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The law is well settled that a beneficiary of charitable works who is injured while attending an immunized event is barred from recovering for a bodily injury negligence claim against the charitable organization. However, what about when the “beneficiary” is dropped off at a church by her daughter to attend an event and the daughter is injured? Is that church protected under the Charitable Immunity Act, N.J.S.A. 2A:53A-7, for the daughter’s injury? That is the question that the Appellate Division decided in Pollard v. Jerusalem Baptist Church, 2014 N.J. Super. Unpub. LEXIS 2834 (App. Div. Dec. 8, 2014).

Plaintiff Elvina Pollard was injured when she fell down the stairs at the Jerusalem Baptist Church. At the time of her accident, the Church was hosting an usher’s council meeting. While she was not attending the meeting, the plaintiff dropped her mother off to attend the meeting. The plaintiff slipped and fell down the Church’s stairs when she returned to pick up her mother.

The Church claimed it was immune from liability based upon the Charitable Immunity Act. Under the Act, the Church would be immune if (1) the entity was formed for non-profit purposes; (2) it is organized exclusively for religious, charitable, or educational purposes, and (3) it was promoting such objectives and purposes at the time of the injury to the plaintiff, who was then a beneficiary, to whatever degree, of its charitable works.

Plaintiff disputed the last factor as to whether she was a beneficiary of the Church’s religious or charitable work. The appeals court noted that one is considered to be a beneficiary if she receives, in some way, a benefit from the functioning of the entity at the time of the accident. Prior case law has bestowed beneficiary status upon the individual if, for example, they were accompanying a child or others to an immunized activity, even if they do not intend to participate in that activity. Further, beneficiary status does not depend upon whether the claimant personally received a benefit from the works of the charity but, rather, whether the institution was engaged in the performance of its charitable objectives when the injury occurred.

The Appellate Division pointed out that the Act has been liberally interpreted to provide immunity. Thus, the court found that plaintiff’s presence on the premises was sufficient to bestow beneficiary status upon her. Her presence was clearly incident to the accomplishment of her objectives, ensuring her mother could participate in the ushers’ council meeting, as well as spending time with her mother. Further, the Church was engaged in a religious activity at the time of the accident. Consequently, the Appellate Division found the Church to be immune from liability for the plaintiff’s injuries suffered in the accident and upheld the dismissal of the lawsuit.

Plaintiffs Alexander and Moinica Bardis suffered a loss on December 26, 2009 when the right basement wall of their 20 year old single family home collapsed. They filed a property loss claim against their homeowner’s policy with Cumberland Insurance Group (“Cumberland”). After investigation, Cumberland determined that the loss was not the result of a peril or cause of loss covered by its policy and issued a declination letter. The plaintiffs filed suit in Bardis v. Cumberland Insurance Group, 2014 N.J. Super. Unpub. LEXIS 2414 (App. Div. Oct. 8, 2014), seeking coverage under Cumberland’s policy for this loss.

Cumberland denied the loss, alleging that the collapse was a result of surface and subsurface ground water, weight of ice, sleet, snow and collapse, which is excluded under the policy. Plaintiffs, however, claimed that the basement wall collapsed due to hidden decay and chimney weight deterioration, which is covered by the policy. Although the trial court struck the plaintiff’s expert report as a net opinion, plaintiffs argued that the wall’s collapse, after having stood for so long evinced a gradual decline in strength over the 20 years since its construction, which is consistent with hidden decay, a covered loss.

While the trial court judge granted summary judgment to the defendants, finding no coverage under the policy, the Appellate Division disagreed.

First, the Appellate Division pointed out that there is no definition of the term “hidden decay” in the policy. Using the definition in the dictionary for “hidden decay,” which included a gradual decline in strength, the court used this ordinary meaning in interpreting this term. This approach is consistent with the principle of construing insurance contracts according to the reasonable expectation of the insured. The appeals court found that, arguably, the plaintiffs could have reasonably expected that their homeowner’s policy would cover a gradual decline in strength of their basement wall, followed by its sudden collapse.

The Appellate Division found that based upon the facts of the case, the loss could have been caused by a hidden decay (covered loss) or it could have been caused by improper construction methods (excluded loss). Based upon this fact issue, coupled with the insured’s likely reasonable expectation of coverage for the collapse of a basement wall, the appeals court reversed the trial court’s decision and remanded the matter back to the trial court for trial on these issues. This matter would need to be decided by a jury.

In Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222 (Sept. 11, 2014 App. Div.), Seven Caesars was a subcontractor  to Dooley House which entered into a contract with the City of Camden to rehabilitated the Hogan House. After the contract was underway, the City maintained that Dooley House was not complying with the terms of the agreement and declined to release any further installment payments. Seven Caesars sued the City of Camden due to its failure to release those funds. The City argued that this suit should be dismissed because Seven Caesars, a Delaware corporation, had its corporate charter revoked in Delaware, making it ineligible to transact business in New Jersey and unable to file suit in New Jersey.

Seven Caesar’s corporate status had lapsed in Delaware because of its failure to file an annual report and pay the annual franchise tax. As a result, New Jersey revoked its registration certificate to do business in the state. Under N.J.S.A. 14A:13-11(1), a foreign corporation transacting business in the state may not maintain any action in any court of the state until it obtains a certificate of authority. After filing this lawsuit, Seven Caesars  did restore its corporate status in Delaware and was able to produce a certificate of authority showing New Jersey restored its corporate registration.

Thus, the Appellate Division had to decide whether a foreign corporation whose certificate of authority to conduct business in New Jersey had expired, can cure that lapse and, upon issuance of a newly issued certificate of authority, retroactively validate a complaint filed when it had lost authority to do business.

The court noted that N.J.S.A. 14A:13-11(1) is jurisdictional as it defines the right of a foreign corporation to use the state courts. This statute specifically restricts access to those foreign corporations transacting business in New Jersey if they fail to comply with the provisions of the Act and register to do business in the state.

Thus, the Appellate Division found that the lapse in valid corporate status deprived Seven Caesars of its ability to file suit. Curing the defect and obtaining a retroactive certificate to conduct business will not retroactively validate the prior action. Therefore, the Appellate Division held that its suit should have been dismissed.

Plaintiffs Mohammad were injured in an automobile accident in Philadelphia. Plaintiffs reside in North Bergen, New Jersey and defendants in Bensalem, PA. Plaintiffs filed suit in Bergen County in Mohammad v. Cohen, 2014 N.J. Super. Unpub. LEXIS 2688 (App. Div. Nov. 14, 2014) and defendants moved to dismiss based upon the lack of personal jurisdiction. The trial court granted the motion and dismissed the case with prejudice, finding that there was no way to cure the jurisdictional deficiency. The plaintiffs then moved for reconsideration and requested a transfer to the Philadelphia Court of Common Pleas. That motion was denied and the plaintiffs appealed this decision.

The plaintiffs conceded the lack of personal jurisdiction. Thus, the Appellate Division found no basis to reinstate the case.

The plaintiffs argued, however, that the case should be transferred to the Pennsylvania state court. The plaintiffs analogized this matter to a child custody suit or the federal courts’ ability to transfer venue amongst the district courts.

The Appellate Division found that neither provided a legal basis for a transfer. Unless there is an authorizing statute permitting the transfer between sovereign jurisdictions, such as in child custody cases, a transfer would improperly interfere  Pennsylvania’s sovereign powers. The appeals court stated that it cannot require a sovereign court take up a New Jersey case or take any action that would impair that state’s ability to enforce its statute of limitations.

However, the Appellate Division did reverse the trial court’s order to dismiss with prejudice and held that the dismissal should be without prejudice. Because this dismissal was based upon a procedural ground, i.e., lack of personal jurisdiction, the plaintiffs should have been given the opportunity to cure this deficiency. Additionally, if the dismissal was with prejudice, it incorrectly signals to other sovereign courts that the dismissal was on the merits, likely precluding litigation in another jurisdiction.

In Rihanna Corp. v. Certain Underwriters at Lloyd’s of London, 2014 N.J. Super. Unpub. LEXIS 2216 (App. Div. Sept. 11, 2014), the plaintiff insureds sought payment under a certain business owner’s insurance policy for a fire loss suffered by Rihana Restaurant. The defendant insurance company (“Lloyd’s”) denied coverage, citing a limitation provision in its policy, which precluded suit filed more than one year from the date of loss. The trial judge granted summary judgment, agreeing that the claim was properly rejected under the policy. The plaintiffs argued in this appeal that the court should have relaxed the one year limitation period and reversed the disclaimer of coverage.

