DOOLEY et al v. SCOTTSDALE INSURANCE COMPANY
OPINION. Signed by Judge Joseph E. Irenas on 2/18/2015. (drw)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JOSEPH DOOLEY and ELIZABETH
HONORABLE JOSEPH E. IRENAS
CIVIL ACTION NO. 12-1838
SCOTTSDALE INSURANCE COMPANY,
MASTER WEINSTEIN SCHATZ MOYER, P.C.
By: Steven J. Schatz, Esq.
100 Grove Street
Haddonfield, NJ 08033
Counsel for Plaintiffs
PRUTTING & LOMBARDI
By: George A. Prutting, Jr., Esq.
701 South White Horse Pike
Audubon, NJ 08106
Counsel for Defendant
Irenas, Senior District Judge:
Plaintiffs bring this action to recover insurance benefits
under a surplus lines homeowner’s insurance policy issued by
Defendant Scottsdale Insurance Co. (“Scottsdale”).
Presently before the Court is Defendant’s motion for
For the following reasons, the motion will be
DENIED as to Plaintiffs’ claims for breach of contract (Count I)
and for a declaratory judgment (Count III).
The motion will be
GRANTED as to Plaintiffs’ bad faith claim (Count II).
The Court recites those facts relevant to deciding the
pending motion for summary judgment and resolves any disputed
facts or inferences in favor of Plaintiffs, the nonmoving party.
In April 2008, Plaintiffs Joseph and Elizabeth Dooley
purchased a two story, two bathroom vacation home located at 105
Bark Drive, Ocean City, New Jersey.
(Pls.’ Counter-Statement of
Material Facts (“P.C.S.F.”) at ¶ 2)
Plaintiffs stayed in the
home the weekend of December 11-12, 2010, and left with the
intention of returning on December 31, 2010, for the New Year’s
(Def.’s Statement of Material Facts (“D.S.F.”) at ¶ 4)
On December 20, 2010, the Ocean City Fire Department
responded to a neighbor’s report of a water leak at the Dooley
property and shut off water at the street valve.
of Frederic Blum at 3, Ex. Q to Def.’s Motion for Summary
Plaintiffs were not aware of the leak
until they returned to the house on December 31, when they
noticed that water had discharged from the second floor bathroom
where an inside wall shower diverter pipe and two inside wall
sink pipes had burst.1
(D.S.F. ¶ 6)
Water usage records
indicate that approximately 22,000 gallons leaked into the
(Blum Rpt. at 3)
the property exceeded $160,000.
Plaintiffs claim damage to
(P.C.S.F. ¶ 1)
Immediately after noticing the discharge of water on
December 31, 2010, Plaintiffs contacted Scottsdale, their
insurance provider, through its representatives, and were given
a claim number.
(Id. at ¶ 3)
Plaintiffs had purchased a
surplus lines insurance policy with Scottsdale in 2008 prior to
closing on their home.
Plaintiffs used a retail agent, The
McMahon Agency (“McMahon”), to procure a homeowners’ policy on
McMahon then contacted Defendant’s general agent,
FTP, Inc., an insurance wholesaler, for placement of the
Dooley’s homeowners’ policy through the surplus lines or
FTP subsequently placed Plaintiffs’ policy
with Scottsdale with effective dates of coverage running from
April 16, 2008 to April 16, 2009.
Plaintiffs later renewed
their policy through the relevant time period.
There is an initial dispute regarding whether Plaintiffs
ever received a complete copy of their policy.
submitted a certification from FTP vice president PJ Powell
Based on the weather records, Defendant’s Expert Frederic Blum concludes
that the pipe must have frozen on December 15 and thawed on December 17.
(Blum Rpt. at 5-6) Water then leaked for around four days until Police shut
off the valve on December 20. (Id.)
stating that FTP mailed Plaintiffs’ entire policy directly to
McMahon when Plaintiffs purchased the policy in 2008.
Cert. ¶ 7, Ex. M to D.M.S.J.)
Angela Wolfe, a McMahon personal
lines manager, testified at her deposition that a May 22, 2008,
entry on the McMahon activity log shows McMahon had received
Plaintiffs’ entire policy from FTP by that date.
