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Broadly-Read Insurance Policy Exclusion Allows Insurer to Deny Coverage for Pharma Company Due to Chairman’s Alleged Self-Dealing Scheme by New Jersey Supreme Court

Mist Pharmaceuticals (Mist), sought coverage from Mist’s insurer, Berkley Insurance Company (Berkley) under a Directors and Officers (D&O) policy for the damages and costs of defense arising out of two lawsuits. Those lawsuits alleged Joseph Krivulka, Mist’s Chairman, engaged in self-dealing between Mist and other entities he controlled. Berkley denied coverage to Mist, stating that coverage was not available to Mist arising out of allegations in the suits due to Krivulka’s roles with other entities. The primary question in Mist Pharms., LLC v. Berkley Ins. Co.,  2026 N.J. LEXIS 397 (2026), before the New Jersey Supreme Court was whether Berkley properly denied coverage for losses “in any way involving” wrongful acts by Krivulka serving in a capacity for any other entity than Mist.

Mist entered a D&O policy with Berkley in 2014 that covered Mist, including Krivulka in his role as Chairman, for any claims made against them for any alleged “Wrongful Act.” A “Wrongful Act” to mean any allegations of a breach of duty or neglect against either Krivulka, in his capacity as Chairman, and Mist. The policy included coverage for damages and costs of suit, but not to any claim arising out of damages not covered, or excluded, by the policy. One such exclusion, the “Capacity Exclusion,” stated that Berkley would not have to make any payments for a claim against Mist or Krivulka based upon or arising out of “or in any way involving any Wrongful Act” by Mist or Krivulka (in his capacity as Chairman).

An outside LLC filed the two lawsuits in question against Mist and Krivulka alleging that Akrimax Pharmaceuticals (Akrimax), a pharmaceutical company Krivulka formed in 2007, which he operated, and of which the LLCs were members, engaged in a scheme to divert funds from Akrimax to Mist. Akrimax was not an insured under Mist’s policy with Berkley.

Shortly after receiving the suit in late 2015, which named Mist, Krivulka, and several other Mist-related entities Berkley did not insure (including Akrimax and other entities owned or controlled by Krivulka), Mist submitted the claim to Berkley. After initially providing partial coverage, an ultimate decision by Berkley disclaimed coverage entirely. Causing Mist to file suit.

Mist advanced several claims against Berkley, primary amongst them was that Berkley misinterpreted the Capacity Exclusion. Mist argued that the D&O policy should cover “dual capacity” situations where an officer acts on behalf of both an insured and an uninsured entity. Berkley countered, arguing the plain meaning of the Capacity Exclusion barred coverage to Mist because all of the underlying allegations arose out of Krivulka’s self-dealing and misconduct as a director of Akrimax, an uninsured entity, not Mist.

The Supreme Court agreed with Berkley, finding that the underlying lawsuits fell squarely within the Capacity Exclusion. It determined that the repeated “or” in the exclusion indicated the exclusion should be read in the disjunctive, meaning that each term separated by an “or” is, on its own, sufficient to trigger the exclusion and deny coverage. That meant the phrasing “based upon” or “arising out of” or “in any way involving any Wrongful Act” should be interpreted very broadly. Here, there are allegations against multiple Krivulka-controlled entities, all of which share one common feature – Krivulka’s role as a director of an entity not insured by Berkley. Each allegation against Mist, or Krivulka as an insured through Mist, was related to his capacity as a member of an uninsured entity. Therefore, each of the allegations asserted against Krivulka, and therefore against Mist, implicate conduct outside of the scope of his covered capacity as the Chair of Mist, and thus excluded from coverage. The Court further disagreed with the “dual capacity” claim, stating that even if Krivulka was acting on behalf of Mist, the “scheme” allegations arose out of his role at Akrimax – an entity Berkley did not insure, and all of the claims against Mist or Krivulka were related to his leadership of Akrimax.

Appellate Division’s Strict Reading of Auto Policy Denies Injured Driver UIM Benefits

In June, 2023, Plaintiff Michael Scott was injured in a car accident. At the time, he was driving a Jeep owned by his live-in girlfriend, Katie Opfer. Opfer was the lone named insured, Scott was listed as a driver, but not as a named insured. The driver at fault for the accident had a liability insurance policy carrying limits of $50,000. Opfer’s policy included uninsured and underinsured motorists (UM and UIM) coverage which provided $100,000 for each person, but contained explicit policy language that advised policy holders that the coverages in the policy may be limited by other  provisions in the policy. One such provision in the UM endorsement of the policy applied a “step-down” for UM/UIM coverage that narrowed the higher $100,000 UIM limits applying to only the named insured, resident spouse/civil union partner, and resident relatives; all others, specifically “any other person,” were only entitled to receive statutory minimum limits; $25,000 in New Jersey.

