BCB BANCORP, INC. et al v. PROGRESSIVE CASUALTY INSURANCE COMPANY et al
OPINION. Signed by Judge John Michael Vazquez on 9/18/17. (sr, )
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
BCB BANCORP, INC., et al,
Civil Action No. 13-1261
CO., et al,
John Michael Vazguezg U.S.D.J.
The matter comes before the Court on Plaintiffs’ motion for partial summary judgment
(D.E. 119), and Defendant Progressive Casualty Insurance Co.’s (“Progressive” or “Defendant”)
cross-motion for summary judgment (D.E. 120).’
Plaintiffs2 and Defendant each oppose the
other’s motion. D.E. 122, 123. The Court reviewed all submissions, and considered the motions
without oral argument pursuant to fed. R. Civ. P. 78(b) and L. Civ. R. 78.1(b). for the reasons
that follow, Plaintiffs’ motion is GRANTED, and Defendant’s motion is DENIED.
11n this Opinion Plaintiffs’ brief in support of its motion (D.E. 119) will be referred to as “P1.
Br.” Defendants’ brief in support of its motion (D.E. 120) will be referred to as “Def. Br.”
Plaintiffs’ brief in opposition (D.E. 122) will be referred to as “P1. Opp.” Defendants’ reply brief
(D.E. 123) will be referred to as “Def. Rep.” The Court has reviewed all filings. The substantive
arguments in both the motion and the cross-motion are nearly identical. As a result, unless
necessary, the Opinion often cites to P1. Brf. although the same issue was raised in Def. Br.
Plaintiffs include BCB Bancorp, Inc. (“BCB”) and former directors and officers at Pamrapo
Bancorp, Inc. (the “Individual Directors”).
This insurance dispute stems from a corporate merger between two banks, BCB and
Pamrapo Bancorp, Inc. (“Pamrapo”), who is not a party. As will be discussed, Plaintiffs were all
named as defendants in a New Jersey state court shareholder class action that led to the instant
insurance coverage litigation. The underlying matter stemmed from the merger of Pamrapo and
Prior to the merger, Pamrapo had a “claims-made”3 directors and officers liability
insurance policy (the “Policy”) with Progressive covering the period from June 15, 2009 through
June 1, 2010 (the “Policy Period”). Plaintiffs’ Statement of Material Facts (“Plfs’ $OMf”) ¶J 17,
21. The “Company,” according to the terms of the Policy, was comprised of four Pamrapo entities.
¶ 24. All of Pamrapo’s officers and directors, including the individual director Plaintiffs
(“Individual Directors”) here, were “Insured Person[sJ” as defined in the Policy.4 Id.
Pursuant to the Policy, Progressive was to provide coverage for a loss resulting from claims made
during the Policy Period against the insured.5 Progressive was obligated to cover loss that “the
A “claims made” policy is different than an “occurrence” policy. See Zuckerman v. National
Union fire Ins. Co., 100 N.J. 304, 310 (1985). In the former, timely notification to the insurance
company by the insured of the claim is part and parcel of the policy itself. Id.. at 324 (“[T]he
event that invokes coverage under a ‘claims made’ policy is transmittal of notice of the claim to
the insurance carrier.”). In an occurrence policy, by comparison, insurance covers pertinent
events that occur while the policy is in effect even if the insured does not learn of the claim until
afier the policy has expired.
“Insured Person” included “any past, present or future director, member of the board of trustees,
officer, [or] Employee.” Declaration of Michael S. Steinberg (“Steinberg Decl.”) Ex. 1 at PlC
“Loss” is defined as “defense costs and any which the Insured is legally obligated to pay resulting
from a Claim, including damages, judgment, settlements, and pre- and post-judgement interest.”
Company has agreed to or is legally permitted or required by law to indemnify the Insured
Nevertheless, under the “Other Insurance or Indemnification” provision, Progressive’s
coverage was to be excess coverage if there was any other non-excess insurance available or if an
insured was entitled to indemnification from “any entity other than the Company.” Id.