48:8-49:11, Ex. N to D.M.S.J.).
(Wolfe Dep. at
Ms. Wolfe also said that
McMahon’s normal procedure would then have been to mail the
entire policy to the Dooleys, but the log does not state
specifically that McMahon ever did so.
(Id. at 51:22-52:7)
Mrs. Dooley testified at her deposition that she and her husband
never received a copy of the full policy from McMahon, though
she never requested a full copy.
(E. Dooley Dep. at 10:6-12:10,
Ex. K to Pls.’ Opposition (“P.O.”))
The Dooleys’ policy states, in relevant part,
SECTION I – PERILS INSURED AGAINST
A. Coverage A – Dwelling and Coverage B – Other
1. We insure against risk of direct physical loss to
property described in Coverages A and B.
2. We do not insure, however, for loss:
a. Excluded under Section I – Exclusions;
. . .
c. Caused by:
(1) Freezing of a plumbing, heating, air
condition or automatic fire protective
appliance, or by discharge, leakage or
appliance caused by freezing.
provision does not apply if you use
reasonable care to:
Maintain heat in the building; or
Shut off the water supply and drain all
systems and appliances of water.
. . .
B. Coverage C – Personal Property
We insure for direct physical loss to the property
described in Coverage C caused by any of the following
perils unless the loss is excluded in Section I –
. . .
a. This peril means freezing of a plumbing,
heating, air conditioning or automatic fire
protective sprinkler system or of a house-hold
appliance but only if you have used reasonable
(1) Maintain heat in the building; or
(2) Shut off the water supply and drain all
systems and appliances of water.
(Scottsdale Policy, Ex. K to D.M.S.J.)
“Exclusions” section states as follows:
SECTION I – EXCLUSIONS
A. We do not insure for loss caused directly or
indirectly by any of the following.
Such loss is
excluded regardless of any other cause or event
contributing concurrently or in any sequence to the
loss. These exclusions apply whether or not the loss
event results in widespread damage or affects a
. . .
Neglect means neglect of an “insured” to use
all reasonable means to save and preserve
property at and after the time of a loss.
On January 5, 2011, Defendant assigned Sweet Claims Company
(“Sweet Claims”), which, in turn, assigned Lisa Friedland, as
the independent adjuster investigating Plaintiffs’ claim.
(D.S.F. ¶ 9)
Patricia Rice acted as the claims analyst for
Plaintiffs retained their own public adjuster, South
Jersey Adjustment Bureau, Inc. (“South Jersey”), on January 6,
(Expert Report of Gene Mehmel at 3, Ex. H to P.O.)
Frank Mazzitelli of Frank’s Plumbing & Heating, who
completed repairs to the home in January 2011, described his
work as repairing “frozen and broken water pipes.”2
Plumbing Invoice, Ex. E to D.M.S.J.)
Plaintiffs informed Sweet
Claims that they had left the heat on upon departing the house
on December 12, 2010.
(Sweet Claims 1/13/11 First Reporting at
4, attached to Friedland Dep., Ex. F to P.O.)
subsequently contacted Atlantic City Electric, Plaintiffs’
electricity provider, to verify that the utility bill supported
(Sweet Claims 2/14/11 Second Reporting at 3)
The utility bill Ms. Friedland obtained states that
Plaintiffs used 125 kWhs of electricity from November 16, 2010,
to December 16, 2010.
Ex. G to D.M.S.J.)
(12/16/10 Atlantic City Electric Bill,
In her Second Reporting to Defendant, dated
February 14, 2011, Ms. Friedland wrote that she called Atlantic
City Electric and asked whether 125 kWhs was enough to turn on
heat in the home, but the electric company refused to reveal any
information since she was not the customer.
However, the woman with whom Ms. Friedland spoke, who
The parties do not seem to dispute that the leaks resulted from pipes that
had frozen and burst.
“would not provide her name,” apparently said that 125 kWhs was
“probably a light usage for a one month period of time and not
an electric heating home cost.”
Based on this
information, Ms. Friedland told Ms. Rice that she questioned
whether Plaintiffs had the heat on during that month.
On March 8, 2011, Defendant asked South Jersey to provide
documentation from a plumber indicating why the pipe leaked.
