon our Supreme Court's holding in Griggs v. Bertram, 88 N.J.

347 (1982) and premised upon principles of equitable estoppel

due to Selective's bad faith and wrongful refusal to defend.

The motion to intervene was granted by order on June 26,

2015. The order limited intervention to "coverage and/or

indemnification under the policy of insurance issued to Woodbury

Medical . . . ." The order provided that the Wears were

substituted for Woodbury Medical for the purpose of asserting

indemnification only and not to assert claims for "bad faith" or

failure to defend against Selective.

In support of their motion, the Wears provided an expert

report by Robert J. Laumbach, who opined that mold was not a

cause of Theresa's injuries. Selective moved to bar the expert

report and for summary judgment dismissing the Wears'

9 A-5526-15T1
intervention. Selective argued the consent order was

unenforceable based upon Griggs.

By order of December 23, 2015, the judge denied all

motions. In her attached statement of reasons, the judge found

a Griggs analysis was triggered as Selective wrongfully denied

Woodbury Medical a defense by continuously failing to comply

with the January 9, 2015 order. The judge further noted that

the "Griggs analysis is triggered regardless of whether an

insurer ultimately prevails on the question of coverage pursuant

to Passaic Valley."3 The judge held that the issue of bad faith

pertaining to the settlement remained open "pending future

discovery and/or future [m]otion practice." Regarding the issue

of the expert's report, the judge held the Wears' expert was not

barred from testifying since "[t]he present action, though

related to the underlying Wear matter, is a separate, distinct

case with a separate discovery period."

On January 20, 2016, Selective filed a motion to settle the

form of the December 23, 2015 orders and to determine the scope

of the hearing to be conducted. The Wears cross-moved for

partial summary judgment under the reasonableness prong of the

Griggs analysis. Thereafter, by consent order dated February

3
Passaic Valley Sewerage Comm'rs v. St. Paul Fire & Marine Ins.
Co., 206 N.J. 596 (2011).

10 A-5526-15T1
26, 2016, the Wears and Selective settled the terms of the

December 23, 2015 orders. The consent order provided that the

monetary settlement between Woodbury Medical and the Wears based

upon the arbitration award satisfied the reasonableness prong

under Griggs. The consent order further provided that the sole

issue in contest was whether the settlement between Woodbury

Medical and the Wears was made in good faith. The good faith

issue was to be determined by the judge on the papers submitted.

After argument and after considering the record and papers,

the judge issued an oral opinion in which she held that the

Wears did not meet the second prong of the Griggs settlement

enforcement analysis. The judge found a lack of good faith as

"there [has] been a total effort made by the Wears and Woodbury

Medical to force this issue to be covered by Selective because

they knew of the mold exclusion . . . ." As such, the judge

found the settlement "which places a 100 percent liability on

Selective," to be a sham and concluded the settlement was

unenforceable against Selective. The oral decision was

memorialized in an order. The order also dismissed the

intervenor complaint with prejudice.4

4
The judge also granted Woodbury Medical's motion without
prejudice for an amendment of the July 2015 order regarding the
counsel fees owed by Selective. The judge added fees incurred
by Woodbury Medical for the medical expert provided to the Wears
(continued)

11 A-5526-15T1
 The Wears filed a motion for a new trial and judgment

notwithstanding the verdict.5 The motion was denied in an

August 2016 order. The Wears filed an appeal. Selective filed

a separate appeal of numerous orders concerning its duty to

defend and to pay counsel fees as well as the denial of stays.6

We granted Selective's motion to consolidate the appeals.

On appeal, Selective raises the following points:7

POINT I

THE TRIAL COURT ERRED IN GRANTING PARTIAL
SUMMARY JUDGMENT REQUIRING SELECTIVE TO
DEFEND WMCA DESPITE THE CLEAR EXCLUSION OF
COVERAGE FOR INJURIES CAUSED BY MOLD, IN
WHOLE OR IN PART, REGARDLESS OF WHETHER ANY
OTHER CAUSE CONTRIBUTED CONCURRENTLY OR IN
ANY SEQUENCE TO THE ALLEGED INJURIES.