After filing suit against the at-fault party for his injuries and against Allstate for UIM benefits arising for his injuries out of the policy, Scott settled with the at-fault party for her full $50,000 policy limits. Allstate, claiming Scott, a listed driver but not a named insured, spouse, or relative, was not entitled to UIM benefits under the policy and asked the court to dismiss the suit. The trial court agreed and dismissed the suit against Allstate, causing Scott to appeal. The issue before the Appellate Division in Scott v. Snyder, 2026 N.J. Super. Unpub. LEXIS 177 (App. Div. Feb. 3, 2026) was whether Scott was in fact entitled to UIM coverage for his damages.

The Appellate Division looked at the policy and agreed with the trial court, affirming its decision in Allstate’s favor. Despite applicable law that requires courts to look at insurance contracts with “special scrutiny” due to the imbalance between insurer and their insureds in their understanding of insurance policies, the Court determined that the clear and unambiguous language of the policy did not provide UIM coverage for Scott. The Court specifically pointed to the language identifying who was entitled to UIM insurance, finding that Scott was neither a named insured, spouse/partner, or resident relative. As a result, he fell into the “step-down” category of “any other person,” to whom New Jersey’s minimum UIM coverage of $25,000 applied. More importantly, because the policy was limited by New Jersey statute, Scott would only be able to recover UIM benefits from Allstate if the UIM limits were in excess of his liability recovery from the at-fault driver. As a result, because the Court determined his UIM limits were $25,000, which is less than his liability recovery of $50,000, he was not entitled to UIM benefits from Allstate. If the Court had found he was entitled to the $100,000 UIM limits as a named insured, he would have been entitled to up to $50,000 of UIM coverage.

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Defending Property Damage Claims Under the Continuous or Repeated Leakage Exclusion

Many homeowners’ insurance policies contain an exclusion for “continuous or repeated leakage or seepage of water.”  Some policies specify that “continuous or repeated leakage” is excluded where it occurs over a certain period of time (14 or more days, for example).  Other policies make no reference to a required timeframe or simply state that the leakage must occur “over a period of time.” The question is, when can this policy exclusion be utilized successfully to defend against a water damage claim? 

Unfortunately, there are no cases in New Jersey or Pennsylvania discussing this type of policy exclusion in any detail.  A look to other jurisdictions (here, Florida and California) is thus instructive.

In Hoey v. State Farm Fla. Ins. Co., 988 So. 2d 99 (Fla. 4th DCA 2008), the insureds’ home was damaged by water leakage from a toilet supply line.  The leak was discovered after the property had been vacant for several months, when a neighbor observed water flowing below a sliding glass door.

The policy at issue excluded losses “caused by or resulting from continuous or repeated  seepage or leakage of water or steam which occurs over a period of time and results in deterioration, corrosion, rust, mold, or wet or dry rot.”  The policy also provided that it did not insure for loss consisting of or caused by “continuous or repeated seepage or leakage of water from a…plumbing system.”

A review of water bills for the property revealed that in the absence of a leak, the water usage for the unoccupied property was 20 gallons per month.  Two months before the loss was discovered, the water usage increased to 760 gallons.  One month before the loss was discovered, the water usage increased to 7,280 gallons.  Finally, in the 18 days before the loss was discovered, the water usage was 8,600 gallons.

At trial, an expert testified on behalf of the insurer that the leakage resulted from the failure of a nylon fitting in a toilet supply line, and that the water bills demonstrated that water usage had increased gradually over three months from zero to 420 gallons a day. This was an ongoing increase from a drip to a major failure of the fitting.  The expert also noted rot in the wood near the fitting and mold in the nearby drywall, which he opined were consistent with leakage over a period longer than a few weeks.

The trial court found that the leak went undiscovered for a period of about three months and thus fell within the policy exclusion for “continuous or repeated  seepage or leakage of water…which occurs over a period of time.”  The appellate court affirmed, finding that the trial court’s decision was supported by the above-referenced evidence.  The appellate court also rejected, without discussion, the insured’s contention that the exclusion at issue was ambiguous.

In Brown v. Mid-Century Ins. Co., 215 Cal. App. 4th 841 (2013), the insureds began observing condensation and mildew on their windows and walls on February 18, 2009.  A week later, they noticed mold forming on all of their windows and some of the walls, which they described as “developing everywhere simultaneously.”  A month after the condensation was initially noticed, the insureds entered the crawlspace and observed moisture and damp soil.  They were unable to observe the source of the water, but shut off the water to the house anyway.  A plumber subsequently determined the leak was coming from a hole in a hot water pipe below the insureds’ laundry room.