(3/8/11 Ltr. from Defendant to South Jersey, Ex. H to D.M.S.J.)
The following day, in an email to Ms. Rice, Ms. Friedland stated
that Sweet Claims “will not be able to prove the cause” of the
pipe break and that “the only aspect we have to show that this
heat was not on is the electric bill previously forwarded.”
(3/9/11 email from L. Friedland to P. Rice, Ex. O to P.O.)
April 4, 2011, South Jersey forwarded to Sweet Claims
correspondence from Mr. Dooley stating that he had set all
thermostats on low before leaving the house.3
(4/4/11 Ltr. from
J. Dooley to South Jersey, Ex. D to D.M.S.J.; Sweet Claims
4/4/11 Final Reporting at 2, attached to Friedland Dep., Ex. F
In her Final Reporting, also dated April 4, 2011, Ms.
Friedland wrote “the electric invoice clearly shows the heat was
not on in this home at the time of the incident.”
Mr. Dooley also stated that all outside water systems were drained and
closed, and all interior water systems were closed and secured.
South Jersey submitted proofs of loss to Sweet Claims on
July 5, 2011, and reiterated that Plaintiffs informed South
Jersey that the house was heated at the time of loss.
Ltr. from South Jersey to Sweet Claims, Ex. J to D.M.S.J.)
August 26, 2011, Defendant sent a letter to Plaintiffs denying
their claim based on the electrical billing.
Ltr., Ex. C to D.M.S.J.)
Plaintiffs filed the present suit on
March 26, 2012.
Mr. Dooley maintained in his deposition that he turned all
thermostats in the home to low, and closed all interior and
exterior plumbing with the exception of the main valve, before
he and his wife departed their house on December 12, 2010. (J.
Dooley Dep. at 48:24-49:12)
He testified that he completed the
same routine every time he and his wife left the house during
prior winters and the pipes had never frozen.
Defendant’s expert, Frederic Blum, concludes that it was
“not possible” that the thermostats were kept on low.
Rpt. at 6)
According to Blum, the lowest setting of most
thermostats is generally 45-50 degrees Fahrenheit, and a house
will not freeze even if all thermostats were set as far down as
(Id. at 7)
For this reason, he states that it is not
possible that the heat was turned on in Plaintiffs’ house.
Blum supports his conclusion with Plaintiffs’ electric
bills and weather records from October to December 2010, along
with the bills and weather records for the same time span in
Plaintiffs’ December 2010 electric bill states that
Plaintiffs used 125kWh of electricity in the house from November
16, 2010 to December 16, 2010, when the average temperature was
41 degrees Fahrenheit.
(Electric Bill, Ex. G to D.M.S.J.)
Plaintiffs used 176 kWh of energy during that same period in
2009, when the temperature averaged 46 degrees.
(Blum Rpt. at
Blum acknowledges that, without knowing the exact usage of
the house during each pay period, month to month comparisons are
However, he notes that the November-December
2010 usage is “conspicuously low.”
(Id. at 7-8)
writes that most of that usage in 2010 would have been consumed
during the December 11-12 weekend Plaintiffs spent at the house.
(Id. at 8)
The “very low usage” during that billing period, in
Blum’s opinion, “indicates that the heat was entirely off after
the Dooleys departed on December 12.”
Defendant also submitted an affidavit of the records
custodian for Atlantic City Electric, who states that there was
no power outage or interruption of service to Plaintiffs’ home
between December 12 and December 31, 2010.
Electric Aff., Ex. O to D.M.S.J.)
Plaintiffs submitted two
expert reports that opine on the ambiguity of the policy’s terms
and the adequacy of Defendant’s investigation of Plaintiffs’
Neither offers an explanation as to how the pipes could
have frozen had Mr. Dooley left on the thermostats.
Federal Rule of Civil Procedure 56(c) provides that summary
judgment should be granted if “pleadings, depositions, answers
to interrogatories, and admissions on file, together with
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.”
477 U.S. 242, 248 (1986).
Anderson v. Liberty Lobby, Inc.,
A fact is material only if it will
affect the outcome of a lawsuit under the applicable law, and a
dispute of a material fact is genuine if the evidence is such
that a reasonable fact finder could return a verdict for the
Id. at 252.
