MAZZOLI et al v. BORGATA HOTEL CASINO & SPA et al
Filing
155
OPINION. Signed by Judge Joseph E. Irenas on 4/11/2011. (TH, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DANIEL T. MAZZOLI and EMMA J.
MAZZOLI,
HONORABLE JOSEPH E. IRENAS
Plaintiff,
CIVIL ACTION NO. 08-649
(JEI/KM)
v.
OPINION
MARINA DISTRICT DEVELOPMENT
COMPANY, LLC, d/b/a BORGATA
HOTEL CASINO & SPA, YATESTISHMAN, REGIONAL SCAFFOLDING
& HOISTING CO., INC., and
COMMERCE RISK CONTROL SERVICES
Defendants;
MARINA DISTRICT DEVELOPMENT
COMPANY, LLC, d/b/a BORGATA
HOTEL CASINO & SPA, YATESTISHMAN,
Third-Party
Plaintiffs,
v.
SELECTIVE INSURANCE COMPANY OF
AMERICA, and APG
INTERNATIONAL, INC.,
Third-Party
Defendants;
SELECTIVE INSURANCE COMPANY OF
AMERICA,
Fourth-Party
Plaintiff,
v.
LIBERTY INTERNATIONAL
UNDERWRITERS, INC., LIBERTY
MUTUAL INSURANCE COMPANY,
TRAVELERS PROPERTY CASUALTY
INSURANCE COMPANY, and ADMIRAL
INSURANCE COMPANY
Fourth-Part
Defendants.
APPEARANCES:
SALTZ, MOGELUZZI, BARRETT & BENDESKY, PC
By: Andrew R. Duffy and Robert J. Mongeluzzi
One Liberty Place
34th Floor
1650 Market Street
Philadelphia, PA 19103
Counsel for Plaintiffs
NAULTY, SCARICAMAZZA & MCDEVITT, LLC
By: Francis T. McDevitt
Greentree Commons
9003-A Lincoln Drive West
Marlton, NJ 08053
Counsel for Yates-Tishman
2
COOPER, LEVENSON, APRIL, NIEDELMAN & WAGENHEIM, PA
By: Victor P. Wasilauskas
1125 Atlantic Avenue
Atlantic City, NJ 08401
Counsel for Marina District Development Company, LLC
WHITE & WILLIAMS, LLP
By: Nancy L. Siegel
Liberty View
457 Haddonfield Road
Suite 400
Cherry Hill, NJ 08002
Counsel for Commerce Risk Control Services
DEASEY, MAHONEY, VALENTINI & NORTH LTD
By: Ward Andrew Rivers
80 Tanner Street
Haddonfield, NJ 08033
Counsel for Admiral Insurance Company
HILL WALLACK
By: Gerard H. Hanson and Todd Jason Leon
202 Carnegie Center
Princeton, NJ 08543
Counsel for Selective Insurance Company of America
ROMADNO, TUCKER, ZIRULNIK & SHERLOCK
By: Arthur E. Donnelly
701 Route 73 South
Suite 120
Marlton, NJ 08053
Counsel for APG International, Inc.
RIVKLIN RADLER LLP
By: Anita Susan Cohen
21 Main Street
Suite 158
Court Plaza South - West Wing
Hackensack, NJ 07601
Counsel for Liberty International Underwriters, Inc.
MARSHALL, DENNEHEY, WARNER, COLEMAN & GOGGIN
By: William C. Foster
1845 Walnut Street
Philadelphia, PA 19103
Counsel for Liberty Mutual Insurance Company
3
Borowsky & Borowsky LLC
By: Erin Marie McDevitt-Frantz
59 Avenue At The Common
Suite 102 & 102
Shrewsbury, NJ 07702
Counsel for Travelers Property Casualty Insurance
IRENAS, Senior District Judge:
This matter comes before the Court on the cross-motions for
summary judgement of Third-Party Defendant/Fourth-Party Plaintiff
Selective Insurance Company of America (“Selective”) and FourthParty Defendant Liberty International Underwriters, Inc. (“LIU”).
For the reasons set forth below, Selective’s Motion will be
denied in full and LIU’s Motion will be granted in part and
denied in part.1
I.