The policy at issue explicitly stated that it did not cover “any water, or the presence of water, over a period of time from any constant or repeating gradual, intermittent or slow discharge, seepage, leakage, trickle, collecting infiltration, or overflow of water from any source…whether known or unknown to any insured.”

Following the reporting of the loss, the insurer’s claim representative inspected the property and observed (1) pervasive mold and moisture on the interior walls of the home; and (2) heavy corrosion on the leaking pipe.  In a recorded statement, the insureds indicated they began noticing evidence of a water leak approximately one month earlier.  They indicated the condensation stopped forming on the windows when they turned off the hot water approximately one month later.

The insurer retained a plumbing expert who inspected the relevant section of pipe and reviewed photographs previously taken by the insurer.  The plumbing expert opined that corrosive elements caused a “slow, gradual and incremental deterioration of the pipe’s outer wall,” resulting in a pinhole-sized opening through which hot water slowly leaked out.  Thereafter, the deterioration process accelerated, resulting in a larger opening and more significant leak.  The expert opined the leak lasted at least 5 months before it was discovered and the water shut off.  The expert also reviewed water bills for the home, which revealed increased water consumption during the period water was escaping from the pipe, which then decreased to normal levels after the repair.  The insureds’ retained their own expert, who opined that the pipe “failed suddenly.”

On appeal from the trial court’s grant of summary judgment in favor of the insurer, the insureds did not dispute the existence of the effects of the water for at least a month or two.  They argued, however, that their expert’s opinion that the breaching of the pipe occurred “suddenly” created a triable issue of fact.  The appellate court rejected this argument, noting that even if the breaching of the pipe occurred suddenly, the subsequent leakage of water continued for a month or two (according to the insureds) or 5 months (according to the insurer).  This water discharge over a period of months, which was the cause of the damage to the insureds’ home, did not qualify as “sudden” under the plain terms of the policy. 

The appellate court also rejected the insured’s argument that the policy’s reference to leakage which occurs “over a period of time” was ambiguous.  “The fact that the policy does not define ‘a period of time’ does not necessarily create ambiguity…[A]lthough there may be, at the quantum level, some ambiguity in the concept of ‘a period of time,’ an average layperson understands generally what ‘a period of time’ is, and understands that for water escaping from a pipe, ‘one to two months’ qualifies.”  The appellate court thus affirmed the grant of summary judgment in favor of the insurer.

The above-referenced cases demonstrate that “continuous or repeated leakage” exclusions can be utilized successfully where properly supported by competent evidence establishing the duration of the leak.  This may include evidence of rot, mold, increased water usage and admissions or expert testimony regarding the duration of the leak.  An insurer seeking to rely on this type of exclusion should thus be on the lookout for, and otherwise develop, as many of these types of evidence as possible.

The Enforcement and Application of Shortened Limitations Period Clauses in Insurance Policies

In the State of New Jersey, breach of contract claims are subject to a 6-year statute of limitations.  However, this often changes in the context of homeowners’ insurance policies.  Often, those policies contain provisions which provide that any suit against the insurer must be initiated within one year of the date of loss.  Other policies provide that any suit against the insurer must be initiated within one year of the insurer’s denial of the claim.  

The enforceability of shortened limitations clauses contained in insurance policies was first addressed in Weinroth v. N.J. Mfrs. Ass’n Fire Ins. Co., 117 N.J.L. 436 (E. & A. 1937).  In Weinroth, the Court upheld a provision in an automobile insurance policy which required that any suit against the insurer be brought within 90 days of the insurer’s denial of coverage.  Because the insured did not file suit until 106 days after the insurer denied coverage, his claim was dismissed. 

Thirty-one years later, the Appellate Division applied Weinroth’s holding in the context of a homeowners’ insurance policy.  In Staehle v. American Employers’ Ins. Co., 103 N.J. Super. 152 (App. Div. 1968), the homeowners’ insurance policy at issue provided that any suit against the insurer must be commenced within twelve months of the inception of the loss.  Because the insured did not initiate suit until 1 year and 6 days after the loss, the Court affirmed the grant of summary judgment in favor of the insurer.  In doing so, the Court noted that “the New Jersey rule [enforcing shortened limitations clauses] seems to be the one followed in the majority of the states.” 

Since Weinroth and Staehle, the courts of New Jersey have continued to enforce 1-year limitations provisions contained in insurance policies and other contracts.  See, e.g., Azze v. Hanover Ins. Co., 336 N.J. Super. 630, 636 (App. Div. 2001) (noting that the 6-year statute of limitations for contract actions “may be shortened by the terms of an insurance contract”); Peloso v. Hartford Fire Insurance Co., 56 N.J. 514 (1970) (enforcing a 1-year limitations period contained in a fire insurance policy); PPG Indus., Inc. v. American Home Assur. Co., 2007 N.J. Super. Unpub. LEXIS 1494 *27 (App. Div. 2007) (quoting Weinroth and noting “the validity of suit-limitation clauses in insurance policies has long been recognized in this state”).

