EXCELSIOR INSURANCE COMPANY et al v. GRANITE STATE INSURANCE COMPANY et al
OPINION filed. Signed by Judge Freda L. Wolfson on 4/28/2017. (mmh)
*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
EXCELSIOR INSURANCE COMPANY, :
Civ. Action No. 16-4911 (FLW)
GRANITE STATE INSURANCE
WOLFSON, District Judge:
Plaintiff insurance-carriers Excelsior Insurance Company (“EIC”), Liberty Mutual
Insurance Company, and Peerless Insurance Company (collectively, “Plaintiffs”) 1 filed this action
against Defendant Granite State Insurance Company (“Defendant”), seeking reimbursement of the
costs to defend and settle an underlying tort action. In lieu of an answer, Defendant moves for
dismissal, arguing against the request for reimbursement of Plaintiffs’ expenses through
subrogation or indemnification, because Plaintiffs and Defendant did not insure a common entity
in the underlying action. In response, Plaintiffs cross-move for leave to amend the Complaint,
seeking reformation of Defendant’s insurance policy to include an additional insured, based upon
mutual mistake. For the reasons set forth below, Defendant’s Motion to Dismiss is GRANTED,
and Plaintiffs’ Request to File a Proposed Amended Complaint in the form submitted is DENIED;
in the event that Plaintiffs can plead additional facts sufficient to state a claim based upon mutual
EIC and Peerless Insurance Company are subsidiaries or successors of Liberty Mutual
Insurance Company. Proposed Amended Complaint (“Am. Compl.”), Parties, ¶ 1.
mistake, Plaintiffs may file an Amended Complaint consistent with the dictates of this Opinion,
within thirty (30) days of the date of the Order accompanying the Opinion.
The Underlying Suit
On January 7, 2010, Ronnie Baker (“Baker”) was injured while working as an employee
of Community Care Services (“CCS”), a tenant of a shopping center located on 900 Easton Avenue
in Somerset, New Jersey. Am. Compl., Parties, ¶ 1. Subsequently, Baker brought suit in the
Middlesex County Superior Court against the Easton Shopping Center (“ESC”) and Littman &
Pakenham, Inc. (“L&P”), the alleged co-landlords of the shopping center (the “underlying suit”). 2
Am. Comp., Factual Background, ¶ 1, Count I, ¶ 4. Plaintiffs incurred various costs in connection
with defending both ESC and L&P in the underlying suit. See Am. Compl., Factual Background,
The Excelsior and Granite State Insurance Policies
EIC provided a policy of insurance to L&P as the named insured, bearing a policy number
ending in 1494 (the “Excelsior Policy”), with a policy period from June 1, 2009 to June 1, 2010.
Rossignol Cert., ¶ 4, Excelsior Policy. 3 ESC, on the other hand, was neither a named insured nor
an additional insured under this plan. Rossignol Cert., ¶ 4, Excelsior Policy.
Defendant argues that ESC and L&P are not co-landlords because the language of CCS’s
Lease Agreement defines the term “Landlord” to solely include “EASTEN CENTER.” Since the
relationship between ESC and L&P is not central to the legal issue at bar, for the purposes of this
motion, the Court will not address this discrepancy, but will accept Plaintiffs’ allegation that ESC
and L&P are co-landlords as true. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d
Cir. 2009) (“[I]t is well established that in deciding a motion to dismiss . . . a court is required to
accept the plaintiff’s allegations as true, and is to construe disputed facts in favor of the plaintiff.”
(internal quotations and citations omitted).
Generally, when ruling on a motion to dismiss, a district court may consider documents
that are “integral to or explicitly relied upon in the complaint.” In re Rockefeller Ctr. Props., Inc.
Defendant Granite State provided a policy of insurance to CCS as the named insured,
bearing a policy number ending in 376-2 (the “Granite State Policy”), with a policy period from
May 25, 2009 to May 25, 2010. Rossignol Cert., ¶ 5, Granite State Policy. Effective as of May 25,
2009, the plan was subsequently amended through a “General Change Endorsement” to include
ESC, the co-landlord, as an additional insured. Rossignol Cert., ¶ 6, General Change Endorsement.
L&P, however, was not a named insured or an additional insured under the Granite State Policy.
Rossignol Cert., ¶ 5, Granite State Policy.