Although the procedural history of this case is quite
complex, the underlying dispute is exceedingly common.
LIU has
discontinued its defense and indemnification of Defendant/ThirdParty Plaintiff Yates-Tishman, and Selective seeks a declaration
that LIU must return to that defense and indemnification.
The underlying action stems from a construction-related
accident that occurred on December 20, 2007, involving Plaintiff
Daniel T. Mazzoli.
(Motion for Summary Judgment as to Liberty
International Underwriters, Inc. (Selective’s Mot.) p. 4) Mazzoli
1
The Court has subject matter jurisdiction pursuant to 28
U.S.C. § 1332.
4
was a glazier employed by Third-Party Defendant APG
International, Inc. (“APG”), and allegedly fell while attempting
to install exterior glass on an expansion project for
Defendant/Third-Party Plaintiff Marina District Development
Company, LLC d/b/a Borgata Hotel Casino & Spa (“Borgata”).
(Id.)
At the time of the accident, APG was a glazier subcontractor
on the construction project and Regional Scaffolding & Hoisting
Co., Inc. (“Regional Scaffolding”) was the scaffolding
subcontractor.
Each of APG and Regional Scaffolding was required
by Defendant Yates-Tishman, the general contractor for the
project, to maintain general liability insurance (Selective’s
Mot. p. 5) Such insurance was also required to include coverage
for Borgata and Yates-Tishman as additional insureds.2
In order to satisfy this requirement, APG entered into a
commercial general liability policy with Selective (the
“Selective Policy”) and Regional Scaffolding entered into a
commercial general liability policy with LIU (the “LIU Policy”).3
Mazzoli, together with his wife, filed a Complaint in this
Court on February 6, 2008, alleging negligence by Borgata and
2
Additional insured are covered “only with respect to
liability arising out of [the primary insured’s] operations or
premises owned by or rented to [the primary insured].” Id. at
Exhibit A.
3
Yates-Tishman was insured by Travelers Property Casualty
Company of America (“Travelers”), and Borgata was self-insured.
5
Yates-Tishman.4
On May 14, 2008, Yates-Tishman filed a Third-
Party Complaint against APG, Selective, Regional Scaffolding and
LIU.
The Third-Party Complaint sought contractual
indemnification from either or both APG and Regional Scaffolding,
as well as coverage as an additional insured under either or both
the Selective Policy and the LIU Policy.
In July 2008, LIU, Regional Scaffolding and Yates-Tishman
settled their dispute, with LIU agreeing to assign counsel to
defend Yates-Tishman in the underlying action and to prosecute
third-party claims against Selective and APG.5
(Id. at 6)
Pursuant to this agreement, Yates-Tishman’s third-party complaint
against LIU and Regional Scaffolding was dismissed.
(Id.)
On December 10, 2008, LIU accepted Borgata’s tender of
coverage claim for additional insured coverage under the LIU
Policy.
(Id.)
On June 4, 2009, Selective wrote to LIU in an attempt to
resolve Borgata and Yates-Tishman’s Third-Party Complaint against
itself and APG, its insured.
(Selective’s Mot. p. 7) Selective
4
Plaintiffs filed an Amended Complaint on March 23, 2009,
naming Regional Scaffolding and Commerce Risk Services, Inc.
(“Commerce Risk”), the site safety contractor for the project, as
additional defendants.
5
In the correspondence memorializing its acceptance, LIU
wrote: “[LIU] accepts the defense of Yates-Tishman on a primary
and non-contributory basis, however, we disclaim any duty to
indemnify Yates-Tishman with respect to liability that does not
arise out of Regional Scaffolding’s operations. . . .”
6
offered to accept the tender for additional insurance coverage on
behalf of Borgata and Yates-Tishman, and to share the defense and
indemnity costs on a pro-rata basis with LIU.
was rejected on July 15, 2009.
(Id.)
This offer
(Id.)
In response to this rejection, Selective filed a FourthParty Complaint on December 2, 2009, seeking a declaration that
Selective, LIU, Travelers (Yates-Tishman’s insurer) and Liberty
Mutual Insurance Company (Commerce Risk’s insurer) owe a coprimary duty to defend Borgata and Yates-Tishman, and that
Selective, LIU, Travelers and LMIC owe a co-primary duty to
indemnify Borgata and Yates-Tishman.