POINT II

THE TRIAL COURT MISCONSTRUED FLOMERFELT V.
CARDIELLO, 202 N.J. 432 (2010) WHICH DOES
NOT APPLY TO THE FACTS OF THIS CASE.

(continued)
to the total sum of fees owed by Selective for the declaratory
action.
5
We note that there was no trial on any of the issues.
6
Selective's notice of appeal recites thirteen discrete orders
including two orders of the Appellate Division denying leave to
appeal.
7
Although the Wears' appeal was filed prior to Selective's
appeal, we address Selective's points on appeal first for
clarity.

12 A-5526-15T1
 POINT III

THE TRIAL COURT ORDERS TO COMPEL SELECTIVE
TO ASSUME [WOODBURY MEDICAL]'S DEFENSE
DESPITE THE CONFLICT OF INTEREST BETWEEN
SELECTIVE AND [WOODBURY MEDICAL] AND DESPITE
THE FACT THAT THE COVERAGE ISSUE WOULD NOT
BE RESOLVED IN THE UNDERLING [SIC] ACTION
WAS ERROR.

On appeal, the Wears raise the following points:

POINT I

THE LAW OF THE CASE DOCTRINE WAS VIOLATED
WHEN THE TRIAL JUDGE MADE AN ENTIRELY
CONTRADICTORY RULING ON THE KEY ISSUE,
WHETHER THE SETTLEMENT WAS ONE OF GOOD FAITH
OR BAD FAITH, BASED ON IDENTICAL EVIDENCE.
ON [DECEMBER 23, 2015], THE TRIAL COURT
RULED THAT BAD FAITH WAS ABSENT, IN ITS
ADJUDICATION OF WHETHER JUDICIAL ESTOPPEL
WAS APPLICABLE TO PLAINTIFFS' ADOPTION OF
ONE CAUSATION THEORY OVER ANOTHER. FOUR
MONTHS LATER, ON [APRIL 1, 2016], THE TRIAL
COURT HELD THAT THE SETTLEMENT CONSTITUTED A
BAD FAITH SHAM. WHEN A JUDGE DECIDES NOT TO
FOLLOW THE LAW OF THE CASE DOCTRINE,
DECISIONAL LAW REQUIRES THAT THE JUDGE
EXPLAIN THE REASONS FOR THAT DEPARTURE AND
THE SUBSTANTIALLY DIFFERENT EVIDENCE THAT
WAS NOT PREVIOUSLY AVAILABLE. [R.] 1:6-
2(F). SISLER V. GANNETT CO., 222 N.J.
SUPER. 153 [] (APP. DIV. 1987), CERTIF.
DENIED, 110 N.J. 304 [] (1988). THE TRIAL
COURT FAILED TO DO SO HERE AND IN DOING SO
WRONGLY DECLINED TO ENFORCE THIS GRIGGS
SETTLEMENT AGAINST SELECTIVE.

POINT II

THE LAW OF THE CASE DOCTRINE WAS VIOLATED
WHEN THE TRIAL JUDGE MADE AN ENTIRELY
CONTRADICTORY RULING ON THE KEY ISSUE,
WHETHER THE SETTLEMENT WAS ONE OF GOOD FAITH
OR BAD FAITH, BASED ON IDENTICAL EVIDENCE.

13 A-5526-15T1
ON [DECEMBER 23, 2015], THE TRIAL COURT
RULED THAT THE SETTLEMENT WAS, PRIMA FACIE,
THE PRODUCT OF GOOD FAITH. FOUR MONTHS
LATER, ON [APRIL 1, 2016], THE TRIAL COURT
HELD THAT THE SETTLEMENT CONSTITUTED A BAD
FAITH SHAM. WHEN A JUDGE DECIDES NOT TO
FOLLOW THE LAW OF THE CASE DOCTRINE,
DECISIONAL LAW REQUIRES THAT THE JUDGE
EXPLAIN THE REASONS FOR THAT DEPARTURE AND
THE SUBSTANTIALLY DIFFERENT EVIDENCE THAT
WAS NOT PREVIOUSLY AVAILABLE. [R.] 1:6-
2(F). SISLER V. GANNETT CO., 222 N.J.
SUPER. 153 [] (APP. DIV. 1987), CERTIF.
DENIED, 110 N.J. 304 [] (1988). THE TRIAL
COURT FAILED TO DO SO HERE AND IN DOING SO
WRONGLY DECLINED TO ENFORCE THIS GRIGGS
SETTLEMENT AGAINST SELECTIVE.