Settlement of the Underlying Suit
The underlying state court action was ultimately settled by the parties, Baker and ESC and
L&P, in mediation, for $400,000, the entirety of which was paid by EIC. Am. Compl., Count I, ¶
1, Count II, ¶ 1. Indeed, Granite State did not contribute to the settlement payment, nor did any
other entity contribute on behalf of Granite State. Am. Compl., Factual Background, ¶ 1. “Prior to
the settlement and after the settlement, request for tender of defense, tender of indemnity, [and]
participation in the settlement/mediation process, were sent on behalf of [EIC] to [Granite State].”
The tenders, however, were refused. Am. Compl., Factual Background, ¶ 1.
On June 20, 2016, Plaintiffs filed a two-count Complaint against Defendant in the Superior
Court of New Jersey, Law Division, Middlesex County. See Original Complaint (“Compl.”). On
August 11, 2016, Granite State removed that case to this Court. In Count I of the Original
Complaint, Plaintiffs seek reimbursement of the costs associated with the underlying suit. Compl.,
Count I, ¶ 6 (“Plaintiffs . . . are entitled to seek reimbursement of reasonable expenses and defense
Sec. Litig., 184 F.3d 280, 287 (3d Cir.1999) (emphasis and citations omitted). Because the relevant
insurance policies in this case are referenced in the Amended Complaint, the Court can consider
them on this motion.
of the underlying claim, reasonable attorney’s fees, reasonable cost, and recoup[ment] of any
indemnity payment.”). In Count II, it appears that Plaintiffs seek to reform the Granite State Policy
to include L&P as an additional insured; however, Plaintiffs do not assert any legal basis upon
which to reform the Granite State Policy. Compl., Count II, ¶ 1 (“In the alternative, it is requested
. . . that the certificate of liability insurance naming Eastern Shopping Center as an insured be
amended to reflect both Eastern and [L&P] as insured of the policy . . . . ”).
Subsequently, Defendant filed a Motion to Dismiss both Counts of Plaintiffs’ Original
Complaint, pursuant to Rule 12(b)(6). In the Motion, Defendant argues that Plaintiffs are not
entitled to recover the costs of defending and settling the underlying action by asserting a claim
for subrogation or indemnification, because Plaintiffs have failed to plead a prerequisite—that the
Excelsior and Granite State insurance policies reflect a common insured.
Plaintiffs, in response, do not dispute that the Excelsior and Granite State insurance policies
do not insure a common entity. Instead, Plaintiffs filed a Cross-Motion for leave to amend the
Complaint, wherein Plaintiffs request permission “to more thoroughly explain the relief that they
are seeking and why they are entitled to such relief,” and submit a newly proposed two-count
Amended Complaint. Plaintiffs’ Memorandum of Law in Support of Cross-Motion for Leave to
Amend the Complaint (“Pls.’ Request to Amend”), at 1. Specifically, in Count 1 of the proposed
amended complaint, Plaintiffs, once again, seek indemnity payments in connection with the
underlying suit. In Count II, Plaintiffs seek reformation of the Granite State Policy to include L&P
as an additional insured, on the basis of mutual mistake. Plaintiffs’ Cross-Motion is opposed by
Standard of Review
When considering a motion to amend, “[t]he Supreme Court has instructed that although
‘the grant or denial of an opportunity to amend is within the discretion of the District Court, . . .
outright refusal to grant the leave without any justifying reason appearing for the denial is not an
exercise of discretion; it is merely an abuse of that discretion and inconsistent with the spirit of the
Federal Rules.’” Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000) (quoting Foman v. Davis, 371
U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962)). Nonetheless, a court may deny a plaintiff
leave to amend for a variety of reasons, including undue delay, bad faith, dilatory motive, prejudice
and futility. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir.1997); Alston
v. Parker, 363 F.3d 229, 235 (3d Cir. 2004). Under Third Circuit precedent, a “futile” amendment
is one that fails to state a claim upon which relief could be granted. Burlington, 114 F.3d at 1434;
Grayson v. Mayview State Hospital, 293 F.3d 103, 113 (3d Cir. 2002). Thus, in determining
whether a complaint, as amended is futile, the District Court must apply the sufficiency standard
set forth under Rule 12(b)(6). Shane, 213 F.3d at 115.
When reviewing a motion to dismiss on the pleadings, courts “accept all factual allegations
as true, construe the complaint in the light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Phillips v.