¶ 22. The
provision provided as follows:
This Policy shall not be subject to the terms of any other insurance.
All Loss, including Defense Costs, payable under this Policy shall
be excess to:
(1) any other existing insurance regardless of whether
collectable, including but not limited to, any insurance under
there is a duty to defend, unless such other insurance is
written only as specific excess insurance over the Limits of
Liability providing by this Policy; and
(2) indemnification to which an Insured is entitled from any
entity other than the Company.
Progressive’s Statement of Material Facts Not in Dispute (“Progressive’s SOMF”)
Although the Policy included a section entitled “Mergers and Acquisitions,” it is not
applicable to this dispute as it addressed coverage for additional employees that Pamrapo may
have acquired through a merger or acquisition during the Policy Period. Plfs’ SOMF
¶ 26. Here,
the merger between Pamrapo and BCB occurred after the Policy Period. Significantly, however,
the Policy does not expressly exclude coverage for the surviving entity of a merger that occurred
outside of the Policy Period.
Steinberg Decl. Ex. 1 at PIC-00294. “Claim” includes “a civil proceeding commenced by the
service of a complaint.” Id. at 6.
On June 30, 2009, Pamrapo and BCB announced that they had signed a merger agreement
(“Merger Agreement”) pursuant to which Pamrapo would merge into BCB. Id.
was consummated on July 6, 2010 after final shareholder and board approval. As set forth the in
the Merger Agreement, Pamrapo was merged with and into BCB; thus, BCB was the surviving
entity. Id. ¶9. The merger was effected “in accordance with the New Jersey Business Corporation
Act (“NJBCA”),” and the entities agreed that the merger “shall have the effects set forth in the
In addition, the Merger Agreement provided that BCB “shall indemnify and hold harmless”
Pamrapo’s employees, including its officers and directors, as to defined claims6 to the fullest extent
that the employees would have been entitled to under Pamrapo’s Certificate of Incorporation,
bylaws, or certain disclosed agreements. Id.
Pamrapo’s Certificate of Incorporation, in turn,
provided that Pamrapo would indemnify its officers and directors to the fullest extent authorized
by the NJBCA. Steinberg Decl. Ex. 13, Art. 10. Specifically, the Certificate of Incorporation
stated as follows:
Each person who was or is made a party or is threatened to be a
made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a “proceeding”), by reason of the fact that he or she is
shall be indemnified and held
or was a director or an officer
harmless by the Corporation to the fullest extent authorized by the
New Jersey Business Corporation Act.
The parties do not dispute that the underlying shareholder class action qualified as a claim
under BCB’s indemnification provision.
Schedule 3.37 of Pamrapo’s Disclosure Schedule for the merger recognizes that Parnrapo’s
directors were involved in the class action suit and that these claims were subject to coverage under
the Policy. Declaration of Jennine Disomma (“Disomma Decl.”) Ex. 8, Sched. 3.37.
The Underlying Class Action Litigation
Shortly after the merger was announced, two Pamrapo shareholders filed separate
shareholder derivative class action suits in New Jersey state court against Pamrapo, the Individual
Directors, and BCB. Plfs’ $OMF
6. The suits sought to enjoin the merger and sought other
relief. Id. The first, the Kube matter, was filed on July 9, 2009. The second, the Shaev matter,
was filed on July 24, 2009. Progressive’s $OMF
The matters were consolidated, and
the class action plaintiffs filed a single amended complaint, alleging claims for breach of fiduciary
duty against the Pamrapo directors and claims for aiding and abetting the breach of fiduciary duty
against BCB and Pamrapo. Plfs’ SOMF ¶ 7-8. The class action plaintiffs filed a second amended
complaint almost a year after the merger closed, but after summary judgment, only the direct
claims against the Individual Directors and the aiding and abetting claim as to BCB survived. Id.
13-15. On December 23, 2014, the remaining parties entered into a stipulation of settlement
that was ultimately approved by the state judge on September 21, 2015. Id.