In deciding a motion for summary judgment, the court must
construe all facts and inferences in the light most favorable to
the nonmoving party.
See Boyle v. Allegheny Pennsylvania, 139
F.3d 386, 393 (3d Cir. 1998).
The moving party bears the burden
of establishing that no genuine issue of material fact remains.
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
nonmoving party must present “more than a scintilla of evidence
showing that there is a genuine issue for trial.”
Cnty. of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005).
evidence is merely colorable . . . or is not significantly
probative . . . summary judgment may be granted.”
477 U.S. at 249-50 (internal citations omitted).
role in deciding the merits of a summary judgment motion is to
determine whether there is a genuine issue for trial, not to
determine the credibility of the evidence or the truth of the
Id. at 249.
Defendant moves for summary judgment on each count of
Plaintiffs argue that summary judgment
should be denied for the following reasons: (1) Plaintiffs never
received a copy of their full policy, (2) the terms “reasonable
care” to “maintain heat” in the policy’s exclusionary provisions
are ambiguous, and (3) there is a genuine dispute of material
fact as to whether Plaintiffs took reasonable care to maintain
heat in their home.
Plaintiffs also claim that Defendant
breached its duty of good faith and fair dealing with respect to
the denial of Plaintiffs’ claim for coverage under the policy.
The Court addresses each of these issues in turn.
A. Plaintiffs’ receipt of the policy
As an initial matter, Defendant asks the Court to issue a
finding that Plaintiffs either directly or constructively
received a full copy of the policy before the December 2010
Plaintiffs state that Defendant is not entitled to
such a finding because Plaintiffs never obtained a complete
version of their policy prior to the present lawsuit.
Plaintiffs further suggest, without any supporting case law,
that their not receiving the full policy somehow effects the
interpretation or application of the policy’s exclusionary
language under which Defendant denied coverage.4
Based on the
evidence presented, the Court finds that Plaintiffs were in
constructive receipt of the full policy as a matter of law when
McMahon, acting as their retail agent, received a copy from FTP.
As a result, the Court will not address the potential impact on
coverage had Plaintiffs not received the policy.5
There is clearly a dispute of fact as to whether Plaintiffs
themselves received a full copy of the Policy.
“[i]nsurance companies have an obligation to supply insureds
with a copy of their policy,” Edwards v. Prudential Prop. and
Cas. Co., 357 N.J. Super. 196, 204 (App. Div. 2003), under New
Jersey law, Plaintiffs need not have received the entire policy
Plaintiffs present a paradoxical argument: they seek coverage for their loss
under the policy, even though they claim not to have received it, but, for
that very same reason, ask not to be bound by the policy’s specific terms.
5 The Court will note, however, that in unpublished opinions, both the
Appellate Division and this Court have declined to find that not receiving a
copy of a policy nullifies the provisions of the policy or abrogates their
applicability, especially where, as is the case here, the insured never
requested a full copy of the policy. See Coney v. Homesite Ins. Co., No. 086151, 2010 WL 2925941, at *3 (D.N.J. July 15, 2010); Friscia v. Andrade, No.
L-5879-07, 2009 WL 3416058, at *4-5 (N.J. Super. App. Div. Oct. 9, 2009).
directly to be bound by its terms.
That McMahon received the
full policy is sufficient.
“The delivery of information by an insurance company or
insurance intermediary to the broker of the insured is
tantamount to providing that information to the insured.
Learning Sys., Inc. v. Gordon, 135 F. Supp. 2d 529, 548 (D.N.J.
2000) (citing TWBC III, Inc. v. Certain Underwriters at Lloyd’s
London Subscribing to Policy No. 89430548192, 323 N.J. Super.
60, 66 (App. Div. 1999)).
The New Jersey Insurance Provider
Licensing Act (IPLA) defines an “insurance broker” as “a person
who, for commission, brokerage fee, or other consideration, acts
or aids in any manner concerning negotiation, solicitation or
effectuation or insurance contracts as the representative of an
insured or proposed insured.”
The Appellate Division’s decision in TWBC, whose facts are
analogous to this case, is instructive.