On January 15, 2010, LIU and Selective began negotiations of
a settlement between them and their respective insureds.
The
parties’ accounts of these negotiations differ in significant
ways.
Selective alleges it reached a formal settlement agreement
with LIU in April 2010.
(Id. at 8) Under the terms of this
alleged settlement, Selective would reimburse LIU for half of the
defense costs already paid and Selective and LIU would split all
costs going forward.
Under Selective’s account, Selective then
requested copies of the billing invoices of counsel in order to
fulfill its obligation to reimburse half of the costs already
paid.
(Id.) Selective alleges that it received those invoices in
July 2010. (Id.) Selective eventually approved the amounts
7
reflected on the invoices in September 2010, and forwarded a
stipulation of dismissal to LIU in October 2010.
stipulation of dismissal was never signed.
(Id. at 9) This
(Id.)
Under LIU’s account, Selective and LIU never entered into a
settlement agreement in April 2010.
Facts (LIU SOF) ¶ 14-16)
(LIU’s Statement of Material
Although LIU admits that it provided
the invoices to Selective, LIU claims that this was for purposes
of negotiation only.
(Id.)
On April 29, 2010, Plaintiff’s Amended Complaint against
Regional Scaffolding was voluntarily dismissed with prejudice.
(LIU SOF ¶ 17)
Following this dismissal, LIU notified all
parties to the present action that it was withdrawing acceptance
of the tender of defense and indemnity to Borgata and YatesTishman because Mazzoli’s injuries could not have been found to
have arisen out of the actions or operations of Regional
Scaffolding as was required for additional insured coverage under
the LIU Policy.
(Id.)
Selective filed its present Motion on November 12, 2010.
Selective seeks a declaration that (1) LIU did not validly
reserve its rights to disclaim coverage to Yates-Tishman and
Borgata, (2) LIU is estopped from disclaiming such coverage,
(3) LIU must immediately resume its duty to defend and indemnify
Yates-Tishman and Borgata, (4) LIU is to share its duty to defend
and indemnify Yates-Tishman and Borgata on an equal, one-half
8
basis of contribution with Selective, (5) LIU is bound to the
alleged settlement agreement reached between itself and
Selective, and (6) LIU must reimburse Selective for 50% of the
attorneys’ fees and costs incurred by Selective in its defense of
Yates-Tishman and Borgata.
LIU filed its Motion on December 14, 2010.
LIU seeks a
declaration that (a) LIU no longer has any obligation under the
LIU Policy to defend Yates-Tishman or Borgata, (2) LIU is not
estopped from withdrawing its defense of Yates-Tishman and
Borgata, (3) there is no enforceable contract compelling LIU to
defend Yates-Tishman or Borgata, (4) LIU may withdraw from
defending Yates-Tishman and Borgata, (5) Selective was obligated
to defend Yates-Tishman and Borgata with LIU during the period
through and including June 2010, and (6) Selective is required to
reimburse LIU for 50% of the defense and expert fees that LIU
expended in defending Yates-Tishman and Borgata during the period
through and including June 2010.6
II.
“[S]ummary judgment is proper ‘if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
6
After the briefing of this matter was completed, Borgata
was dismissed from this matter in full. Therefore, any
prospective relief sought in regard to the defense and
indemnification of Borgata is moot.
9
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.’”
Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P.
56(c)).
In deciding a motion for summary judgment, the Court
must construe the facts and inferences in a light most favorable
to the non-moving party.
Pollock v. Am. Tel. & Tel. Long Lines,
794 F.2d 860, 864 (3d Cir. 1986).
“‘With respect to an issue on
which the non-moving party bears the burden of proof, the burden
on the moving party may be discharged by ‘showing’– that is,
pointing out to the district court – that there is an absence of
evidence to support the nonmoving party’s case.’”
Conoshenti v.
Public Serv. Elec. & Gas, 364 F.3d 135, 145-46 (3d Cir. 2004)
(quoting Celotex, 477 U.S. at 323).
The role of the Court is not
“to weigh the evidence and determine the truth of the matter, but
to determine whether there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
III.
A.