POINT III

IT WAS SELECTIVE'S BURDEN TO PROVE THAT THE
SETTLEMENT WAS A BAD FAITH SHAM. HOWEVER,
THE TRIAL COURT WRONGLY SHIFTED THAT BURDEN
TO THE WEARS TO PROVE THAT THE SETTLEMENT
WAS NOT A SHAM, A BURDEN-SHIFTING WHICH
VISITED A MISCARRIAGE OF JUSTICE UPON THE
WEARS.

POINT IV

THE UNIVERSE OF EVIDENCE PRESENTED BY THE
PARTIES WAS IDENTICAL THROUGHOUT THE
CONTRADICTORY TRIAL COURT RULINGS OF
[DECEMBER 23, 2015] ON THE ONE HAND AND THE
RULINGS OF [APRIL 1, 2016] AND [AUGUST 12,
2016] ON THE OTHER. SELECTIVE CHOSE TO
REFRAIN FROM OBTAINING AN EXPERT WITNESS ON
THE GOOD FAITH ISSUE, DESPITE AN EXTENSION
OF TIME TO DO SO. EACH OF SELECTIVE'S
ARGUMENTS THAT THE SETTLEMENT WAS AN UTTER
SHAM WERE ANALYZED AND REJECTED BY THE TRIAL
COURT ON [DECEMBER 23, 2015] AND NOTHING WAS
PRESENTED TO REBUT THE COMPREHENSIVE EXPERT
CONCLUSIONS OF PLAINTIFFS' OCCUPATIONAL AND
ENVIRONMENTAL MEDICINE/INDUSTRIAL HYGIENE

14 A-5526-15T1
 EXPERT, ROBERT J. LAUMBACH, M.D., M.P.H.,
C.I.H.

POINT V

THE TRIAL COURT COMMITTED REVERSIBLE ERROR
IN ITS [AUGUST 12, 2016] AND [APRIL 1, 2016]
RULINGS BECAUSE THOSE RULINGS WRONGLY
DISREGARDED PARAGRAPH 1 OF THE CONSENT ORDER
OF [FEBRUARY 26, 2016].

II.

We commence by addressing Selective's argument that the

judge erred in granting partial summary judgment to Woodbury

Medical in holding Selective had a duty to defend. Selective

argues "[t]here was no allegation that [Theresa] suffered

divisible injuries due to separate and discrete etiologies or

that exposure to mold was not a principal cause of her

symptoms." As such, the policy's exclusion, which included

anti-concurrent and anti-sequential language, barred coverage.

Woodbury Medical argues in reply that Selective had a duty to

defend as the Wears alleged alternative causes of injury,

separate and apart from mold.

The judge's determination that Selective had a duty to

defend was decided by the grant of summary judgment. Thus, the

judge's conclusions and interpretation of the record are not

entitled to our deference. We apply the same standard the judge

applied in ruling on summary judgment. W.J.A. v. D.A., 210 N.J.

229, 237 (2012).

15 A-5526-15T1
 At the outset, we agree with the judge that, when disputes

arise between the insured and insurer, the duty of an insurer to

defend is generally determined by a side-by-side comparison of

the policy and the complaint, and is triggered when the

comparison demonstrates that if the complaint's allegations were

sustained, an insurer would be required to pay the judgment.

Sears Roebuck & Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh,

340 N.J. Super. 223, 241-42 (App. Div. 2001); see also Danek v.

Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953). "In making that

comparison, it is the nature of the claim asserted, rather than

the specific details of the incident or the litigation's

possible outcome, that governs the insurer's obligation."

