ROCKLEIGH COUNTRY CLUB, LLC v. HARTFORD INSURANCE GROUP (L-4013-20, BERGEN 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NOT FOR PUBLICATION WITHOUT THE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-1826-21

ROCKLEIGH COUNTRY
CLUB, LLC,

Plaintiff-Appellant,

v.

HARTFORD INSURANCE
GROUP a/k/a THE HARTFORD
d/b/a HARTFORD FIRE
INSURANCE COMPANY,
STRATEGIC INSURANCE
PARTNERS, INC., PHILIP D.
MURPHY, in his capacity as
Governor of the State of New Jersey,
and STATE OF NEW JERSEY,

Defendants -Respondents.
______________________________

Argued May 9, 2022 – Decided June 21, 2022

Before Judges Sumners and Vernoia.

On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Bergen County,
Docket No. L-4013-20.
 Gary S. Newman argued the cause for appellant
(Newman & Denburg, LLC, attorneys; Gary S.
Newman, of counsel and on the brief; David F. Scheidel
II, on the brief).

Jonathan M. Freiman (Wiggin and Dana, LLP) of the
Connecticut bar, admitted pro hac vice, argued the
cause for respondents Hartford Insurance Group
(Steptoe & Johnson, LLP, Jonathan M. Freiman, Sarah
D. Gordon (Wiggin and Dana, LLP) of the Virginia bar,
admitted pro hac vice, and Anjali S. Dalal, (Wiggin and
Dana, LLP) of the New York bar, admitted pro hac vice,
attorneys; James L. Brochin, Jonathan M. Freiman,
Sarah D. Gordon and Anjali S. Dalal, on the brief).

Carl A. Salisbury argued the cause for amicus curiae
United Policyholders (Bramnick, Rodriguez, Grabas,
Arnold & Mangan, attorneys; Carl A. Salisbury, on the
brief).

PER CURIAM

Plaintiff Rockleigh Country Club, LLC, owns and operates a facility that

conducts "pre-contracted for and pre-planned social events [such as] weddings."

In March 2020, Governor Philip D. Murphy issued Executive Order 107 (EO

107) in response to the COVID-19 pandemic. Exec. Order No. 107 (Mar. 21,

2020), 52 N.J.R. 554(a) (Apr. 6, 2020). In pertinent part, EO 107 "cancelled"

"[g]atherings of individuals, such as parties, celebrations, or other social

events," required the closure of "[t]he brick-and-mortar premises of all non-

essential retail businesses," and mandated the closure of "[a]ll recreational and

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entertainment business." In accordance with EO 107, plaintiff closed its venue

pending further orders from the Governor.

Plaintiff submitted a claim to defendant Hartford Insurance Company for

business interruption coverage under a one-year Special Multi-Flex Business

Insurance Policy (the policy) defendant issued to plaintiff on March 1, 2020.

Plaintiff sought coverage for business losses and expenses it incurred due to the

closure of its facility in response to EO 107's requirements and restrictions.

Defendant denied plaintiff's claim.

Plaintiff filed a complaint against defendant seeking damages, a

declaratory judgment and asserted fourteen causes of action, including breach

of contract, breach of the covenant of good faith and fair dealing, bad faith,

fraud, and others. Plaintiff also asserted causes of action, not relevant to this

appeal, against its insurance broker, defendant Strategic Insurance Partners,

Inc., and Governor Murphy.

By leave granted, plaintiff appeals from an order granting defendant

summary judgment on thirteen of the asserted claims, all of which are founded

on the contention defendant wrongfully denied coverage under the policy for

business losses plaintiff sustained, and expenses plaintiff incurred, as a result of

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the closure of its business pursuant to EO 107.1 Plaintiff also appeals from an

order denying its motion for summary judgment on three counts of its

complaint.2

Defendant offers the following arguments for our consideration:

POINT I

THE APPELLATE STANDARD OF REVIEW.

A. A grant or denial of summary judgment is reviewed
de novo.

B. Insurance ambiguity is always interpreted in favor of
the insured.

POINT II

THE LOSSES STEMMING FROM GOVERNOR
MURPHY'S EOS ARE A COVERED CAUSE OF
LOSS.

