HOWARD BERGER CO., LLC v. LIBERTY MUTUAL FIRE INSURANCE
OPINION. Signed by Judge Noel L. Hillman on 5/23/2017. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HOWARD BERGER CO., LLC,
LIBERTY MUTUAL FIRE
KIMBERLY PELKEY SDEO
PAUL J. MASELLI
SHAWN DAVID EDWARDS
MASELLI WARREN PC
600 ALEXANDER ROAD
PRINCETON, NJ 08540
JOSHUA L. MALLIN
WEG AND MYERS, P.C.
52 DUANE STREET, SECOND FLOOR
NEW YORK, NEW YORK 10007
On behalf of Plaintiff
CHRISTOPHER S. FINAZZO
FINAZZO COSSOLINI O'LEARY MEOLA & HAGER, LLC
67 EAST PARK PLACE
MORRISTOWN, NJ 07960
On behalf of Defendant
HILLMAN, District Judge
This matter concerns whether an electrical outage at
Plaintiff’s business caused by Superstorm Sandy is covered under
an insurance policy issued by Defendant.
Presently before the
Court is the motion of Defendant for summary judgment on
Plaintiff’s claim that Defendant breached the parties’ insurance
contract by not indemnifying Plaintiff for its covered losses.
For the reasons expressed below, Defendant’s motion will be
Defendant Liberty Mutual Fire Insurance Company issued an
All Risk Policy of Insurance, effective August 1, 2012 through
August 1, 2013, to Plaintiff Howard Berger Co., LCC, 1 and that
policy was in effect on October 29, 2012 when Superstorm Sandy
impacted the Cranbury, New Jersey area where Plaintiff is
The storm caused Plaintiff to be without electrical
power, supplied by Jersey Central Power & Light Company, from
October 29, 2012 until November 4, 2012.
Electricity is produced at the electric company’s
generating plant, which transmits high-voltage electric power
downstream through transmission lines to transmission
substations and then to distribution substations that connect
the electricity to customers.
The Cranbury substation delivers
electricity to Plaintiff on Circuit 4783.
Plaintiff develops, markets and distributes security and
builder’s hardware, plumbing products, paint applicators and
home environment products to leading retailers, discount stores,
home centers, wholesalers, drug and food chains, catalog
companies, municipalities, and hardware stores worldwide.
substation receives electricity from the D82 transmission line.
The D82 transmission line is supported by utility poles,
including a 65’ wooden pole which broke as a result of Sandy’s
That failure of the D82 transmission line caused
the Cranbury substation to de-energize, and become unable to
provide electricity to Circuit 4783 which supplied Plaintiff
with its electricity.
The distribution line that directly
provided electricity to Plaintiff was also impacted by the
As a result, Plaintiff claims that it suffered business
income losses in excess of $1,900,000.00.
Plaintiff submitted a
claim to Defendant detailing its losses and costs associated
with the damages it suffered, but Defendant denied Plaintiff’s
claim on the basis that the electric service was interrupted due
to the failure of overhead transmission and distribution lines,
which is a non-covered cause of loss of utilities under the
Plaintiff filed a one-count breach of contact complaint
against Defendant, claiming that its damages are covered losses
under the policy.
Defendant has moved for summary judgment in
its favor, taking the same position as its claim denial.
Plaintiff has opposed Defendant’s motion.
Subject matter jurisdiction
This Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1332 because there is complete diversity of citizenship
between the parties and the amount in controversy exceeds
The citizenship of the parties is as follows:
Plaintiff’s sole member is also an LLC, Main, LLC (“Main”).
Main’s members are four corporations and an LLC, Walker Lake
Accounting for each of the members of the sole
member of Plaintiff LLC, including the corporations and the
members of Walker Lake, Plaintiff is a citizen of New York, New
Jersey, Delaware, and Connecticut. (Docket No. 45).
is a corporation duly organized and existing under and by virtue
of the laws of Wisconsin, having its principal place of business
Standard for Summary Judgment
Summary judgment is appropriate where the Court is
satisfied that the materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations, admissions, or
interrogatory answers, demonstrate 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.
Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(a).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
A fact is “material” if, under the governing
substantive law, a dispute about the fact might affect the
outcome of the suit.
In considering a motion for summary
judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
instead, the non-moving party's evidence “is to be believed and
all justifiable inferences are to be drawn in his favor.”
Marino v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir.
2004)(quoting Anderson, 477 U.S. at 255).
Initially, the moving party has the burden of demonstrating
the absence of a genuine issue of material fact.
v. Catrett, 477 U.S. 317, 323 (1986).
Once the moving party has
met this burden, the nonmoving party must identify, by
affidavits or otherwise, specific facts showing that there is a
genuine issue for trial.
Thus, to withstand a properly
supported motion for summary judgment, the nonmoving party must
identify specific facts and affirmative evidence that contradict
those offered by the moving party.
Anderson, 477 U.S. at 256-
A party opposing summary judgment must do more than just
rest upon mere allegations, general denials, or vague
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir.
The Third Circuit has summarized New Jersey law governing
the interpretation of insurance contracts:
Generally, “when interpreting an insurance policy, courts
should give the policy's words their plain, ordinary
meaning.” Nav–Its, Inc. v. Selective Ins. Co. of Am., 183
N.J. 110, 869 A.2d 929, 933 (2005) (internal quotation
marks and citation omitted). “If the policy language is
clear, the policy should be interpreted as written,
[but][i]f the policy is ambiguous, the policy will be
construed in favor of the insured.” Id. (internal
citations omitted). Exclusions in an insurance policy
should be narrowly construed. Id. at 934 (citing Princeton
Ins. Co. v. Chunmuang, 151 N.J. 80, 698 A.2d 9, 16 (1997)).
The insurer has the burden of bringing the claim within the
exclusion. Princeton Ins., 698 A.2d at 16–17. Nonetheless,
“exclusions are presumptively valid and will be given
effect if ‘specific, plain, clear, prominent, and not
contrary to public policy.’” Id. at 17 (quoting Doto v.
Russo, 140 N.J. 544, 659 A.2d 1371, 1378 (1995)); see also
Am. Motorists Ins. Co. v. L–C -A Sales Co., 155 N.J. 29,
713 A.2d 1007, 1013–14 (1998) (finding that a policy
exclusion precluded coverage because it was “clear and
unambiguous” and not contrary to public policy). New
Jersey courts also “endeavor to interpret insurance
contracts to accord with the objectively reasonable
expectations of the insured.” See Nav–Its, 869 A.2d at 934
(internal quotation marks and citation omitted). The New
Jersey Supreme Court has “recognized the importance of
construing contracts of insurance to reflect the reasonable
expectations of the insured in the face of ambiguous
language and phrasing, and in exceptional circumstances,
when the literal meaning of the policy is plain.” See id.
(internal citations omitted).
Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231,
236 (3d Cir. 2006).
Thus, the starting point for the analysis of Plaintiff’s
breach of contract claim is the relevant policy language.
C. If coverage for loss of business income is provided as shown in B. Coverages of the
DECLARATIONS, Form RM1000, we will pay for:
1. The actual loss of business income you incur during a period of restoration resulting
from damage from a peril insured against to the type of property covered by this policy at a
8. We will not pay for:
a. Any loss during any idle period. Idle period includes, but is not limited to, any period
when production, operation or service would cease or be prevented due to:
(1) physical damage not insured under this policy on or away from the covered location;
(2) planned or rescheduled shutdown or maintenance;
(3) strikes or other work stoppage; or
(4) any reason other than a covered loss
A. GROUP A EXCLUSIONS
We will not pay for loss or damage caused by or resulting from any of the following,
regardless of any other cause or event, including a peril insured against, that contributes to
the loss at the same time or in any other sequence:
9. Interference with or interruption of any public or private utility or any entity providing
electrical, heating, air conditioning, refrigeration, telecommunication, steam, water, sewer or
fuel service or any other service, if the failure occurs away from the covered location.
If a covered loss ensues, we will pay for that loss.