Flomerfelt, 202 N.J. at 444 (citation omitted).

The interpretation of an insurance policy upon established

facts is a question of law for the court to determine.

Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 428 (App.

Div. 2004). "Generally, '[w]hen interpreting an insurance

policy, courts should give the policy's words "their plain,

ordinary meaning."'" Nav-Its, Inc. v. Selective Ins. Co., 183

N.J. 110, 118 (2005) (quoting President v. Jenkins, 180 N.J.

550, 562 (2004)). "An insurance policy is a contract that will

be enforced as written when its terms are clear in order that

the expectations of the parties will be fulfilled." Flomerfelt,

16 A-5526-15T1
202 N.J. at 441 (citing Kampf v. Franklin Life Ins. Co., 33 N.J.

36, 43 (1960)).

As this court held in New Jersey Manufacturers Insurance

Co. v. Vizcaino, in permitting the dispute of uncovered claims,

courts protect both parties by ensuring that the insurer does

not incur responsibility for uncovered claims and that the

insured is entitled to both defense and indemnity if the dispute

is resolved in its favor. 392 N.J. Super. 366, 370 (App. Div.

2007). In line with those principles, exclusions in insurance

policies are presumptively valid and enforceable "if they are

'specific, plain, clear, prominent, and not contrary to public

policy.'" Flomerfelt, 202 N.J. at 441 (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 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,

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, 202 N.J. at 442

17 A-5526-15T1
(quoting Westchester Fire Ins. Co. v. Cont'l Ins. Cos., 126 N.J.

Super. 29, 41 (App. Div. 1973)). 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).

In a situation where "two or more identifiable causes — one

a covered event and one excluded — may contribute to a single

property loss," there is coverage absent an anti-concurrent or

anti-sequential clause in the policy. See Simonetti, 372 N.J.

Super. at 431 (citing Assurance Co. of Am., Inc. v. Jay-Mar,

Inc., 38 F. Supp. 2d 349, 352-54 (D.N.J. 1999)). As noted, the

policy at issue contains within the exclusion language an anti-

concurrent and anti-sequential clause and excludes coverage from

any loss or damage "regardless of whether any other cause,

event, material or product contributed concurrently or in any

sequence to such injury or damage." We do not consider the

exclusion language to be ambiguous. A fair reading of the

exclusion is that, despite other potential causes, mold must be

excluded as a causative factor in order for there to be a

covered loss.

The judge concluded that Selective owed a defense to

Woodbury Medical while acknowledging that mold was averred in

the complaint as a causative factor. The judge found that the

18 A-5526-15T1
complaint averred other "environmental" hazards as causative

factors thus requiring a defense. However, other than

referencing those allegations, the judge did not analyze whether

the anti-concurrent and anti-sequential language in the

exclusion would bar coverage or, at a minimum, raise a

substantial question as to the existence of coverage.

Succinctly, in the absence of a comparison of the complaint

with the exclusion's anti-concurrent and anti-sequential

language, we conclude that the issue of coverage was not of such

clarity at this stage of the action to require Selective to

defend. In reaching our conclusion, we are informed by the

following.

Neither the duty to defend nor the duty to indemnify

"exists except with respect to occurrences for which the policy

provides coverage." Hartford Accident & Indem. Co. v. Aetna

Life & Cas. Ins. Co., 98 N.J. 18, 22 (1984). Here, the judge

cited Flomerfelt as authority, which provides that:

in circumstances in which the underlying
coverage question cannot be decided from the
face of the complaint, the insurer is
obligated to provide a defense until all
potentially covered claims are resolved, but
the resolution may be through adjudication
of the complaint or in a separate proceeding
between insured and insurer either before or
after that decision is reached.

[202 N.J. at 447.]

19 A-5526-15T1
 There are two exceptions to this general rule.

The insurer need not provide the defense at
the outset if the allegations include claims
that are not covered by the policy as well
as claims that are covered or if the
question of coverage is not, by its nature,
capable of determination in the underlying
action against the insured. In those
situations, the insurer's obligation to
defend becomes an obligation to reimburse
for defense costs to the extent that the
defense is later determined to have been
attributable to the covered claims and, if
coverage is not determinable in the
underlying action, it is later determined
that there was in fact coverage.