County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). In Bell
Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L. Ed. 2d 929 (2007), the
Supreme Court clarified the 12(b)(6) standard. Specifically, the Court “retired” the language
contained in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957), that “a
complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id.
at 1968 (quoting Conley, 355 U.S. at 45-46). Instead, the factual allegations set forth in a complaint
“must be enough to raise a right to relief above the speculative level.” Id. at 1965. As the Third
Circuit has stated, “[t]he Supreme Court’s Twombly formulation of the pleading standard can be
summed up thus: ‘stating . . . a claim requires a complaint with enough factual matter (taken as
true) to suggest’ the required element. This ‘does not impose a probability requirement at the
pleading stage,’ but instead ‘simply calls for enough facts to raise a reasonable expectation that
discovery will reveal evidence of’ the necessary element.” Phillips, 515 F.3d at 234 (quoting
Twombly, 127 S.Ct. at 1965).
Plaintiffs’ Proposed Amended Complaint is Futile
Defendant argues that Plaintiffs are not entitled to reimbursement, because the Excelsior
and Granite State policies do not insure a common entity, i.e., ESC and L&P. Plaintiffs, in
response, concede this point. Instead, Plaintiffs seek to amend their Complaint to reform the
Granite State Policy, adding L&P as an additional insured through the doctrine of mutual mistake.
In opposition to Plaintiffs’ Cross-Motion, Defendant only argues that Plaintiffs’ allegations
regarding mutual mistake are futile. In that regard, there is no dispute that Plaintiffs’ proposed
amended claims rise and fall on whether Plaintiffs properly state a claim for mutual mistake.
Therefore, the Court’s inquiry is confined to this question.
As the basis of mutual mistake, Plaintiffs allege that ESC and L&P are co-landlords of the
shopping center in which CCS’s business is located. Am. Compl., Count II, ¶¶ 3-4. Plaintiffs
further allege that CCS entered into a Lease Agreement that required CCS “to obtain
comprehensive general liability insurance for the protection of the [shopping center’s]
landlord(s).” Am. Compl., Count, II, ¶ 3. According to Plaintiffs, , “a mutual mistake of fact
occurred when [CCS] went to Granite State and asked to obtain coverage for only [ESC] and when
Granite State provided a policy that gave coverage to only [ESC] and not [L&P].” Am. Compl.,
Count II, ¶ 6. These allegations are not sufficient to establish mutual mistake for pleading purposes.
The principles of contract interpretation and reformation have been set forth by the
Supreme Court of New Jersey:
As a general rule, courts should enforce contracts as the parties intended. Similarly,
it is a basic rule of contractual interpretation that a court must discern and
implement the common intention of the parties. The Court’s role is to consider what
is written in the context of the circumstances at the time of drafting and to apply a
rational meaning in keeping with the expressed general purpose.
Ill. Nat’l Ins. Co. v. Wyndham Worldwide Operations, Inc., 653 F.3d 225, 231 (3d Cir. 2011)
(citing Pacifico v. Pacifico, 920 A.2d 73, 77 (N.J. 2007)). In light of these principles, “when
interpreting an insurance policy, courts should give the policy’s words their plain, ordinary
meaning.” Id. (citing Nav-Its, Inc. v. Selective Ins. Co. of Am., 869 A.2d 929, 933 (2005)). This is
done by “interpret[ing] [the] contract according to its plain language by reading the document as
a whole in a fair and common sense manner so as to match the reasonable expectations of the
parties.” Id. (citing Hardy ex rel. Dowdell v. Abdul-Matin, 965 A.2d 1165, 1168-69 (N.J. 2009)).
Nevertheless, “the primary goal of contract interpretation is always to ‘enforce contracts
as the parties intended.’” Ill. Nat’l Ins. Co. v. Wyndham Worldwide Operations, Inc., 85 F. Supp.
3d 785, 794 (D.N.J. 2015) (quoting Pacifico, 920 A.2d at 77)). Therefore, in some instances, a
court may “‘reform the terms of a written instrument on a claim of mutual mistake, without regard
to whether the writing is in fact ambiguous.’” Id. (citing Cent. State Bank v. Hudik-Ross Co., Inc.,
396 A.2d 347, 350 (App. Div. 1978)); Savings Inv. & Trust Co. v. Connecticut Mut. Life Ins. Co.,
85 A.2d 311, 314 (Ch. Div. 1951) (“That contracts where there is a mutual mistake common to
both parties may be reformed in equity is so well settled in our jurisprudence that it seems
unnecessary to cite but few cases.”). Stated differently, “in New Jersey even an unambiguous
contract may be reformed when there was mutual mistake and the written contract does not match
what the parties intended.” Id. (citing Cent. State Bank, 396 A.2d at 350.)