The Coverage Dispute
Pamrapo notified Progressive of the shareholder class action by letter on August 21, 2009,
seeking coverage for defense costs for the individual directors and the bank. Id.
December 4, 2009, Progressive acknowledged coverage for the shareholder action and reserved
its rights under the Policy. Id.
30. Specifically, Progressive recognized that the class action
qualified as a claim made within the Policy Period and that the Individual Directors and Pamrapo
may be entitled to coverage. Id.
¶J 3 1-32.
Progressive agreed to advance “defense costs” incurred
on behalf of Pamrapo and its directors, subject to its reservation of rights, and after Pamrapo
exhausted its Sl25,000 retention. Id.
In addition, Progressive acknowledged potential
coverage for Pamrapo to the extent that it was required to indemnify the Individual Directors, but
also indicated that the directors may be entitled to indemnification from another source, which
would trigger the “Other Insurance or Indemnification Provision.” Progressive’s SOMf
Pamrapo indemnified the Individual Directors by paying their legal fees in connection with
the shareholder litigation until June 6, 2010, when the merger closed. Plfs’ SOMf
¶J 36-37. In
so doing, Pamrapo first satisfied the $125,000 retention required under the Policy. Id.
Progressive seems to believe that it did not have a duty to defend at this point. It claimed that
Pamrapo, instead, had the duty to defend claims under the Policy. Progressive’s $OMF
However, subject to its reservation of rights, Progressive reimbursed Parnrapo for a portion of the
following the merger. Plfs’ SOMf
¶ 33-34. Progressive made this partial payment to BCB
¶ 49. Progressive Statement in Response to Plaintiffs’
Statement of Undisputed Material Facts ¶ 49.
Through a. letter dated July 30, 2009, however, Progressive informed BCB that its
indemnification coverage post-merger, was now “excess of [BCB’sJ indemnification obligation”
and formally disclaimed coverage. Plfs’ SOMF ¶ 39-41. Progressive claimed that the Individual
Directors were now entitled to indemnification from BCB, pursuant to the Merger Agreement, and
such indemnification triggered the “Other Insurance and Indemnification” provision of the Policy.
BCB demanded payment from Progressive for defense costs incurred on behalf of the Individual
Directors post-merger; Progressive refused to pay. Id.
¶f 45-46. Consequently, BCB has paid for
the post-merger defense costs related to the Individual Directors in the shareholder litigation. Id.
II. PROCEDURAL HISTORY
Plaintiffs initially filed this matter in New Jersey state court, and it was removed to this
Court in March 2013. D.E.1. Plaintiffs thereafter filed a First Amended Complaint on December
8, 2014, D.E. 59, to which Progressive filed an Answer, D.E. 90. As pertinent to the current
motion, Plaintiffs made three claims against Progressive: declaratory judgment, breach of contract,
and breach of the covenant of good faith and fair dealing. D.E. 59.
Concerning the declaratory
judgment claim, Plaintiffs seek a declaration of the rights and duties of Progressive under the
Policy regarding coverage for the shareholder action. Id.
Plaintiffs filed the current motion seeking summary judgment as to their declaratory
judgment claim. Plaintiffs specifically seek a declaration that BCB has the right to reimbursement
from Progressive under the Pamrapo Policy for BCB’s post-merger defense costs vis-ã-vis the
Independent Directors. Relatedly, Plaintiffs seek a declaration that they are not barred from
reimbursement by the “Other Insurance or Indemnification” provision of the Policy. Because this
underlying dispute involves a merger pursuant to the NJBCA, Plaintiffs contend that BCB, as the
surviving entity, obtained all of the contractual rights and liabilities of Pamrapo. Plaintiffs argue
that, therefore, it follows that BCB retained Pamrapo’s Policy rights with Progressive, including
Pamrapo’s right to reimbursement. See generally P1. Br., D.E. 119.