[Muralo Co., Inc. v. Employers Ins. of
Wausau, 334 N.J. Super. 282, 289-90 (App.
Div. 2000).]

In short, "[i]f an insurer believes that the evidence indicates

that the claim is not covered, the insurer is not always

required to provide a defense." Polarome Int'l, Inc. v.

Greenwich Ins. Co., 404 N.J. Super. 241, 274 (App. Div. 2008);

see Passaic Valley, 206 N.J. at 615-18 (explaining that Burd v.

Sussex Mut. Ins., 56 N.J. 383, 393-95 (1970) permits an insurer

to fulfill its defense obligations by reserving rights and

disputing coverage, thereby translating its obligation into one

for reimbursement if it is later adjudged that the claims were

within the policy covenant to pay); see also Grand Cove II

Condo. Ass'n, Inc. v. Ginsberg, 291 N.J. Super. 58, 73-75 (App.

Div. 1996) (discussing problems that can arise with respect to

20 A-5526-15T1
the duty to defend and conversion of that duty to one of

reimbursement).

"Although the duty to defend is broader than the duty to

pay, the duty 'is not broader in the sense that it extends to

claims not covered by the covenant to pay.'" Grand Cove II, 291

N.J. Super. at 72 (quoting Horesh v. State Farm Fire & Cas. Co.,

265 N.J. Super. 32, 38 (App. Div. 1993)). Therefore, "[i]f an

excluded claim is made, the insurer has no duty to undertake the

expense and effort to defeat it, however frivolous it may appear

to be." Ibid. (quoting Horesh, 265 N.J. Super. at 39).

Grand Cove II addressed an alternative to the duty to

defend, "the duty to reimburse."

Where a conflict exists between an
insurer and its insured by virtue of the
insurer's duty to defend mutually-exclusive
covered and non-covered claims against the
insured, the duty to defend is translated
into a duty to reimburse the insured for the
cost of defending the underlying action if
it should ultimately be determined, based on
the disposition of that action, that the
insured was entitled to a defense.
[Burd, 56 N.J. at 390.]

Similarly, where an insurer did not
undertake defense of the case at the
inception of the litigation, the duty to
defend may be converted into a duty to
reimburse. [SL Indus., Inc. v. Am.
Motorists Ins. Co., 128 N.J. 188, 200
(1992).]

[Id. at 73-74 (citations omitted).]

21 A-5526-15T1
In Grand Cove II, this court found the insurance coverage issues

in the case created problems with the trial court's mandate that

the insurance company must immediately assume defense of all the

causes of action of the insured. Id. at 74-75. Such issues

included, but were not limited to: the trial court's concession

that certain claims were not covered, an inherent conflict due

to late-raised claims, and the fact that the underlying

litigation would not resolve the coverage issues. Ibid.

Therefore, we held the "insurers' duty to defend should have

been converted to a duty to reimburse pending the outcome of the

coverage litigation." Id. at 76.

Here, through our comparison of the averments in the

complaint to the policy's exclusion, we conclude it was

premature to order Selective to assume responsibility for the

defense since it was unclear, based on the anti-concurrent and

anti-sequential language in the exclusion, whether any claims

would be covered. Therefore, as in Grand Cove II, we hold that

the duty to defend should be converted to a duty to reimburse

pending resolution of the coverage action.

III.

Given our determination that the decision obligating

Selective to defend was premature, it follows that the decision

holding that Griggs applied was without basis. The predicate

22 A-5526-15T1
for the application of Griggs is whether there was a breach of

duty by Selective by its failure to defend Woodbury Medical.

Only if Selective was determined to be in default of that duty

would it trigger indemnification. In Griggs, our Supreme Court

held:

Where an insurer wrongfully refused
coverage and a defense to its insured, so
that the insured is obliged to defend
himself in an action later held to be
covered by the policy, the insurer is liable
for the amount of the judgment obtained
against the insured or of the settlement
made by him. The only qualifications to
this rule are that the amount paid in
settlement be reasonable and that the
payment be made in good faith.