In Rihana, suspicions arose as to whether the fire was intentionally set. Lloyd’s issued a reservation of rights letter. Thereafter, it disclaimed coverage of the fire claim due to “concealment, misrepresentation, or fraud.” It also disclaimed because the insured refused to submit  to a statement under oath. The insured refused because he was being investigated by the police for arson.

The plaintiffs filed a declaratory judgment action, seeking compensation under the policy. Lloyd’s filed a summary judgment citing to the limitations period in the policy, which required that any suit or action for recovery under the policy be brought within 12 months after the inception of the loss.

The suit limitation clause in the policy mirrored the standard contract provisions required to be included in every New Jersey fire insurance policy. The primary purpose of the statute of limitations is to provide defendants a fair opportunity to defend and to prevent plaintiffs from litigating stale claims.

This statute has been interpreted to allow suits filed within 12 months from receipt of the insurer’s denial of the claim, rather than the date of loss. Other cases make clear that the defendant’s conduct is relevant to the applicable statute of limitations.

However, in this case, the Appellate Division noted that even assuming the suit limitation was tolled because of the defendant’s delayed notification of the decision to deny coverage, the complaint was not filed within one year after the insured was notified that coverage was disclaimed. Inexplicably, the insured waited for 2 years after the claim was rejected to file suit. Thus, the court found no basis to justify relaxation of the suit limitation period and affirmed the dismissal of the lawsuit.

Plaintiff Rajnikant Patel claimed to be injured at work while working on a tablet press machine manufactured by the defendant Karnavati Engineering, Ltd. (“Karnavati”), a corporation located in India.  In Patel v. Karnavati America, LLC, 2014 N.J. Super. LEXIS 139 (App. Div. Oct. 9, 2014), the defendant Karnavati claimed that the court in New Jersey had no personal jurisdiction over it and, as a result, the plaintiff’s complaint should be dismissed.

Karnavati filed a motion to dismiss on that basis, which was denied by the trial court judge. Karnavati then appealed, claiming the judge’s finding of minimum contacts led to an erroneous legal conclusion.

The defendant, which manufactured the machine, was incorporated and operates in India. It did not ship the machine to the United States. Further, it has no contacts with the State of New Jersey. It is not registered to do business in the State; does not advertise in New Jersey; has never solicited business from or paid taxes to the State; has never attended any trade shows and has never sent any employees to New Jersey. Additionally, Karnavati has never owned any real or personal property in New Jersey, had any bank accounts in the State or maintained insurance for products liability conduct in the State.

Karnavati sold the machine to GlobePharma, Inc. (“Globe”), which had its place of business in New Brunswick. The machine was sent by sea to Globe, which took possession of it in Mumbai, India. Globe thereafter sold the machine to plaintiff’s employer Neil Laboratories, a company located in New Jersey.

The trial judge concluded that New Jersey courts had jurisdiction because there was a sufficient showing that the machine was made for and sold to a New Jersey company, for the purpose of being used in New Jersey. The judge reasoned that Karnavati has availed itself of this jurisdiction and, therefore, the New Jersey courts had personal jurisdiction over Karnavati.

The Appellate Division disagreed with the trial court’s decision. No one disputed that Karnavati lacked sufficient continuous contacts with New Jersey to warrant an exercise of general jurisdiction. The trial judge, however, believed that the facts supported an application of specific jurisdiction.

The defendant contended that the single sale of a product to an independent corporation in India, even if accompanied by the knowledge the product will be delivered to a user in New Jersey, is insufficient to allow the application of long-arm jurisdiction. The Appellate Division agreed with this position, that such single sale failed to provide the requisite facts to justify the exercise of jurisdiction.

The plaintiff failed to identify specific actions by Karnavati which demonstrated its desire to conduct business in New Jersey. The appeals court refused to conclude that the sale of this single machine to Globe for resale in New Jersey showed Karnavati’s purpose availment of business opportunities that support the exercise of personal jurisdiction in New Jersey. The Appellate Division found these acts were insufficient to support the conclusion that Karnavati’s conduct surrounding the sale of this machine “constituted purposeful acts for which Karnavati would be on notice that it would be subject to suit in New Jersey.” Hence, the appeals court reversed the trial court’s decision and dismissed the lawsuit as to Karnavati.