In calculating the limitations period under an insurance policy, it is important to note that the shortened limitations period does not necessarily run uninterrupted from the date of loss.  This is particularly so where the insurer spends some time investigating the claim before issuing a denial.  This situation was addressed in Azze, citing the Supreme Court of New Jersey’s prior decision in Peloso.  There, the Azze court noted as follows:

In Peloso…the Court determined that contractual limitation provisions should not be read literally, with the one-year period running uninterrupted from the date of the loss.  According to the Court, such a reading of these provisions would be unfair, because it would allow, in effect, a ticking away of the limitations period while the insurance company investigated the loss.  Peloso stated that:

The fair resolution…is to allow the period of limitation to run from the date of the casualty but to toll it from the time an insured gives notice until liability is formally declined.  In this manner, the literal language of the limitation is given effect; the insured is not penalized for the time consumed by the company while it [investigates the loss]; and the central idea of the limitation provision is preserved since an insured will have only 12 months to institute suit.

The Azze court noted that “from the passage above, it becomes evident that between the time the insured gives notice of loss and the time that the insurance company formally denies coverage, the statutory period is tolled,” or paused.

A case I recently handled provides a good example of how this is applied in practice.  As in the above-referenced cases, the homeowners’ policy at issue required any lawsuit to be initiated within one year of the date of loss.  The loss at issue occurred on May 20, 2022.  However, the homeowners did not report the loss until March 22, 2023 (306 days later).  Our client, the insurer, investigated the loss and issued a partial denial letter on May 1, 2023 (40 days after the loss was reported).  Thereafter, the homeowners did not file a lawsuit until July 26, 2023 (432 days after the date of loss).

Utilizing the above-referenced timeline, we argued that even after accounting for the tolling of the limitations period during the 40 days the insurer investigated the claim, it still took the homeowners 392 days to file suit (432 total days – 40 days to investigate and issue a denial = 392 days).  Because that 392-day period exceeded the 1-year limitations period set forth in the policy, we argued that the homeowners’ lawsuit was barred.  The Court agreed and granted our Motion for Summary Judgment, dismissing the case. 

The above example demonstrates that the proper calculation of a limitations period requires strict identification of the date of loss; the date the loss is reported; the date a clear, formal denial is issued; and the date a lawsuit is ultimately filed.  Under appropriate circumstances, a policy’s shortened limitations period can be used to defeat an untimely filed lawsuit at the outset, saving time and resources.

Appellate Division Reverses Summary Judgment Granted to Defendant as to Property Damage Claim

Plaintiff Zulfigar Ahmed suffered a property damage loss at his owner-occupied two-story residential apartment house in Paterson due to a high wind rainstorm.  At that time, a tree limb and branches fell onto plaintiff’s home, damaging its roof, vinyl siding, concrete masonry wall, a window and other property.  The issue in Ahmed v. American Security Insurance Co., 2024 N.J. Super. Unpub. LEXIS 852 (App. Div. May 13, 2024) was whether the plaintiff had submitted sufficient proofs of his property damage from this rainstorm to survive a motion for a summary judgment dismissal.

Plaintiff’s home was insured with American Security Insurance Company under a hazard insurance policy.  The policy provided liability coverage for the dwelling.

After the rainstorm, plaintiff submitted an insurance claim, specifically claiming that rainwater leaked from the damaged roof and window to lower levels of the house causing water damage to the basement.  Defendant’s adjuster inspected the exterior of the property, taking limited pictures.  Plaintiff submitted damages in the form of an itemized invoice from Ortiz Construction in the amount of $34,246.00 for the repairs performed.  The defendant insurance company advised plaintiff it was preserving a full reservation of rights pending full access to the property for a complete inspection.  Subsequently, plaintiff submitted a request for payment for an exterior gutter, house trimming, a door, a step railing, the roof, and vinyl siding.  Plaintiff resubmitted the paid Ortiz Construction invoice and requested a payment of same.

A dispute arose as to the extent of the damage caused by this storm.  The defendant insurance company disputed causation for some of the plaintiff’s alleged property damage, attributing necessary repairs to prior insurance claims.  In the prior year, plaintiff had settled five property damage claims with defendant.

In December 2020, defendant notified plaintiff’s counsel that the claim adjustment was completed and sent a check in the amount of $8,703.00 to cover the damage it claims was caused by the rainstorm.  While the plaintiff’s counsel received the check, allegedly, it was returned as inadequate.  The plaintiff maintained that the total tree damage loss to his house and car was approximately $440,000.00. 