BCB also incurred its own costs related to the shareholder litigation because it was a named
defendant. BCB had its own “claims-made” policy with Colonial American at the time of the
merger. As a result, BCB brought coverage claims against Colonial America in this instant
litigation regarding the reimbursement of its own defense costs but these claims were settled in
2015. Consequently, those costs are no longer at issue.
Progressive filed a cross-motion for summary judgment as to all three counts. Progressive
alleges that because BCB8 is not a “Company” under the Policy, Progressive is not required to
reimburse BCB for any post-merger defense costs. Progressive further asserts that the “Other
Insurance or Indemnification” provision also bars the reimbursement sought by BCB.
generally Def. Br., D.E. 120.
III. SUMMARY JUDGMENT STANDARD
A moving party is entitled to summary judgment where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
fed. R. Civ. P. 56(a). A fact in dispute is material when it “might affect the outcome of the suit
under the governing law” and is genuine “if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 24$ (1986).
Disputes over irrelevant or unnecessary facts will not preclude granting a motion for summary
judgment. Id. “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 nonmoving
party’s evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor.”
Marino v. Indus. Crating Co., 358 f.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at
255)). A court’s role in deciding a motion for summary judgment is not to evaluate the evidence
and decide the truth of the matter but rather “to determine whether there is a genuine issue for
trial.” Anderson, 477 U.S. at 249.
Throughout its papers, Progressive continually refers to BCB as the “Uninsured Entity.” Of
course, the very issue before the Court is whether BCB is entitled to reimbursement pursuant to
the terms of Pamrapo’s Policy with Progressive. The Court guesses that that Progressive
believed that use of such a label Uninsured Entity was somehow beneficial or persuasive.
Given the central issue in the case, the Court finds it to be presumptuous at best.
A party moving for summary judgment has the initial burden of showing the basis for its
motion and must demonstrate that there is an absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). After the moving party adequately supports its motion,
the burden shifts to the nonmoving party to “go beyond the pleadings and by [his] own affidavits,
or by the depositions, answers to interrogatories, and admissions on file, designate specific facts
showing that there is a genuine issue for trial.” Id. at 324 (internal quotation marks omitted). To
withstand a properly supported motion for summary judgment, the nonmoving party must identify
specific facts and affirmative evidence that contradict the moving party. Anderson, 477 U.S. at
250. “[I]f the non-movant’s evidence is merely ‘colorable’ or is ‘not significantly probative,’ the
court may grant summary judgment.” Messa v. Omaha Prop. & Cas. Ins. Co., 122 F. Supp. 2d
523, 528 (D.N.J. 2000) (quoting Anderson, 477 U.S. at 249-50)).
Ultimately, there is “no genuine issue as to any material fact” if a party “fails to make a
showing sufficient to establish the existence of an element essential to that party’s case.” Celotex
Corp., 477 U.S. at 322. “If reasonable minds could differ as to the import of the evidence,”
however, summary judgment is not appropriate. See Anderson, 477 U.S. at 250-5 1.
The parties do not dispute that Pamrapo had a valid, “claims made” Policy with
Progressive. Nor do they dispute that Pamrapo filed a timely claim and that it was entitled to
coverage under the Policy. The parties, moreover, do not dispute that the Pamrapo and BCB
merger was effected in accordance with the NJBCA, which has been referred to as a “statutory”
Under the NJBCA, the surviving corporation of a merger in essence steps into the shoes of
the merged entity for purposes of the merged entity’s rights and liabilities.
surviving company “possess[es] all the rights, privileges, powers, [and] immunities.
the merging or consolidating corporations.” N.J.S.A.