[Griggs, 88 N.J. at 364 (citing Fireman's
Fund Ins. Co. v. Security Ins. Co. of
Hartford, 72 N.J. 63, 71 (1976) (quoting
N.J. Mfrs. Indem. Ins. Co. v. U.S. Cas. Co.,
91 N.J. Super. 404, 407-08 (App. Div.
1966))).]

As our Supreme Court held in Passaic Valley, a good-faith

challenge to coverage is not a breach of an obligation to

defend. 206 N.J. at 617. Here, we are satisfied that Selective

was within its rights to dispute coverage based upon the

language of the policy's exclusion. Vizcaino, 392 N.J. Super.

at 370.

We are also satisfied that, in reaching its claim decision,

Selective did not breach its duty to act in good faith.

Fireman's Fund, 72 N.J. at 73. Saliently, Woodbury Medical has

23 A-5526-15T1
not argued, as in Griggs, that there was an unreasonable delay

by Selective in regard to its coverage decision so as to

prejudice the defense.

In sum, in the absence by Selective of a breach of its duty

to defend, Griggs was inapplicable.

Having determined that the judge's decision to apply Griggs

to the enforcement of the settlement was a premature finding of

a breach of duty to defend, we vacate the orders that were the

product of that decision. Specifically, those orders are the

consent order between Selective and the Wears dated February 26,

2016, and the order denying enforcement of the settlement.

We also reverse the order dismissing the declaratory

judgment action and remand the action for its resolution. In

conformance therewith, we affirm the decision to allow the Wears

to intervene in the declaratory judgment action.

In reaching our decision, we express no view on the

enforcement of the settlement reached between the Wears and

Woodbury Medical should there be a judicial determination of

coverage.

IV.

Finally, we turn to the judge's award of fees and costs to

Woodbury Medical, premised upon Rule 1:10-3.

24 A-5526-15T1
 We review a trial court's order enforcing litigant's rights

pursuant to Rule 1:10-3 under an abuse of discretion standard.

Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011); see

also Innes v. Carrascosa, 391 N.J. Super. 453, 498 (App. Div.

2007). An abuse of discretion occurs when a decision was "made

without a rational explanation, inexplicably departed from

established policies, or rested on an impermissible basis."

Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002).

The decision to award counsel fees "rests within the sound

discretion of the trial court." Maudsley v. State, 357 N.J.

Super. 560, 590 (App. Div. 2003). We afford trial courts

"considerable latitude in resolving fee applications . . . ."

Grow Co. v. Chokshi, 424 N.J. Super. 357, 367 (App. Div. 2012).

Such "determinations by trial courts will be disturbed only on

the rarest occasions, and then only because of a clear abuse of

discretion." Packard-Bamberger & Co. v. Collier, 167 N.J. 427,

444 (2001) (quoting Rendine v. Pantzer, 141 N.J. 292, 317

(1995)).

We are satisfied that the judge exercised appropriate

discretion with regard to the award of fees and costs to

Woodbury Medical for Selective's non-compliance with the court's

January 9, 2015 order. Selective's motions to stay were denied,

both before the judge and before this court, yet Selective

25 A-5526-15T1
continuously refused to comply with the orders. While Selective

was within its right to seek review of the orders with which it

disagreed, in the absence of a stay or reversal, it was not free

to ignore those orders.

That stated, the quantum of counsel fees was based on those

incurred by Woodbury Medical in the defense of the action as of

January 9, 2015. Since we have determined that the award for

counsel fees based upon Selective's failure to defend was

premature, Woodbury Medical's entitlement to counsel fees is

limited to those incurred in prosecuting the motion to enforce

litigant's rights. Upon remand, Woodbury Medical may seek

reimbursement for those counsel fees and associated costs before

the Law Division.

Affirmed in part. Reversed in part. We do not retain

jurisdiction.

6

26 A-5526-15T1