This dispute ended up in a lawsuit in which plaintiff sued the insurance company for breach of contract, negligent misrepresentation, declaratory judgment, specific performance, unjust enrichment, and bad faith.  Then it produced an expert report by a forensic engineer who opined that most of the interior damage was unrelated to the tree impact and was related to prior claims. While the report acknowledged the exterior damage, the expert opined that there was “historical and overlapping damage.”  Plaintiff, in rebuttal, produced multiple receipts, including additional paid invoices from Ortiz Construction and MK Construction. 

At the conclusion of discovery, the defendant moved for a summary judgment dismissal.  The trial court judge granted the motion, finding that all of the damage was not causally related to the tree damage.  Plaintiff appealed this ruling.

The Appellate Division reversed.  It found that summary judgment should not have been granted because there were issues of fact which precluded a dismissal though a summary judgment proceeding.  The Court found that the trial court judge failed to address plaintiff’s Ortiz Construction invoices which showed payment for the repair work.

The Appellate Division found that “the construction company invoices sufficiently demonstrated a prima facie showing of disputed facts regarding property damage causally related to the fallen tree limb precluding summary judgment.”  The Court expressed no opinion as to whether plaintiff’s proffered contractors should be qualified as experts, but it concluded that plaintiff made a sufficient prima facie showing as to at least some of the damages alleged.  Thus, the Appellate Division reversed and remanded back to the trial court for further proceedings.

Court Finds That Lawsuit Filed Against Insurance Company Was Timely Filed

Plaintiffs Marlene Romhen and Ibrahim Mirkhan filed a lawsuit against the defendant insurance company Franklin Mutual Insurance Inc. based upon a theft loss that occurred at their insured residence.  The claim was denied by Franklin Mutual by letter dated September 17, 2021.  According to the denial letter, the insured needed to file suit against them within twelve (12) months of the date of the letter.  The issue in Romhen v. Franklin Mutual Insurance, Inc., 2024 N.J. Super. Unpub. LEXIS 708 (App. Div. Apr. 25, 2024) was whether the lawsuit was timely filed because it was filed on the Monday after the one year time period expired the prior Saturday.

The theft occurred at the insured residence on March 30, 2021.  Plaintiffs reported the loss to Franklin Mutual on April 1, 2021.  The insurance policy contained a provision that any lawsuit filed against Franklin Mutual must be filed within twelve (12) months of the date of the denial letter.  The denial letter was issued on September 17, 2021.

However, the plaintiffs did not file their complaint against Franklin Mutual until Monday, September 19, 2022.  Franklin Mutual argued before the trial court that the complaint needed to be filed on or before Saturday, September 17, 2022 to meet the 12 month shortened suit requirement, and, therefore, the complaint was filed two days late.

The trial court accepted that argument and dismissed the complaint.  This appeal ensued.

The Appellate Division noted the well settled law that “because insurance policies are contracts of adhesion, if any ambiguity exists, the ambiguity must be construed so as to effect the ‘reasonable expectations of the insured.’”  Further, the Court noted that if the policy language supported two meanings, one that favored the insurer and the other one that favored the insured, the policy should be construed so as to sustain coverage in favor of the insured.

Under New Jersey court rules, in computing any period of time fixed by rule or court order, if the last day of the time period falls on a Saturday, Sunday, or legal holiday, the time period would not run until the end of the next day which is neither a Saturday, Sunday, nor legal holiday.  The trial court, however, found that this court rule did not apply because it was applying the terms of the insurance policy, which is a contract between the parties.  The Appellate Division agreed with that rationale. 

However, the Court noted that it was not disputed that the parties agree to an abbreviated deadline, commonly referred to as a “shortened suit clause,” which shortens the time period from the normal six (6) year statute of limitations that would generally apply to a breach of contract in a civil case.

But, the Appellate Division found that there was an ambiguity in the insurance contract.  It noted that if Franklin Mutual “wanted to ensure strict adherence to a one-year deadline with no exceptions or extensions for weekends, it could have said so explicitly in the endorsement it drafted.”  Further, when it sent out its denial of coverage letter, it could have specified the exact date when the deadline for filing a lawsuit would expire.  By specifying the exact date, that would have left no doubt as to its interpretation of the policy clause and would have provided clear notice of the last day in which a lawsuit could be filed.  However, the denial letter left it up for the policy holders to determine the one year deadline because the letter made no reference to the fact that, in this instance, the expiration of the one year time period fell on a Saturday.