of each of
§ 14A:lO-6(c). In addition, the surviving
corporation “shall be liable for all the obligations and liabilities of each of the corporations so
§ 14A:10-6(e). In short, the surviving company takes the good and the bad, i.e. the
right and liabilities, of the entity that merged with it. Thus, all real and personal property of the
merged entity is automatically vested in the surviving company and the merged entity ceases to
§ 14A:10-6(b); (d). Pamrapo’s rights and liabilities, therefore, became BCB’s rights
and liabilities as a result of the merger. See, e.g., DBA Distribution Servs., Inc. v. All Source
freight Sols., Inc., No. 11-3901, 2012 WL $45929, at *4 (D.N.J. Mar. 13, 2012) (act of merger
caused transfer of agreement to surviving entity by operation of law); NovaSeptum AB v. Amesil,
Inc., No. 05-5175, 2010 WL 5620906, at *2 n.2 (D.N.J. Dec. 29, 2010) (finding that surviving
entity had standing to enforce consent order of merged entity); see also Tordella v. Infoshare, Inc.,
No. A-l038-13T2, 2014 WL 884467$, at *8 (N.J. App. Div. May 19, 2015) (stating that in a
statutory merger “all of the liabilities of a former corporation attach to the surviving corporation”).
The NJBCA does not exclude insurance policies of the entity that merged into the surviving
entity. See fed. Ins. Co. ex rel Associated Aviation Undenvriters v. Purex Indus., Inc., 972 F.
Supp. 872, $90 (D.N.J. 1997) (“Assuming for the sake of argument, however, that Purex is the
surviving corporation of a merger transaction, it is true as a matter of law that the insurance policy
previously owned by Airwork would have transferred to Purex along with the other assets involved
in the transaction, absent a specific provision in the policy to the contrary.”); Brunswick Coip. v.
St. Paul fire & Marine ins. Co., 509 F. Supp. 750, 752-53 (E.D. Pa. 1981) (concluding that under
substantially similar law, the surviving company “simply stands in the same position as that
occupied by the merger corporation prior to the merger” despite the existence of a general anti-
assignment clause in insurance policy). Therefore, by operation of law, Pamrapo’s Policy from
Progressive was transferred to BCB when the statutory merger was consummated.
Progressive ignores this clear statutory construct by arguing that it is not required to
reimburse the Individual Directors post-merger because BCB is not the “Company” as defined by
the Policy. P1. Br. at 16. But the fact that BCB is not encompassed by the definition of Company
under the Policy is overcome by the legal effect of the NJBCA. As recognized by Progressive,
Pamrapo’s Policy required Progressive to reimburse Pamrapo for defense costs that its Individual
Directors incurred in the shareholder litigation. Plfs’ SOMF
¶J 30-34; Progressive Statement in
Response to Plaintiffs’ Statement of Undisputed Material Facts
¶ 49. Through the statutory
merger, the Policy and the rights under the Policy transferred to BCB such that BCB is now
effectively the insured. N.J. S.A.
§ 1 4A: 10-6. At a minimum, BCB is entitled to the same coverage
that Pamrapo was entitled to under the Policy. Therefore, as was the case before the merger,
Progressive, after the merger, was obligated to cover defense costs for the Individual Directors.
Progressive, for the most part, does not address the NJBCA or its legal effect. Instead, it
discusses many of the Policy’s provisions, including the anti-assignment provision. As noted, the
anti-assignment provision concerned assignments during the Policy Period and was silent as to
those that occurred later. While not binding on this Court, Lime Tree Associates, LLC v. Burlington
Insurance Company, is instructive on this issue. No. 13-6017, 2014 WL 6685414 (D.N.J. Nov.
In Lime Tree, Burlington Insurance Company (“Burlington”) issued Lime Tree Associates
a general liability insurance policy. During the policy period, Lime Tree Associates filed a claim
for coverage after an event occurred on its property. Id. at *1. After the policy expired, Lime Tree
Associates merged into Lime Tree LLC pursuant to the New Jersey Uniform Partnership Act
(“NJUPA”). Id. at *2. Much like Progressive here, Burlington denied coverage to Lime Tree LLC
afler the merger because Lime Tree LLC did not meet the definition of insured under the insurance
policy. Burlington argued that despite the effect of the statutory merger, the policy language
controlled coverage. Id. at *3• In support of its argument, Burlington relied upon two provisions
in the policy: the anti-assignment clause and the new entities exclusion. Id. The former prevented
the insured from assigning its rights under the policy without Burlington’s written consent; the
latter excluded coverage, in certain circumstances, for the insured if the insured formed a new
Judge Hayden rejected Burlington’s argument, relying on the reasoning of Furex Indus.,
Inc., DBA Distribution Servs., Inc., and Segat v. Greater Valley Terminal Corp., 83 N.J. Super.