In TWBC, plaintiffs,
who sought recovery under a surplus lines insurance policy,
claimed that a surplus lines agent, acting on behalf of a
surplus lines insurance provider, had not complied with its
statutory obligation to provide plaintiffs with “evidence of
insurance,” as required by statue.
TWBC III, 323 N.J. Super. at
However, the surplus lines agent had provided such
evidence to plaintiffs’ broker, who had originally been
contacted by plaintiffs, and who then contacted the surplus
lines agent, to obtain insurance for plaintiffs.
to the IPLA’s definitions of “insurance agent” and “insurance
broker,” the Appellate Division recognized that the surplus
lines agent represented the insurer and that the insurance
broker represented the insured.
Id. at 65.
principal who selects someone to act for him is generally bound
by the acts of that person within the apparent authority which
he knowingly permits the person to assume,” the court “s[aw] no
reason why notice to the broker chosen by plaintiffs to act for
them should not be deemed notice to plaintiffs themselves.”
at 66 (internal quotations omitted).
See also Kramer v. Metro.
Life Ins. Co., 494 F. Supp. 1026, 1031 (D.N.J. 1980) (“It is a
long recognized rule of insurance law that delivery of a policy
to an agent for the purpose of delivering it to a prospective
insured is tantamount to actual delivery to that prospective
Here, McMahon clearly acted as Plaintiffs’ insurance broker
by obtaining insurance on their behalf from FTP, Defendant’s
The Court finds that when McMahon received the
policy, Plaintiffs were in constructive receipt of the policy.
Plaintiffs try to argue that TWBC does not apply here because McMahon was a
“dual agent” for both Plaintiffs and Scottsdale in that McMahon also
collected premiums on behalf of the insurer. As a result, Plaintiffs contend
that McMahon acted as Scottsdale’s agent in delivering the policy to
Plaintiffs rather than as Plaintiffs’ agent in receiving the Policy. The
Court finds this characterization of the parties’ relationships unconvincing.
TWBC states that insurance brokers “act[ ] for the insured and represent[ ]
B. Ambiguity of Terms
The parties disagree on how to interpret the policy’s terms
allowing for coverage when pipes freeze where the insured took
“reasonable care” to “maintain heat.”
While the Court disagrees
with both parties’ particular interpretations of these terms,
the Court does not find the language to be ambiguous and will
give these terms their ordinary meaning.
In New Jersey, courts “have consistently recognized that
insurance policies are contracts of adhesion and are subject to
special rules of interpretation.”
Lee v. Gen. Acc. Ins. Co.,
337 N.J. Super. 509, 513 (App. Div. 2001).
be construed liberally in [the insured's] favor to the end that
coverage is afforded to the full extent that any fair
interpretation will allow.”
Longobardi v. Chubb Ins. Co. of
N.J., 121 N.J. 530, 537 (1990) (internal quotations omitted).
Exclusion clauses in particular should be “strictly construed.”
Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 429 (App.
When interpreting insurance contracts, “the basic rule is
to determine the intention of the parties from the language of
the policy, giving effect to all parts so as to give a
the insured in obtaining insurance.” TWBC III, 323 N.J. Super. at 65
(emphasis added). McMahon’s receiving a copy of the policy surely
constituted an element of “obtaining” insurance on Plaintiffs’ behalf.
reasonable meaning to the terms.”
Id. at 428.
unambiguous terms must be enforced as they are written.
Ambiguities, on the other hand, must be resolved against the
“Yet, an insurance policy is not ambiguous merely
because two conflicting interpretations have been offered by the
A genuine ambiguity arises only “where the
phrasing of the policy is so confusing that the average
policyholder cannot make out the boundaries of coverage.”
v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979).
Plaintiffs argue that the terms “reasonable care” to
“maintain heat” are not defined in the policy and therefore
They ask the Court to apply a subjective
understanding of the terms.
Specifically, Plaintiffs suggest
that an insured person took “reasonable care” to “maintain heat”
if his actions were reasonable in his own mind.
Dooley testified that he believed his steps to maintain heat
were reasonable, Plaintiffs state that Defendant should have
covered their loss.