The Appellate Division applied a liberal interpretation of the shortened suit clause in the insured’s favor, “coupled with the general preference to hear cases on their merits rather than dismiss them based on strict enforcement of procedure rules.”  Hence, the Court determined that the lawsuit challenging Franklin Mutual’s denial of coverage as to the lawsuit which was filed on Monday, September 19, 2022 was deemed timely under the shortened suit clause endorsement.  Thus, the Appellate Division reversed the trial court decision and remanded the case back to the trial court for further proceedings.

Warrant to Satisfy Judgment Bars Claim to Challenge Ruling Denying Claim for Future Medical Expenses

Plaintiff Linda Brehme appealed a trial court in limine ruling barring her claim for future medical expenses. She had sued defendants Thomas Irwin and New Jersey Manufacturers Insurance Company for personal injuries resulting from an automobile accident. The issue in Brehme v. Irwin, 2023 N.J. Super. Unpub. LEXIS 2401 (App. Div. Dec. 27, 2023) was whether the signed warrant to satisfy judgment barred her ability to appeal the trial court judge’s in limine ruling denying her claim for future medical expenses.

After discovery was completed in this matter, the case proceeded to trial. On the first day of trial, the judge heard an in limine motion by defendant to bar plaintiff’s claim for future medical expenses. The judge determined that plaintiff’s personal injury protection coverage under her automobile insurance policy was not exhausted and, hence, barred as speculative any claim by plaintiff for future medical expenses.

The case was tried before a jury, which awarded plaintiff the sum of $225,000 for pain and suffering and $50,000 for lost wages. After adding interest and costs, the judge entered a judgment. Thereafter, plaintiff’s counsel signed a warrant to satisfy judgment. There was nothing in the warrant that indicated plaintiff’s intent to appeal the judge’s in limine ruling denying her claim for future medical expenses. The judgment was paid and the signed warrant to satisfy judgment was entered on the court’s docket. Thereafter, plaintiff filed this notice of appeal.

The plaintiff argued that the judge made a mistake in denying her claim for future medical expenses. In her appeal, she sought a new trial limited to this issue. She further argued that she was not precluded from proceeding with her appeal, notwithstanding the warrant to satisfy judgment.

The Appellate Division rejected that argument. It noted the well settled law that “a litigant who voluntarily accepts the benefits of a judgment is estopped from attacking it on appeal.” Here, the defendant elected not to appeal the judgment and agreed to pay the full amount to plaintiff in return for a warrant of satisfaction. The Court noted the case law that “where a party receives and accepts the judgment amount and the adverse party then files a warrant for satisfaction, such conduct expressly acknowledges the validity of the judgment and operates as a waiver of the right to appeal therefrom.”

The plaintiff never advanced, either on the record or in writing, that she intended to continue to pursue her claim for future medical expenses. She accepted and received the full judgment amount from the defendant New Jersey Manufacturers Insurance Company and a warrant to satisfy judgment. The Appellate Division held that the plaintiff’s receipt and acceptance of the full amount of the judgment precluded her appeal challenging the trial judge’s denial of future medical expenses. Thus, the Court dismissed the appeal as moot.

Homeowner Did Not Have Insurance Coverage for Accident of Person Who Lived With Insured

Plaintiff Mary Ann Iaeck lived with Patricia Barnaba in a condominium owned by Defendant Barnaba.  Plaintiff fell down a flight of stairs in the condominium and sued Barnaba, claiming that Barnaba’s negligence caused her fall.  Barnaba had a homeowner’s insurance policy with personal liability coverage with Federal Insurance Company (“Federal”).  The issue in Iaeck v. Barnaba, 2023 N.J. Super. Unpub. LEXIS 1768 (App. Div. Oct. 16, 2023) was whether the Federal insurance policy provided coverage for this personal injury claim or whether the exclusion for liability to persons who live with the policyholder was triggered.

Plaintiff had lived with Barnaba in the condominium since 2008.  She had a verbal lease with Barnaba and paid Barnaba rent.  However, it was undisputed that they shared parts of the condominium, including the kitchen, the garage, the mailbox and the space where the washing machine and dryer were located.  Plaintiff used the bedroom and bathroom on the fourth floor of the condominium.

After living with Barnaba for about 11 years, plaintiff fell down the stairway in the condominium.  She claimed that she tripped because the lights were out, the handrail was loose and Barnaba had placed boxes and other things on the steps.

As a result of her fall, plaintiff suffered a fracture of her left leg and compartment syndrome. Plaintiff was required to have multiple surgeries, which left her with permanent scarring.

At the time of the accident, Barnaba had a homeowner’s insurance policy with Federal.  The policy did cover Barnaba’s home and provided her with personal liability coverage which provided coverage for damages Barnaba was legally obligated to pay for personal injuries.