To that end, a finding of mutual mistake is appropriate where the parties have “met and
reached a prior existing agreement, which the written document fails to express.” Bonnco Petrol,
Inc. v. Epstein, 115 N.J. 599, 608 (1989) (internal citations omitted). “As the name implies, the
mistake must be mutual; reformation is warranted only when ‘both parties were laboring under
the same apprehension as to [a] particular, essential fact’ and when the mistake has a material
effect on the agreed-upon exchange.” Ill. Nat’l Ins. Co., 85 F. Supp. 3d at 795 (quoting Bonnco
Petrol, Inc., 560 A.2d at 659). Therefore, “‘[f]or a court to grant reformation there must be clear
and convincing proof that the contract in its reformed, and not original, form is the one that the
contracting parties understood and meant it to be.’” Id. (quoting Cent. State Bank, 396 A.2d at
351); Coca-Cola Bottling Co. v. Coca-Cola Co., 988 F.2d 386, 404 (3d Cir. 1993) (“Reformation
is available when clear and convincing evidence shows . . . their mutual mistake resulted in a
written document which does not accurately reflect the terms of the parties’ agreement.” (citing
Restatement (Second) of Contracts § 155 (1981)).
Here, assuming that ESC and L&P are co-landlords, Plaintiffs fail to allege facts in the
proposed amended complaint establishing mutual mistake. First, even if CCS was required to
obtain coverage for L&P, pursuant to the Lease Agreement, the proposed amended complaint does
not allege that CCS and Granite State “met and reached a prior existing agreement, which the
written [Granite State Policy] fails to express.” Bonnco, 560 A.2d at 608 (internal citations
omitted). To the contrary, Plaintiffs’ assertions, as pled, tend to show that CCS and Granite State
never agreed to include L&P as an additional insured under the Granite State Policy. Indeed,
Plaintiffs maintain that CCS and Granite State both were operating under a mistake of fact when
the parties entered into the insurance agreement, because, according to Plaintiffs, CCS informed
Granite State to only provide coverage for ESC. Plaintiffs argue that, therefore, Granite State
issued a policy under which ESC was the sole insured. See Am. Complaint, Count II, ¶ 6. However,
that is not sufficient to establish a mutual mistake, since Granite State and CCS were not “laboring
under the same apprehension as to [an] essential fact”—that L&P required coverage. Bonnco, 560
A.2d at 608 (internal quotations and citations omitted). In fact, Granite State provided CCS with
the exact insurance policy that CCS requested, which is one that solely provided coverage for ESC.
At most, the proposed amended complaint alleges that a unilateral mistake was made on the part
of CCS, in that, CCS allegedly failed to inform Granite State that L&P required coverage under
the Lease Agreement. Hence, the Court cannot find that Plaintiffs have adequately pled that a
mutual mistake occurred, as the proposed amended complaint fails to allege that CCS and Granite
State reached a prior agreement that the Granite State Policy fails to express. St. Pius X House of
Retreats, Salvatorian Fathers v. Diocese of Camden, 88 N.J. 571, 579 (1982) (“Reformation
predicated upon mutual mistake requires that both parties are in agreement at the time they attempt
to reduce their understanding to writing, and that the writing fails to express that understanding
correctly.”). Accordingly, Plaintiffs’ proposed amendments as to mutual mistake are futile;
because Plaintiffs’ claims are dependent upon establishing mutual mistake, the Original Complaint
is dismissed in its entirety.
For the foregoing reasons, Defendant’s Motion to Dismiss is GRANTED and Plaintiffs’
Cross-Motion to File an Amended Complaint is DENIED. In the event that Plaintiffs can plead
facts that would support a theory of mutual mistake, Plaintiffs may file an Amended Complaint
consistent with the dictates of this Opinion, within thirty (30) days of the date of the Order
accompanying the Opinion.
Dated: April 28, 2017
/s/ Freda L. Wolfson
Freda L. Wolfson
United States District Judge
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