In Lebrio v. Pier Shops at Caesar’s, 2014 N.J. Super. Unpub. LEXIS 2319 (App. Div. Sept. 25, 2014), the plaintiff Karen Lebrio injured her knee and back when she slipped and fell while walking in a common area at The Pier Shops at Caesar’s in Atlantic City. The jury awarded her $427,000 for her injuries. The issue on appeal is whether the trial judge improperly instructed the jury to apply the mode-of-operation doctrine.

The mode-of-operation doctrine is a limited exception to proving notice in a traditional premises liability negligence case. Under this doctrine, when a substantial risk of injury is inherent in a business’s method of doing business, an injured plaintiff is excused from proving that the business had actual or constructive notice of the dangerous condition that caused the injury.

In Lebrio, after the plaintiff fell, she noticed a clear liquid on the floor, as well as a cup, lid, and straw nearby. The plaintiff did not know how long the liquid had been spilled on the floor. The mall sold beverages in their food court and allowed patrons to walk around the mall and drink them in common areas.

The trial judge found that the mode-of-operation should apply because the mall did not restrict the carrying or consumption of food and drink in the common areas of the mall. Further, about 20 feet from where plaintiff fell, there was a large fountain where patrons gathered to watch a water show.

The Appellate Division pointed out that this doctrine does not apply because a defendant operates a certain kind of business. Rather, it applies based upon the business’s method of operation, which is “designed to allow patrons to directly handle merchandise or products without intervention from business employees, and entails an expectation of customer carelessness.”

Here, the plaintiff established that spills regularly occurred on busy holiday weekends at The Pier Shops in common areas as a result of patrons’ unrestricted consumption of beverages. Thus, the Appellate Division found that the jury was appropriately instructed and tasked with the duty to determine if this doctrine applied and upheld the jury verdict.

Melissa Alvarado sued the Blair House, a condominium complex, and its property manager based upon personal injuries she suffered due to the defendants’ alleged failure to provide adequate security while at Blair. One night, she was there to visit her boyfriend at 12:15 am and, while parking her car, was approached by two individuals, Eric Obugyei and Catherine Smith. They persuaded her to drive them to the bus station and, after she drove off the Blair lot, abducted her, and stole her car. In Alvardo v. Blair House, 2014 N.J. Super. Unpub. LEXIS 2106 (App. Div. Aug. 27, 2014), the plaintiff claimed that her injuries could have been prevented had the defendants had better security.

The trial court granted summary judgment as to the defendants and this appeal followed.

Alvarado voluntarily lent Obugyei her cell phone while in the Blair parking lot. She also agreed to drive them to the bus station after they promised to pay her. She unlocked her car and let them into her car. Neither individual did anything threatening to her until they were about a mile from Blair. Then Smith put a wire around plaintiff’s neck, started to choke her, pulled her into the backseat, put a bag over her head, and bound her wrists and ankles. They then drove to the river, made her walk to knee-deep water and, thereafter, drove off with her car.

When the plaintiff was in the parking lot of Blair, there was a camera pointed at the area where she encountered her two abductors. The plaintiff showed that there were 85 prior calls to the police from Blair and claimed that it was “rife” with criminal activity. However, the plaintiff was unable to show, except for a few calls, that they involved the commission of a crime.

The Appellate Division looked at not whether the defendants owed a duty of care but whether they breached that duty. The plaintiff contended that Blair should have had a security guard constantly watching the monitor and, when the individuals approached her, they should have questioned them.

The court found that, based upon the totality of the circumstances, no reasonable jury could infer that the defendants breached their duty of care due to the security guards’ failure to question these individuals. From an objective point of view, it looked like an innocuous encounter among three adults. The abductors showed no outward hostility or aggression towards the plaintiff in the parking lot. There was no suggestion that criminal activity was to occur. Thus, under these facts, the Appellate Division found that the defendants did not breach their duty of care and upheld the dismissal of the case.

Plaintiffs Alfio and Jennifer Leone filed a lawsuit against Lantana Insurance Ltd., relating to their claims for coverage under their Homeowners Insurance policy. They claimed that Lantana wrongfully denied their claim for wind damage to their home incurred during Hurricane Sandy. In Leone v. Lantana Insurance Ltd., 2014 U.S. Dist. LEXIS 121873 (D.Ct. Sept. 2, 2014), they brought suit in federal court for claims of breach of contract, breach of the duty of good faith and fair dealing, and a declaratory judgment. They sought attorneys fees for each count.