Defendant claims that the policy’s language is clear and
unambiguous, and the relevant terms should be given their
Defendant then provides the following
interpretation of these terms: if the pipes in a house froze and
the insured cannot present evidence of some intervening cause,
such as vandalism, a broken window, or a power outage, then
“clearly an insured did not use reasonable care to maintain
(Def.’s Reply at 5)
In the Court’s opinion, the parties offer conflicting
interpretations of otherwise clear terms.
The absence of a
definition for “reasonable care” does not render that phrase
The nature of coverage decisions, which must be made
on a case by case basis, makes it impossible to define what
constitutes “reasonable care” in any one situation.
the average policy holder would not be confused by the phrase
“maintain heat,” particularly in the context of an exclusionary
provision related to “freezing.”
The Court will construe those
terms, taken together, by their ordinary meaning: an insured
individual would not be excluded from coverage for losses caused
by freezing if he took objectively reasonable steps, i.e. steps
an ordinary person in his position would have taken, to ensure
that the temperature in his home remained above freezing.
Plaintiffs’ subjective understanding of “reasonable care”
to “maintain heat” is unworkable.
Forcing Defendant to provide
coverage whenever an insured person thought he did enough,
whether or not that belief was objectively reasonable, would
vitiate the exclusionary provision.
Defendant’s circular construction of these terms is
According to Defendant’s understanding of
the policy, if pipes froze, the insured must not have acted with
reasonable care to maintain heat.
In other words, Defendant
decides whether an insured individual acted reasonably based the
outcome of that individual’s acts, not by the acts themselves.
Yet, when evaluating the objective reasonableness of an
individual’s behavior, one must look at how an ordinary
reasonable person would have acted at that time.
whether an individual exercised “reasonable care” by the result,
rather than by the person’s actions, would not be a reasonable
reading of the policy.7
If Defendant intended to allow coverage
for damage caused by freezing pipes only when some proven
“extenuating circumstance” caused the pipes to freeze, then
Defendant should have made that explicit in the policy.
Since the Court finds the “reasonable care” to “maintain
heat” language in the policy to be unambiguous, it will apply
the ordinary meaning of that language, as described above, in
determining if there is a genuine dispute of material fact as to
whether Defendant appropriately denied Plaintiffs coverage.
Defendant underscores the problematic nature of their interpretation in
their motion papers. On the one hand, Defendant submitted an expert report
stating that a house will not freeze if the thermostats are set to low. (Blum
Rpt. at 7) Based on that opinion, one could assume that turning the
thermostats to low, which Mr. Dooley claims he did, would constitute
“reasonable care” to “maintain heat.” Yet, in an apparent attempt to justify
the denial of coverage even had Mr. Dooley left the heat on, Defendant also
states that, since weather conditions change, keeping thermostats on low one
year may not be adequate the next year. (D.M.S.J. at 27) Here, Defendant
looks only to the end result – the frozen pipe – and characterizes what one
would assume to be reasonable care as unreasonable.
C. Plaintiffs’ actions to maintain heat in the home
Defendant’s motion for summary judgment must fail as to
Plaintiffs’ breach of contract and declaratory judgment claims
because there is a genuine dispute of material fact as to
whether Mr. Dooley kept the thermostats on low when he and Mrs.
Dooley left their house on December 12, 2010.
Had Mr. Dooley
done so, a reasonable jury could find that he took “reasonable
care” to “maintain heat” in the home and that Defendant should
have covered Plaintiffs’ loss.
Mr. Dooley testified in his deposition, and stated in an
earlier letter to his public adjuster while Defendant considered
his claim, that before he and Mrs. Dooley left their house on
the relevant weekend, he shut off all interior water systems,
drained and closed all outside water systems aside from the main
valve, closed all windows and storm windows, and, most relevant
here, turned all thermostats to low.
(J. Dooley Dep. at 48:24-
49:12; J. Dooley Ltr. to South Jersey, Ex. D to D.M.S.J.)
Dooley stated that he had gone through the same routine each
time he left the house during prior winter months and had never
experienced any issues with water leaks.
(Dooley Dep. at 37:14-
Defendant claims that Mr. Dooley could not have left the
thermostats on low.
Frederic Blum, Defendant’s expert, argues
that a house will not freeze if all thermostats were on, even if
they were set as far down as possible.