A. Long standing New Jersey precedent mandates
coverage for loss of use and function.

1
Plaintiff's complaint included fourteen separate counts asserting causes of
action against defendant. Defendant moved for summary judgment on thirteen
of the causes of action—those asserted in counts one through ten and eleven
through fourteen. Defendant did not move for summary judgment on count
eleven, which remains pending before the trial court.
2
Plaintiff sought summary judgment on counts: one, which sought a declaratory
judgment on plaintiff's business interruption coverage claim; two, which alleged
breach of contract; and five, which sought a declaratory judgment on plaintiff's
extra expense coverage claim.
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B. The terms "direct physical loss of" and "direct
physical damage to" must be interpreted to provide
[plaintiff] coverage for its loss of function to effectuate
the reasonable expectations of the insured.

POINT III

THE COURT BELOW ALSO ERRED BY FINDING
NO COVERAGE UNDER THE "CIVIL
AUTHORITY" POLICY PROVISIONS.

POINT IV

THE COURT BELOW ERRED BY RULING THAT
"LOSS OF FUNCTION" IS NOT THE EQUIVALENT
OF "DIRECT PHYSICAL DAMAGE" OR "DIRECT
PHYSICAL LOSS" VIOLATING [PLAINTFF]'S
REASONABLE EXPECTATIONS OF COVERAGE.

POINT V

STATE LAW MANDATES COVERAGE[] FOR
PLAINTIFF[] FOR LOSSES DUE TO GOVERNOR
MURPHY'S "SHUTDOWN ORDER" C[AU]SING
COMPLETE LOSS OF FUNCTION[.]

A. Policy Exclusions are narrowly construed to provide
coverage whenever possible.

B. "Virus" is NOT the cause of loss as there was
NEITHER "virus" AT the premises NOR has Hartford
demonstrated that it can be used as a sword to thwart
coverage.

C. Alternatively, application of the "Virus Exclusion"
DOES NOT apply because the cause for the Executive
Orders of Governor Murphy CANNOT exclude
coverage for an emergency situation which did not exist

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 at the Plaintiff[]'s premises and is well beyond the
scope of the "virus exclusion[.]"

Unpersuaded by plaintiff's arguments, we affirm.

"We review de novo [a] grant of summary judgment." Branch v. Cream-

O-Land Dairy, 244 N.J. 567, 582 (2021). Similarly, where, as here, a motion

court's "decision . . . turns on its construction of a contract, appellate review of

that determination is de novo." Manahawkin Convalescent v. O'Neill, 217 N.J.

99, 115 (2014). Summary judgment is proper if the record demonstrates "no

genuine issue as to any material fact challenged and that the moving party is

entitled to a judgment . . . as a matter of law." Burnett v. Gloucester Cnty. Bd.

of Chosen Freeholders, 409 N.J. Super. 219, 228 (App. Div. 2009) (quoting R.

4:46-2(c)).

In determining the meaning of an insurance policy provision, a court must

"first look to the plain meaning of the language at issue." Oxford Realty Grp.

Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196, 207 (2017). The

parties' agreement must be "enforced as written when its terms are clear in order

that the expectations of the parties will be fulfilled." Flomerfelt v. Cardiello,

202 N.J. 432, 441 (2010). Thus, in the absence of a specific definition in a

policy, a word or term "must be interpreted in accordance with [its] ordinary,

plain and usual meaning." Daus v. Marble, 270 N.J. Super. 241, 251 (App. Div.

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1994). 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." Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231,

238 (2008) (quoting Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 272-73

(2001)). Thus, if there is no ambiguity in a policy's terms, those terms should

be enforced "as written." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 597 (2001).

Alternatively, if a policy's language is ambiguous, a court may utilize

rules of construction beyond the four corners of the contract. Oxford Realty,

229 N.J. at 207. Courts usually "construe insurance contract ambiguities in

favor of the insured via the doctrine of contra proferentem." Id. at 208. This

allows for consideration of "the vast differences in the bargaining positions

between an insured and an insurance company in the drafting of an insurance

policy," therefore permitting interpretation of a contract against the drafter.

Villa v. Short, 195 N.J. 15, 23 (2008). Moreover, a court may consider the

insured's "reasonable expectations." Oxford Realty, 229 N.J. at 208. More

particularly, if the policy's language "fairly supports two meanings, one that

favors the insurer and the other that favors the insured, the policy should be

construed to sustain coverage." President v. Jenkins, 180 N.J. 550, 563 (2004).

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 A court must "read the policy in favor of the insured" if there is a "genuine

ambiguity" in the contract, meaning that "the phrasing of the policy is so

confusing that the average policyholder cannot make out the boundaries of

coverage." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of

Pittsburg, 224 N.J. 189, 200 (2016) (quoting Progressive, 166 N.J. at 274).