However, the policy contained numerous exclusions.  The pertinent one was entitled “Covered person’s or dependent’s personal injury.”  According to that exclusion, Federal stated that it would not cover damages for personal injuries for any covered person or their dependents where the ultimate beneficiary is the offending party or defendant.  Further, the exclusion stated that Federal would not cover any damages for personal injury “for which you or a family member can be held legally liable in any way, to a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary.”

After the plaintiff’s fall, counsel for plaintiff sent Federal a letter advising of the fall and asking Federal to open a bodily injury claim under its policy.  Thereafter, Federal denied any obligation to provide Barnaba with coverage for plaintiff’s injuries.  Federal advised that Barnaba’s personal liability coverage was excluded under the policy’s “Covered person’s or dependent’s personal injury exclusion.”

Thereafter, plaintiff sued Barnaba with plaintiff claiming that Barnaba was negligent in causing her injuries.  Thereafter, plaintiff amended her complaint to assert a direct claim against Federal and sought a declaratory judgment that the policy issued by Federal to Barnaba provided coverage for plaintiff’s injuries.  She also requested a default against Barnaba.  Sometime later the trial court conducted a proof hearing concerning plaintiff’s injuries, for which Barnaba did not appear.  A judgment in the amount of $766,330 was entered in favor of plaintiff against Barnaba.

Cross-motions for summary judgment were filed between Federal and plaintiff as to the coverage issue.  The trial court granted summary judgment to Federal and declared that Federal did not have any indemnity or defense obligations as to plaintiff’s personal injury claims against Barnaba and dismissed all claims against Federal with prejudice.  That order was appealed to the Appellate Division.

The issue upon appeal was whether the “Covered person’s or dependent’s personal injury” exclusion applied to plaintiff’s personal injury claims because plaintiff lived with Barnaba.  The Appellate Division noted the well settled concepts that coverage provisions are to be read broadly and exclusions are to be read narrowly with any potential ambiguities being resolved in favor of the insured. Further, the policy is to be read in a manner that fulfills the insured’s reasonable expectations.  However, if the plain language of the policy is unambiguous, the court is not to engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased.

In applying these principles, the Appellate Division found that the “Covered person’s or dependent’s personal injury” exclusion did apply.  The Appellate Division explained that Barnaba’s liability to plaintiff for her personal injuries was excluded under the policy because plaintiff did live with Barnaba at the time of the accident.  It found that the language was “plain and unambiguous.”  The Court found that the exclusion applied to personal injury suffered by plaintiff because plaintiff was living with Barnaba at the time of the accident.  It found no ambiguity in this exclusion, even if read narrowly, and also found that it was not contrary to public policy because “it is reasonable for an insurer to exclude coverage for liability for personal injuries to people who live with the covered person.”

One of the arguments made by plaintiff upon appeal was that the exclusion should be read to apply only to individuals who are part of the covered person’s household or who have a romantic or familial relationship with the covered person.  The Appellate Division rejected that argument as inconsistent with the plain language of the exclusion.  It noted that the exclusion did not use the term “household” members.  Rather, it stated that there was no liability coverage for personal injuries to “a person who lives with” the covered person.

Further, the Appellate Division found that if the exclusion was meant only to apply to household members or family members, there would be no need to list “a spouse, a family member or a person who lives with you.”  By separately listing “a person who lives with you,” the Court found that “Federal was clearly stating that the exclusion applied to people who are not in a familial relationship.”  There was nothing in the terms “a person who lives with you” that require that there be a romantic relationship between that person and the covered person.

The Court rejected all of the plaintiff’s other arguments and upheld the trial court’s decision. Thus, the summary judgment entered in favor of the Federal Insurance Company dismissing the case against it was affirmed. 

Joint Insurance Fund’s Self-Insurance Found Not To Trigger Other Insurance Clause

The issue in the Supreme Court case, Statewide Insurance Fund v. Star Insurance Co., 2023 N.J. LEXIS 205 (2023), was whether the Statewide Insurance Fund (the “Fund”) or Star Insurance Company (“Star”), a commercial general liability insurance company, had the primary responsibility to pay the settlement of a negligence claim brought against Long Branch.  This lawsuit involved a tragic accident in which a boy died from injuries while at the beach with his family in the City of Long Branch.  After the case settled, an insurance coverage dispute arose between the Fund and Star to determine which entity was responsible to pay the balance of the settlement after Long Branch paid its $1 million dollar self-retention under the Star policy. The issue was which policy was primary and which one was excess based upon their respective “other insurance” clauses.

The boy had been visiting the beach with his family in the City of Long Branch and dug a tunnel in the sand near a lifeguard stand.  Unfortunately, the sand collapsed on the boy and he died the next day from his injuries.

The boy’s parents filed a negligence action, suing Long Branch, Long Branch Beach Patrol, and seasonal beach police officers who were responsible for patrolling the area.  The underlying negligence action was settled but the payment of the balance of this settlement awaited the conclusion of this appeal.