INTERRUPTION OF SERVICES COVERAGE EXTENSION, modifying
EXTENSIONS OF COVERAGE, Form RM1002 EXCLUSIONS, Form RM1003
1. We will pay for physical loss or damage to covered property, loss of business income
and extra expense resulting from an interruption of the electrical, heating, air conditioning,
refrigeration, telecommunication, steam, water, sewer or fuel service to a location shown on
the Schedule of this endorsement, but only if the interruption of service results:
A. From physical damage by a peril insured against;
B. Away from a location shown on the Schedule of this endorsement;
C. To the following, if marked with an “X”, that directly supply service to the location shown
on the Schedule of this endorsement and are either owned, managed or controlled by a
company with a contract to supply these services to that location, or are located within one
(1) mile of that location:
(1) (X) Any electrical generating plant, substation, power switching station, transformer, gas
compressor station, telephone switching facility, water or sewer treatment plant or any other
plant or facility responsible for providing services specified in 1. above;
(2) (X) Transmission and distribution lines, connections or supply pipes which furnish
electricity, steam, gas, refrigeration, telecommunication, water or sewer (other than overhead
transmission and distribution lines);
(3) ( ) Overhead transmission and distribution lines.
2. We will not pay for any physical loss or damage to covered property, loss of business
income or extra expense due to any interruption of service from:
A. A satellite, regardless of cause; or
B. The operation of any breaker, switch, device or system designed to preserve or protect any
property or system integrity; or
C. Any misalignment, miscalibration, tripping off-line, or any condition which can be
corrected by resetting, tightening, adjusting, cleaning, or the performance of maintenance.
(Docket No. 32-1 at 12-14.)
Defendant argues that the unchecked box for “(3) ( )
Overhead transmission and distribution lines” in the
INTERRUPTION OF SERVICES COVERAGE EXTENSION section precludes
coverage for loss of business income due to an interruption of
Plaintiff’s electrical service.
The basis for this
determination is that the cause of Plaintiff’s outage was due to
damage to the overhead distribution line that directly supplied
power to Plaintiff, or damage to the wooden pole which is part
of the overhead transmission line that permitted wires to become
dislocated, resulting in a fault that caused a breaker upstream
to de-energize the transmission line.
Defendant argues that
damages arising from either cause are not covered because
Plaintiff did not elect to purchase coverage for physical damage
to “overhead transmission and distribution lines.” 2
In response, Plaintiff argues that the damage to the pole
supporting the transmission line caused the power outage, and
Defendant also argues that Plaintiff’s claim is not covered
under the “Idle Period Clause.” The Court does not need to
address that argument.
that the pole can be considered a “plant,” which is covered
under “(1) (X) Any electrical generating plant . . . or any
other plant or facility responsible for providing the services .
. . .”
Plaintiff has provided an expert to support its position
that damage to the D82 transmission line pole caused Plaintiff’s
Plaintiff’s expert also views the “plant utility
pole” to be “any other plant or facility responsible for
providing the services.”
The expert takes this view because in
the electrical industry, the term “plant” is broad and
encompasses substations, transformers, circuit breakers,
structures, and supporting poles, which provide a critical
function as part of the system that provides electrical power
The Court accepts for the purposes of Defendant’s motion
that the cause of Plaintiff’s power outage was the damaged D82
transmission line pole, as Plaintiff’s expert determined.
Court also accepts Plaintiff’s expert’s view that the term
“plant” is used broadly in the industry and can encompass many
components of the electric supply system.
Even accepting these
views as true, the Court must interpret the insurance policy as
a matter of law in a manner that comports with the literal
meaning of the policy language. 3
When doing so, the Court finds
See Boddy v. Cigna Property & Cas. Companies, 760 A.2d 823, 828
(N.J. Super. Ct. App. Div. 2000) (“It is well-established that
that Plaintiff’s argument that the utility pole supporting the
transmission line constitutes an “electrical generating plant .
. . or any other plant” strains the policy beyond its plain and
An “overhead” electric power line of a certain length
requires support to ensure that the line remains over-head. 4
It cannot float in the air like a magic carpet.