(Blum Rpt. at 7)
According to Blum, the Dooleys’ electric utility bill for the
November 16 to December 16, 2010, period, which shows a “very
low usage” of electricity, “indicates that the heat was entirely
off after the Dooleys departed on December 12.”
At this posture, the Court must make all inferences in
favor of Plaintiffs, the non-moving party.
A jury will
determine the credibility of Mr. Dooley’s testimony and the
weight of any contradictory expert report.8
At this stage,
however, assuming that Mr. Dooley kept the thermostats on low
when he and his wife left their house on December 12, as was his
usual routine, and considering the statement from Defendant’s
own expert that a house does not freeze if thermostats are set
on low, a reasonable jury could find that Plaintiffs took
“reasonable care” to “maintain heat” and their losses should
have been covered under their policy.
For these reasons, the
As the Court sees it, Defendant’s core argument is that Mr. Dooley could not
have turned the thermostats to low before leaving the house because, had Mr.
Dooley done so, it would have been “scientifically impossible for the pipes
to freeze.” (D.M.S.J. at 21) The Court does not accept such an
oversimplified conclusion, which ignores even Defendant’s expert Frederic
Blum’s comment that, when the heat is on, an avenue of cold outside air can
still cause local freezing that affects pipes in a limited area. (Blum Rpt.
at 7) Neither party seems to have inspected whether there were limited areas
within Plaintiffs’ fifty-year old house, specifically the second floor
bathroom in which all three pipes burst, that could fall below freezing even
with the thermostats on low (Blum writes merely that no such avenue of cold
air was found or reported). Nobody addresses the quality of the insulation
in the house. Simply put, pipes can freeze even in an otherwise heated home
based on the location of the pipes, the insulation of the pipes, and the
insulation of the home in general. Defendant’s “scientifically impossible”
conclusion goes too far.
Court will deny Defendant’s motion for summary judgment as to
Plaintiffs’ breach of contract and declaratory judgment claims.
D. Plaintiffs’ Bad Faith Claim
Since Plaintiffs have not presented sufficient evidence
from which a jury could find that Defendant acted in bad faith
when it denied Plaintiffs’ insurance claim, the Court will grant
Defendant’s motion for summary judgment as to Count II of
The Supreme Court of New Jersey has recognized an insured’s
cause of action against an insurer for the bad-faith failure to
pay the insured’s claim.
Pickett v. Lloyd’s, 131 N.J. 457, 470
The Pickett court stated that, “[t]o show a claim for
bad faith, a plaintiff must show the absence of a reasonable
basis for denying benefits of the policy and the defendant’s
knowledge or reckless disregard of the lack of a reasonable
basis for denying the claim.”
“If a claim is ‘fairly
debatable,’ no liability in tort will arise.”
Id. at 473.
Explaining how the “fairly debatable” standard operates in
the context of the denial of benefits on the basis of noncoverage, the Pickett court stated that “a claimant who could
not have established as a matter of law a right to summary
judgment on the substantive claim would not be entitled to
assert a claim for an insurer’s bad-faith refusal to pay the
As a result, when a plaintiff brings a bad faith
cause of action, courts must determine whether there are any
genuine issues of material fact that would preclude summary
judgment in plaintiff’s favor on the underlying claim for
“If factual issues exist as to the underlying claim
(i.e., questions of fact as to whether plaintiff is entitled to
insurance benefits-plaintiff's first cause of action), the Court
must dismiss plaintiff's second cause of action-the ‘bad faith’
Tarsio v. Provident Ins. Co., 108 F. Supp. 2d 397, 401
Here, as detailed above, there is a genuine dispute of
material fact as to whether Mr. Dooley left the thermostats on
before he and Mrs. Dooley departed their house on December 12,
This dispute would preclude the Court from granting
summary judgment in Plaintiffs’ favor on their underlying claim
The Court will therefore grant Defendant’s motion
for summary judgment as to Plaintiffs’ bad faith claim.
For the reasons stated above, the Court will deny
Defendant’s motion for summary judgment as to Counts I and III
of the Complaint.
The Court will grant Defendant’s motion as to
Count II of the Complaint.
An appropriate Order accompanies
DATE: February 18, 2015
s/ Joseph E. Irenas
Joseph E. Irenas, S.U.S.D.J.
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