120 (App. Div. 1964), among others. Id. at *46. First, she recognized that in a statutory merger
under the NJUPA, the surviving entity is automatically vested with all property and debts of the
merged business entities. Id. at *4 Next, Judge Hayden concluded that in order to prevent such
a statutory transfer of rights there must be explicit contractual language preventing the transfer.
See Id. at *3 (“[T]he exclusionary language must have anticipated such a transfer and purposefully
prevented it.”). Burlington’s policy with Lime Tree Associates did not contain the necessary
exclusionary language. A general anti-assignment clause did not suffice. Id. at *5 Moreover, the
new entity exclusion did not apply because the new entity, Lime Tree LLC, was merely “a
continuation of Lime Tree Associates[,]” the insured. Id. Consequently, because the Lime Tree
merger caused all rights and benefits under the policy to be transferred to Lime Tree LLC,
Burlington could not disclaim coverage. Id. at *4•
Judge Hayden also discussed the purpose of an anti-assignment provision: “The rationale
for no assignment clauses is simple and pragmatic: the clause protects insurers from the unforeseen
risks by requiring the insurer’s approval prior to transfer.” Id. at *6. Judge Hayden found,
however, that “the need for such protection abates entirely when the transfer or assignment occurs
after the event giving rise to coverage because by that time the risk is no longer unforeseen.” Id.
(emphasis added) (citing Purex, 972 F. Supp. at 889; 3 Couch on Insurance § 35.8). Finally, Judge
Hayden determined that her ruling was in accord with New Jersey law regarding insurance contract
interpretation, specifically requiring courts to construe a policy consistent with the reasonable
expectation of the insureds when the policy language was not sufficiently clear. Id. (citing Sparks
v. St. Paul Ins. Co., 100 N.J. 325, 495 (N.J. 1985)).
As noted, the Court finds the decision and reasoning of Lime Tree to be persuasive.
Although Lime Tree dealt with a merger under the NJUPA, a statutory merger under the NJBCA
results in a virtually identical outcome concerning the rights and liabilities of the surviving entity.
Compare N.J.S.A. ¶42:1A-46(g), wit/i N.J.S.A.
§ 14A:10-6(c). Accordingly, this Court concludes
an insurance contract must contain specific exclusionary language to prevent a transfer of rights
to the surviving entity under the NJBCA.
In this instance, the Policy does not contain the
necessary, specific exclusionary language.
In fact, the Policy does not contain any explicit
exclusionary language as to the effect of a post-Policy merger or assignment. As to Progressive’s
repeated arguments that such an interpretation will deprive it of the benefit of its bargain and force
it to incur unforeseen risks, the Court likewise agrees with the cogent reasoning of Lime Tree
concerning assignments or transfers that occur after the insured event, as is the case here. Pamrapo
made a valid claim covered by the Policy within the Policy Period; the merger with BCB did not
occur until well after the Policy Period expired.
Moreover, the majority of the cases that Progressive cites to support its argument address
the results of an asset purchase agreement, not a statutory merger. See Progressive Br. at 18-19.
There are material differences between a statutory merger and an asset purchase. See, e.g., Dep ‘t
ofTranp. v. FSCRes., Inc., 175 N.J. Super. 447,453 (App. Div. 1980) (explaining that “[c]orporate
successor liability is dependent upon the structure of the corporate acquisition”). Most importantly
for purposes of the current motions, is the fact that N.J.S.A.