The Supreme Court noted that Long Branch had joined the plaintiff Statewide Insurance Fund, which is a public entity JIF created under the Joint Insurance Fund Act. Through the JIF, Long Branch was entitled to receive $10 million dollars in liability coverage per each occurrence.  However, the Fund’s contracting document contained a clause which limited recovery from the Fund to liability in excess over other “insurance or self-insurance” coverage.  Thus, based upon this provision, Long Branch could recover from the Fund only after it exhausted any other insurance or self-insurance coverage to which it was entitled.

Long Branch had also purchased a commercial insurance policy from the defendant Star.  Under that policy, Long Branch had $10 million dollars in liability insurance coverage with a $1 million dollar self-insured retention (“SIR”).  Star’s policy had a provision making its coverage excess over “other insurance.”

Payment of the SIR was not an issue on this appeal.  That amount was paid to the plaintiffs.  The question in this case was whether the Fund or Star had the primary responsibility to pay the remaining settlement amount. 

At the trial court level, both Star and the Fund filed for a summary judgment.  The trial court granted the Fund’s motion and denied Star’s motion.  The trial court judge concluded that Long Branch’s membership in the Fund did not trigger Star’s “other insurance” clause.  Further, the judge determined that the Fund did not provide insurance coverage to its members.  Rather, Long Branch self-insured by joining the Fund.  Thus, the plaintiffs in the underlying negligence lawsuit could look to Star’s primary policy limits, above the SIR, for the balance of their settlement with Long Branch.

This matter went up on appeal to the Appellate Division.  The Appellate Division agreed with the trial court judge that the Fund was not an insurance company and that the Fund did not qualify as an insurer under New Jersey law.  The Appellate Division determined that Fund membership protected Long Branch against liability claims through “self-insurance” and it upheld the Fund’s summary judgment order.

The Supreme Court accepted this appeal upon petition for certification.  Star’s main argument was that, regardless of the statutory framework, the Fund issued what Star characterized as an insurance policy to Long Branch and is bound by its terms.  Under that purported policy, Star claimed that the Fund provided “insurance,” not “self-insurance.”  Thus, Star argued that its own “other insurance” clause is therefore triggered, making Star’s coverage excess to the “insurance” provided by the Fund. 

The Fund rebutted this argument based upon two reasons.  First, it asserted that the Legislature “explicitly exempted JIFs from insurance statutes and regulations, conclusively precluded JIFs from acting as insurers, and unambiguously declared that authorized JIF activities do not constitute the transaction of insurance or doing insurance business.”  Secondly, the Fund argued that because claims against Long Branch are satisfied from member assessments, rather than from an authorized insurance policy, Long Branch “self-insured – and retained risk by joining the Fund.”  Because its members protected against liability through self-insurance, rather than insurance, the Fund argued that Star’s “other insurance” clause would not be triggered and, therefore, Star should cover the damages that exceeded the SIR up to Star’s policy limit.  The Fund contended that it would only provide excess coverage after Star’s policy limit was exhausted.

The New Jersey Supreme Court reviewed the JIF enabling statute and found that the Fund was not an insurance company.  Rather, its authorized activities do not constitute either the transaction of insurance or doing the business of insurance.  More importantly, the Fund was not subject to the extensive insurance laws contained in New Jersey statutes.  Hence, the New Jersey Supreme Court ruled that JIFs cannot insure members.  Instead, “JIFs enable members to self-insure, spread risks, and reduce insurance costs.”

Thus, the Court rejected Star’s argument that general references to “insurance” in the Joint Insurance Fund Act “should be interpreted to mean that JIFs are providing insurance to their members.”  Further, the Supreme Court found that the word “insurance” in the Fund’s contracting documents do not override the Legislature’s clear mandate that JIFs are not insurance companies.  The Supreme Court found that “[a]s a matter of law, Long Branch’s liability protection as a Fund member is through ‘self-insurance,’ not insurance.”

The Supreme Court found that because self-insurance is not the same as insurance under the law and because membership in the Fund protected against liability claims rather than by insurance, the Supreme Court agreed with the trial court and Appellate Division that Star’s “other insurance” clause was not triggered.  Unlike the Fund’s contracting document, which specified that the Fund’s obligation were excess over “insurance or self-insurance,” the Court noted that Star’s clause states only that insurance coverage available under the Star policy is “excess over . . . any of the other insurance.”  The Supreme Court held that because Star’s clause did not encompass the self-insurance available to members through the Fund, Star’s insurance policy was primary in covering the underlying plaintiff settlement of the negligence action against Long Branch. 

Hence, the Supreme Court affirmed the Appellate Division decision.

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