Selective first argues that LIU should be estopped from
withdrawing from the defense and indemnification of Yates-Tishman
because LIU did not properly reserve its rights when it assumed
the defense of Yates-Tishman.
In opposition,
LIU argues that
estoppel is solely for the benefit of the insured, and Selective
does not have standing to raise estoppel.
10
The questions before the Court are whether Selective has
standing to invoke estoppel, and, if it does, is estoppel
appropriate in the circumstances of this case.
It is a long-standing rule under New Jersey law that if an
insurance carrier assumes the defense of an insured without
properly reserving its rights to later disclaim coverage, that
insurance carrier cannot later disclaim coverage to the insured.
See Merchants Indem. Corp. v. Eggleston, 37 N.J. 114, 126 (1962).
“Control of the defense is vitally connected with the obligation
to pay the judgment.” Id. at 127.
For that reason, the New
Jersey Supreme Court ruled that “it would be unfair to permit a
carrier to control the defense without the consent of the insured
and then leave the judgment for his payment.”
Id.
In the present case, though, it is not Yates-Tishman, the
insured, that is seeking to estop LIU, the insurer, from
disclaiming coverage.
Instead, it is Selective, a co-insurer of
Yates-Tishman with LIU, who is seeking to estop LIU from
disclaiming coverage.
This is a novel issue which has not received much attention
before.
There is no binding precedent, and the case law is
mixed.
See, e.g., General Fire & Casualty Co. v. Progressive
Casualty Co., 799 P.2d 1113, 1117 (N.M. 1990)(“The rule [of
estoppel] does not operate to preclude a suit such as this
whereby one insurer attempts to assert that another insurer
11
provided primary coverage.”); St. Paul Mercury Ins. Co. V.
Lexington Ins. Co., 78 F.3d 202 (5th Cir. 1996)(Estoppel “is
simply not intended to be applied to the relationship among
insurers.”); Kitchnefsky v. National Rent-A-Fence of America, 88
F.Supp.2d 360, 365 (D.N.J. 2000)(Estoppel is “focused upon the
insured’s need for protection”).
At least two New Jersey courts have estopped an insurer from
disclaiming coverage in favor of a co-insurer.
In Selective Ins.
Co. v. Allstate Ins. Co., 2005 WL 3839975 (N.J.Super. App. Div.
March 10, 2006), an insured tendered coverage to two different
insurers: Selective and Allstate.
Id. at *1.
Selective assigned
counsel to defend the insured, subject to a purported reservation
of rights, and Allstate refused coverage.
Id.
Selective later
attempted to disclaim coverage on the basis that the claim was
not subject to coverage under Selective’s policy, which in fact
it was not.
Id.
Despite this, Allstate successfully moved the
court to estop Selective from withdrawing from the defense of
insured because Selective failed to properly reserve its rights.
Id. at 10.
Similarly, in Nazario v. Lobster House et al., 2009 WL
1181620 (N.J.Super. App. Div. May 5, 2009), an insured tendered
coverage to two different insurers. Id. at *1.
Each insurer
assigned counsel to defend the insured while purportedly
reserving rights.
Id.
Both of these attempts to reserve rights
12
were later found to be ineffective as a matter of law. Id. at *2.
The insured’s umbrella insurer then sought a declaration that
both primary insurers were estopped from disclaiming coverage to
the insured.
Id. at *8.
The trial court found that the primary
insurers were estopped from disclaiming coverage because of the
failed reservation of rights.
Id.
The Court finds the result in those cases to be correct.
It is clear that in certain instances, an insurer will have
exerted so much control over a case that allowing it to disclaim
coverage would be prejudicial to both the insured and other
insurers of the insured.
In such instances, the prejudice to the
co-insurers would be so great that it would be appropriate for a
court to estop the insurer from disclaiming coverage.
The question then becomes what are the necessary elements
for an insurer to estop a disclaiming co-insurer.
In New Jersey,
an insured may invoke estoppel against a disclaiming insurer so
long as the insurer did not properly reserve its rights - the
insured does not have the burden of proving prejudice.
In
Eggleston, the New Jersey Supreme Court noted that “prejudice is
an essential ingredient” in estoppel, but did not reach the
question of whether the insured bears the burden of proving
prejudice.