Policy terms, like those in the policy we are required to consider on appeal here,

are "not ambiguous merely because two conflicting interpretations of it are

suggested by the litigants." Powell v. Alemaz, Inc., 335 N.J. Super. 33, 44 (App.

Div. 2000).

Because resolution of plaintiff's arguments on appeal is dependent on the

proper interpretation of the policy, we first summarize its pertinent provisions.

The policy includes a "PROPERTY CHOICE COVERAGE FORM[,]" defining

the terms and conditions of the coverage to which plaintiff claims entitlement.

Under the section entitled "COVERAGE," plaintiff is afforded coverage where

it suffers a "direct physical loss of or direct physical damage to . . . Covered

Property caused by or resulting from a Covered Cause of Loss." The policy

defines "Covered Cause of Loss" as a "direct physical loss or direct physical

damage . . . unless the loss or damage is excluded or limited." It also defines

"Covered Property" as plaintiff's buildings or structures, and business or

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personal property including fixtures and furniture. Thus, the policy provides

coverage for losses resulting from the "direct physical loss of or direct physical

damage" to plaintiff's event facility, as long as the cause of that loss is not

otherwise specifically excluded.

The policy also provides coverage under defined circumstances for loss

of business income and extra expense suffered because of "direct physical loss

of or direct physical damage to" plaintiff's property "caused by or resulting from

a Covered Cause of Loss." More specifically, in a section entitled "PROPERTY

CHOICE – BUSINESS INCOME AND EXTRA EXPENSE COVERAGE

FORM," the policy provides "business interruption" coverage

for the actual loss of [b]usiness [i]ncome [plaintiff]
sustain[s] and the actual, necessary[,] and reasonable
[e]xtra [e]xpense [plaintiff] incur[s] due to the
necessary interruption of [plaintiff's] business
operations during the Period of Restoration due to
direct physical loss of or direct physical damage to
property caused by or resulting from a Covered Cause
of Loss at "Scheduled Premises[.]"

[(Emphasis added).]

The policy further includes "Civil Authority" coverage for business

interruption losses for "the actual loss of [b]usiness [i]ncome" or an "actual,

necessary and reasonable [e]xtra [e]xpense" incurred when "access to

[plaintiff's] '[s]cheduled [p]remises' is specifically prohibited by order of a civil

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authority as the direct result of a Covered Cause of Loss to property in the

immediate area." (Emphasis added).

The policy also includes express exclusions from coverage, including the

provision plaintiff refers to as the virus exclusion. 3 The exclusion provision

states defendant "will not pay for loss or damage caused directly or indirectly

by . . . [the p]resence, growth, proliferation, spread or any activity of 'fungus,'

wet rot, dry rot, bacteria or virus." The policy also provides that "[s]uch loss or

damage is excluded regardless of any other cause or event that contributes

concurrently or in any sequence to the loss or damage." Furthermore, the virus

exclusion applies "whether or not the loss event results in widespread damage

or affects a substantial area."4

3
The exclusion is actually entitled "'Fungus,' Wet Rot, Dry Rot, Bacteria or
Virus" and is included in the "EXCLUSIONS" section of the "PROPERTY
CHOICE – COVERED CAUSES OF LOSS AND EXCLUSIONS FORM"
endorsement to plaintiff's policy.
4
Under the virus exclusion, "if direct physical loss or direct physical damage
to Covered Property by a 'Specified Cause of Loss' results," defendant agreed to
"pay for the resulting loss or damage caused by that 'Specified Cause of Loss.'"
There is no coverage under this provision because, as we explain, plaintiff did
not suffer a "direct physical loss or direct physical damage to Covered Property"
under the policy. Additionally, the policy contains two exceptions to the virus
exclusion. The exclusion does not apply "[w]hen 'fungus,' wet rot, dry rot,
bacteria or virus results from fire or lightning," and, where, "coverage is
provided in the Additional Coverage(s) – 'Fungus,' Wet Rot, Dry Rot, Bacteria

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 In its detailed written opinion granting defendant's summary judgment

motion and denying plaintiff's motion for summary judgment, the motion court

carefully considered and analyzed the pertinent policy provisions. The court

found there was no business income or extra expense coverage because plaintiff

did not establish that its "inability to use its premises to host large social

gatherings[] constitute[d] physical loss of or physical damage to its property. "