The District Court noted that this lawsuit was subject to the American Rule in which “the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys fee from the loser.” There are 3 exceptions to the rule: (1) where counsel fees are permitted by court rule or statute; (2) pursuant to a contract; and (3) where counsel fees are a traditional element of damages in a particular cause of action.

There is a New Jersey court rule, R. 4:42-9(1)(6), which does permit the award of attorneys fees in an action upon a liability or indemnity policy of insurance in favor of a successful claimant. However, the District Court found that New Jersey case law is clear in that this rule does not extend to permit counsel fees to an insured on a direct suit against the insurer to enforce a casualty or other first-party direct coverage.

Here, this lawsuit was based upon a first party property damage claim under their policy. Thus, the rule does not permit the award of attorneys fees. Because the plaintiffs provided no other grounds of statutory authorization, agreement, or other established exception for which they could receive counsel fees, the court dismissed all claims for attorneys fees.

In Marciante v. Huezo, 2014 N.J. Super. Unpub. LEXIS 2281 (App. Div. Sept. 19, 2014), ARI Mutual Insurance Co. (“ARI”) tried to vacate a default entered against its insured more than one year after a default judgment was entered against its insured and three years after the insured was served with the lawsuit. The plaintiff Shannon Marciante was seriously injured in a motor vehicle accident when she was struck by a truck driven by defendant Amado Huezo and owned by Rudery Marcia. Huezo was never served but Marcia was served on June 11, 2010 but never filed an answer to the complaint. Default was entered against him in July 2010 due to his failure to answer.

ARI insured UHU, a company that was supposed to have been leasing the vehicle at the time of the accident from Marcia and learned of the existence of the lawsuit in August 2010 when Great American Insurance Co. (“Great American”), which insured the cab, informed it of the suit. At that time, ARI hired an investigator to try to track down Marcia but was unsuccessful in locating him.

Both insurers initially denied coverage and declined to defend or indemnify Marcia. ARI denied because it was advised that UHU had not been leasing the vehicle at the time of the accident. Great American denied coverage based upon a business use exclusion.

In April 2012, a proof hearing was held and the trial court entered a judgment in the amount of $1.2 million for the plaintiff’s pain and suffering and $7800 for her lost wages. Thereafter, a default judgment was entered solely against Marcia for $1,207,800. While the plaintiff was not able to establish that it served the judgment upon Marcia, it did serve the judgment upon ARI and Great American.

Eight months later, Great American sent to ARI a copy of the lease between UHU and Marcia. That agreement showed that the vehicle had indeed been leased to UHU at the time of the accident. After receiving the lease agreement, ARI changed its position and decided to provide representation to Marcia under a reservation of rights. Although it was not successful in contacting Marcia, ARI hired defense counsel to try to vacate the default judgment.

While the motion was accompanied with a certification from ARI’s claim manager, it was not supported by a certification by Marcia. The trial judge chastised the two insurance companies for not acting sooner and denied the motion to vacate the judgment. This appeal followed.

A motion to vacate a default judgment based upon “mistake, inadvertence, surprise, or excusable neglect” under R. 4:50-1 had to be filed within one year of entry of the final judgment. Because the plaintiff could not prove that Marcia had been served with the judgment, the one year time period had not been violated. Nevertheless, the motion had to be filed “within a reasonable time.” The Appellate Division upheld the trial court’s determination that waiting to set aside a final judgment for more than one year did not qualify as a “reasonable time.”

However, the court did leave it open that, if Marcia himself provided an explanation by certification as to why he never answered or presented such other facts that could equitably justify relief from this judgment, that he could file such a motion and the trial court would have to consider the circumstances.

The bottom line is that if there is potential coverage, an insurance carrier must investigate promptly and make a determination as to whether it should afford a defense. Otherwise, if it decides not to defend or timely challenge a default judgment entered against its insured, and it turns out that there is coverage, it may be faced with rather dire adverse consequences. The carrier may be foreclosed from vacating that judgment and, potentially, be required to satisfy that judgment.