Id. at 130.
Later case law, though, clarifies that
an insured enjoys a presumption of prejudice when an insurer
controls the defense of a claim.
13
See Sneed v. Concord Ins. Co.,
98 N.J. Super. 306, 318 (App.Div. 1967)(“[A]n insurer’s taking
over of control of investigation and negotiations for settlement
of the claim, and consequent exclusion of the insured therefrom,
for a substantial period of time, invades valuable rights of the
insured and should evoke a presumption of prejudice. . . .”);
Griggs v. Bertram, 88 N.J. 347, 359 (N.J. 1982)(A presumption of
prejudice is appropriate when “a material encroachment upon the
rights of an insured to protect itself by handling the claim
directly and independently of the insurer, then prejudice to
those rights should be presumed.”).
Selective urges us to adopt a presumption of prejudice in
the present case.
This argument, though, fails to recognize that
insurers are in significantly different positions viz a viz the
disclaiming co- insurer than is the insured.
There is no reason
to presume that the control of a claim by a co-insurer is a
“material encroachment upon the rights” of an insurer, nor must
we presume that there is a “resultant inequity.”
Often, the
interests of co-insurers will be aligned. In addition, insurers
are free to seek contractual protection from other insurers.
For
these reasons, the Court will not presume that Selective was
prejudiced by LIU’s control of the defense of Yates-Tishamn, but
instead will examine whether Selective suffered actual prejudice.
The Court finds that Selective has not made an adequate
showing of prejudice to invoke estoppel against LIU.
14
The
underlying litigation is still ongoing, a trial date has not been
set in the matter, and no settlements have been made.
Yates-
Tishman’s defense is controlled by counsel selected by Selective,
and Selective has not shown that previous counsel was deficient
in any way.7
In sum, Selective has not presented any evidence
to the Court that its position was in any way harmed by LIU’s
control of the litigation.
Because Selective has not made an adequate showing of
prejudice, LIU will not be estopped from withdrawing from the
defense and indemnification of Yates-Tishman.
Selective’s motion
for summary judgment as to estoppel will be denied, and LIU’s
motion for summary judgment as to estoppel will be granted.
B.
Selective next seeks a declaration that LIU is bound to the
terms of the settlement agreement reached between LIU and
Selective, and that LIU must contribute 50% towards the costs of
defending Borgata and Yates-Tishman going forward.
LIU, in turn,
seeks a declaration that there is no enforceable contract
compelling LIU to defend Borgata and Yates-Tishman.
The Court
will deny both motions as there is a dispute of material fact as
to whether a contract existed.
A settlement agreement is a contract between the parties,
7
Quite to the contrary, the settlement agreement that
Selective argues was entered into between LIU and Selective
ratifies LIU’s previous selection of counsel for Yates-Tishman.
15
and traditional contract law applies to their interpretation.
See New Jersey Mfrs. V. O’Connell, 300 N.J. Super 1, 7 (App. Div.
1997).
Only when parties agree on the essential terms and
manifest an intention to be bound by such terms is an enforceable
contract created.
Weichert Co. Realtors v. Ryan, 128 N.J. 427,
435 (1992).
For the purposes of the present motions, the Court must
construe the facts and inferences in the light most favorable to
the opposing party in considering whether the parties entered
into a settlement agreement.
In response to LIU’s argument that
there was no settlement agreement, Selective has presented
credible evidence from which a reasonable factfinder could infer
that the parties did enter into a settlement agreement.
In
response to Selective’s argument that there was a settlement
agreement, LIU has presented credible evidence from which a
reasonable factfinder could infer that there was no such
settlement agreement.
Put succinctly, there is a material
dispute of fact concerning the existence of a settlement
agreement.
Summary judgment is inappropriate when such disputes
of material fact exist, and both parties’ motions for summary
judgment will be denied as to this issue.
IV.
For the reasons set forth above, Selective’s Motion for
Summary Judgment will be denied in full.
16
LIU’s Motion for
Summary Judgment will be denied as to the question of the
settlement agreement, and will be granted as to estoppel. An
appropriate Order accompanies this Opinion.
Dated: April 11, 2011
s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.
17
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