More particularly, the court found the policy provides business

interruption coverage only where business losses and extra expense are "due to

direct physical loss or direct physical damage to property caused by or resulting

from a Covered Cause of Loss" at the property. The court concluded that

because the closure of defendant's facility was the result of EO 107, and not any

actual physical loss of or damage to plaintiff's property, the business losses

resulting from closure were not covered under the policy's plain and

unambiguous language. The court rejected plaintiff's argument that a "loss of

use" alone constitutes "direct physical loss or direct physical damage." In other

words, the court found that absent some actual physical loss of or damage to the

or Virus – Limited Coverage with respect to loss or damage by a cause of loss
other than fire or lightning." Neither of the exceptions applies here.

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property—as opposed to plaintiff's inability to open its facility pursuant to EO

107—plaintiff did not suffer a covered loss under the policy.

The court also rejected plaintiff's claim that it was entitled to coverage

under the Civil Authority provision. The court noted there is coverage under

the provision where "access to" plaintiff's property "is specifically prohibited by

order of a civil authority as the direct result of a Covered Cause of Loss to

property in the immediate area." The court held "plaintiff's claim fails" because

plaintiff did not identify a "Covered Cause of Loss," meaning a "physical

damage or loss in or near the Premises," that prompted the governmental orders.

The court reasoned that a Covered Cause of Loss under the policy is defined as

actual physical damage to or loss of property, and the record lacks any evidence

plaintiff was denied use of its property under the EO 107 as "a direct result" of

any such damage in the immediate area of its property. To the contrary, to the

extent EO 107 denied plaintiff access to its property, the prohibitions and

limitations imposed by the order were based solely on the threat posed by the

COVID-19 pandemic.

The motion court further concluded the virus exclusion bars any claim for

coverage under the policy. The court rejected plaintiff's argument the virus

exclusion is inapplicable because it is limited to circumstances where a virus is

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present at the insured property. The court noted other policy exclusions are

conditioned upon circumstances being present on the insured property, but the

virus exclusion is not. The court further found EO 107 was clearly issued in

response to the threat posed by the COVID-19 virus, and, as such, any losses

plaintiff suffered as a result of the mandated closure were "caused directly or

indirectly by" the virus, and thus fell within the exclusion's plain language.

On appeal, plaintiff does not contend there are any genuine issues of

material fact that precluded the court's summary judgment award to defendant.

Instead, plaintiff reprises the arguments it made before the motion court and

contends the court erred as a matter of law in its interpretation of the policy.

Plaintiff claims it is entitled to coverage for the losses it suffered from the

closure of its business pursuant to EO 107 because the closure constituted a

"Covered Cause of Loss" under the policy. The argument is grounded in the

contention the court erred by interpreting "direct physical loss of or direct

physical damage to" its property to require actual physical damage or loss.

Plaintiff contends, as does amici United Policyholders, that the closure of

plaintiff's business pursuant to EO 107 constitutes a "direct physical loss of or

direct physical damage to" its property within the meaning of the business

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interruption and Covered Cause of Loss provisions of the policy and, for that

reason, it is entitled to coverage.

Plaintiff also argues it is entitled to coverage under the Civil Authority

provision because it is undisputed EO 107 constituted "an order of civil

authority" under the policy, and, by mandating closure of plaintiff's facility, the

order resulted in a direct physical loss of and direct physical damage to the

insured property. Moreover, Plaintiff contends the virus exclusion is

inapplicable because there is no evidence the virus was present on the property,

and the closure of its business operations was caused by EO 107 and not by the

COVID-19 virus.

We have carefully considered plaintiff's arguments, but it is unnecessary

that we address them in detail in this opinion. In the first instance, we affirm

the summary judgment orders substantially for the reasons set forth in the court's

thorough and thoughtful written opinion. In addition, in our opinion in

Mattdogg, Inc. v. Philadelphia Indemnity Insurance Company, we carefully

considered, exhaustively addressed, and rejected the identical arguments

plaintiff relies on in support of its appeal and amici contends support a reversal

of the court's summary judgment orders. ___ N.J. Super. ___, ___ - ___ (App.

Div. 2022) (slip op. at 22-52). Our reasoning and holdings in Mattdogg, Inc.

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apply with syllogistic precision here, and they support our determination the

court correctly granted defendant's motion for summary judgment and denied

plaintiff's motion for summary judgment.

Affirmed.

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