§ 14A:10-6 does not apply to asset
purchase deals. The cases that Progressive relies on were not dealing with a statutory transfer of
rights and liabilities. In addition, the general rule regarding corporate liability after an asset
purchase is that the successor entity does not retain the assets and liabilities pf the selling company
(unless they were provided for in the purchase agreement). Mettinger v. Globe Slicing Mach. Co.,
Inc., 153 N.J. 371, 380 (1998).
Of course, the NJBCA says the opposite.
Progressive’s cases are inapposite. Accordingly, the Court does not agree with Progressive’s
argument that the definition of “Company” under the policy precludes BCB’s recovery.9
Progressive also claims that the “Other Insurance or Indemnification” provision in the
Policy entitles it to relief. Progressive relies on the Policy language that indicates loss and defense
costs payable under the Policy “shall be excess to
entitled from any entity other than the Company.”
indemnification to which an Insured is
Progressive asserts that because BCB is
contractually bound to provide indemnification pursuant the Merger Agreement, the provision
controls. Progressive makes several arguments in support of its position. The Court finds none of
Progressive also maintains that requiring it to cover defenses costs post-merger is improper
because it would provide BCB with more coverage than Pamrapo was entitled to receive. But
paying defense costs to the Individual Directors does not exceed the coverage that Pamrapo paid
to receive under the Policy. BCB is simply seeking to continue the coverage that Progressive
already recognized it was required to provide under the Policy and partially paid. Indeed,
adopting Progressive’s position would result in a windfall to Progressive as Pamrapo paid its
premiums for such coverage.
Progressive’s asserts that Pamrapo could have negotiated different indemnification terms
in the Merger Agreement so that it would not have had to indemnify the Individual Directors. Def.
Br. at 27. This argument misses the mark because it ignores the effect of the NJBCA.
discussed, BCB assumed all of Pamrapo’s rights and liabilities pursuant to the statutory merger.
One such liability was Pamrapo’s obligation to indemnify its officers and directors, as set forth in
Pamrapo’s Certificate of Incorporation.
Steinberg Decl. Ex. 13.
Thus, even if the Merger
Agreement did not contain an indemnification provision, BCB was nevertheless bound to
indemnify the Individual Directors due to the statutory merger.
More fundamentally, Progressive’s position ignores the effect of the statutory merger.
Progressive’s argument concerning the “Company” in the “Other Insurance or Indemnification”
provision is essentially the same as Progressive’s earlier assertion concerning the “Company” and
coverage in the first instance. The Court has already rejected this argument for the reasons stated.
It would certainly be an untenable result if the definition of “Company” did not prevent BCB from
obtaining Pamrapo’s rights under the Policy but nevertheless precluded BCB from recovery
pursuant to the “Other Insurance or Indemnification” provision.
Finally, Progressive also takes issue with Plaintiffs’ argument that in making payment to
BCB for pre-merger defense costs, Progressive conceded that BCB is now Pamrapo for purposes
of the Policy. Def Br. at 2 1-22. As noted, following the merger, Progressive sent BCB a payment
due to Pamrapo under the Policy. Progressive provides no legal authority to support its position
that the partial payment should not be construed as a concession or admission.
Progressive’s payment reflects the reality of the statutory merger it could only send the payment
to BCB as BCB had acquired all the rights and liabilities of Pamrapo through the merger and
Pamrapo thereafter ceased to exist.
In sum, BCB is entitled to Pamrapo’s rights under the Policy by operation of law.
Consequently, Plaintiffs’ motion for summary judgment is granted. As a result, Progressive’s
cross-motion for summary judgment must necessarily be denied.
BCB has the right to
reimbursement from Progressive under the Pamrapo Policy for BCB’s post-merger defense costs
vis-à-vis the Independent Directors. Plaintiffs are not barred from reimbursement by the “Other
Insurance or Indemnification” provision of the Policy.
For the reasons set forth above and for good cause shown, Plaintiffs’ motion for partial
summary judgment (D.E. 119) is GRANTED and Defendant’s cross-motion (D.E. 120) is
DENIED. An appropriate Order accompanies this Opinion
Date: September 18, 2017
John Michael Vazquez,
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