The wooden pole
supporting the D82 transmission line serves as that support. 5
Even accepting that the pole functions more than simply a
support girder and provides a critical part of the system that
provides electrical power, it cannot be considered a “plant”
under the parties’ insurance policy.
If the pole were
considered to be a plant, then all overhead transmission lines
supported by similar poles would subsume the insurance policy’s
expert witnesses simply may not render opinions on matters which
involve a question of the law . . . [O]nce the trial court
correctly determined that the interpretation of the contract
language was a legal matter, [the court] was obligated to
disregard the expert's opinion concerning its interpretation.”
(internal quotations and citations omitted)).
See, e.g., N.J.A.C. 16:25-10.3(c), Location and alignment of
overhead power and communication lines (“The distance between
utility poles should be the longest feasible span length
consistent with geometric and design line loading
See N.J.A.C. 16:25–2.1, Utility Accommodation, Definitions
(“‘Wooden pole’ means the stem of a tree which has the proper
natural characteristics to meet the engineering and design
standards to support a utility line; and has been harvested,
shaped, treated, and certified to meet that need.”).
specific carve-out of coverage for “overhead transmission and
Moreover, classifying a wooden pole to be a “plant” would
render the definition of a “transmission line” nonsensical.
New Jersey Administrative Code defines “transmission line” as:
“Transmission line” means an electrical line, wire, or
cable, (including the supporting structures) and
appurtenant facilities that transmits electricity from a
generating plant to electric substations or switching
stations. An electric transmission line usually has a
rating exceeding 69 kilovolts.
N.J.A.C. 14:5-1.2, Board of Public Utilities, Electric Service,
The supporting structure – the wooden pole – is
part of a line that transmits electricity from a generating
plant to a substation or switching station.
It would not make
any sense to interpret the definition of “transmission line” to
read that a “plant” transmits electricity from a plant.
same interpretation holds true for the terms in the insurance
Plaintiff argues that an insured would not understand the
technical definitions provided by the N.J. Administrative Code
when reading the insurance policy, and, consequently, such
definitions should not be considered in interpreting the policy
In that same vein, however, an insured would also not
understand that a wooden pole can also constitute a “plant” as
articulated by Plaintiff’s expert.
Returning to the plain language of the policy, it is clear
that the insured had three options for covering its loss of
business income and extra expenses resulting from an
interruption of the electrical service: physical damage to (1)
“Any electrical generating plant, substation, power switching
station, transformer . . . or any other plant or facility
responsible for providing services . . .”; (2) “Transmission and
distribution lines, connections or supply pipes which furnish
electricity . . . other than overhead transmission and
distribution lines”; and (3) “Overhead transmission and
Plaintiff chose the first two options.
Plaintiff’s damages were caused by the third option it did not
Although insurance policies should be construed in favor of
the insured, courts “‘should not write for the insured a better
policy of insurance than the one purchased.’”
Boddy v. Cigna
Property & Cas. Companies, 760 A.2d 823, 828 (N.J. Super. Ct.
App. Div. 2000) (quoting Walker Rogge, Inc. v. Chelsea Title &
Guar. Co., 116 N.J. 517, 529, 562 A.2d 208 (1989)).
although courts “should not ignore an exclusion's clear meaning,
if there is another fair interpretation, the court must construe
the insurance policy in favor of coverage and against the
insurer, adopting the interpretation supporting coverage.”
This does not mean, however, “that any far12
fetched interpretation of a policy will be sufficient to create
an ambiguity requiring coverage.”
Id. (citation omitted).
Here, the classification of the wooden pole that supported
the D82 transmission line as a “plant” rather than an “overhead
transmission line” is far-fetched based on the plain language of
the insurance policy.
Accordingly, because Plaintiff’s damages
were caused by an event excluded from coverage, Plaintiff is not
entitled to indemnification of those losses under the parties’
For the reasons expressed above, Defendant’s motion for
summary judgment in its favor on Plaintiff’s breach of contract
claim must be granted.
An appropriate Order will be entered.
Date: May 23, 2017
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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