Filed: Aug. 12, 2008
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2008 Decisions States Court of Appeals for the Third Circuit 8-12-2008 Gloucester v. Princeton Ins Co Precedential or Non-Precedential: Non-Precedential Docket No. 07-1179 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008 Recommended Citation "Gloucester v. Princeton Ins Co" (2008). 2008 Decisions. Paper 676. http://digitalcommons.law.villanova.edu/thirdcircuit_2008/676 This decision is brought to you for free and open access by
Summary: Opinions of the United 2008 Decisions States Court of Appeals for the Third Circuit 8-12-2008 Gloucester v. Princeton Ins Co Precedential or Non-Precedential: Non-Precedential Docket No. 07-1179 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008 Recommended Citation "Gloucester v. Princeton Ins Co" (2008). 2008 Decisions. Paper 676. http://digitalcommons.law.villanova.edu/thirdcircuit_2008/676 This decision is brought to you for free and open access by ..
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Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
8-12-2008
Gloucester v. Princeton Ins Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-1179
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2008
Recommended Citation
"Gloucester v. Princeton Ins Co" (2008). 2008 Decisions. Paper 676.
http://digitalcommons.law.villanova.edu/thirdcircuit_2008/676
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-1179
COUNTY OF GLOUCESTER, GLOUCESTER COUNTY SHERIFF’S
DEPARTMENT, GLOUCESTER COUNTY DEPARTMENT OF HEALTH, JOHN
DOES (A-Z) AGENTS AND EMPLOYEES OF GLOUCESTER COUNTY; SUMMIT
RISK SERVICES, INC.; GENERAL STAR MANAGEMENT COMPANY/APEX,
PUBLIC ENTITY INSURANCE PROGRAM
v.
THE PRINCETON INSURANCE COMPANY
Summit Risk Services, Inc.
General Star Indemnity Company,
Appellants
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 04-CV-2157)
District Judge: The Honorable Renee Marie Bumb
ARGUED MAY 13, 2008
Before: McKEE and ROTH, Circuit Judges
O’NEILL*, District Judge
(Filed: August 12, 2008 )
*The Honorable Thomas N. O’Neill, Jr., United States District Judge for the Eastern
District of Pennsylvania, sitting by designation.
Peter J. Luizzi, Esq. (Argued)
LePore Luizzi, P.C.
489 Aurora Place
Brick, NJ 08723
Counsel for Appellants
Scott C. Bushelli, Esq. (Argued)
Cooper Bushelli & Morrison, LLC
3000 Atrium Way, Suite 297
Mt. Laurel, NJ 08054
Brad S. Miller, Esq.
Cooper Bushelli & Morrison, LLC
3000 Atrium Way, Suite 297
Mt. Laurel, NJ 08054
Counsel for Appellee
OPINION OF THE COURT
O’NEILL, District Judge
Appellants General Star Indemnity Company and Summit Risk Services, Inc.
appeal from an order granting summary judgment in favor of appellee Princeton
Insurance Company and denying appellants’ motion for summary judgment. We have
jurisdiction over the District Court’s final order pursuant to 28 U.S.C. § 1291, and we will
affirm for the reasons given by the District Court.
I.
Because we write only for the parties, our factual summary is brief. Appellants
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General Star and Summit, an insurance company and an insurance administrator,
respectively, issued an insurance policy expressly covering “County of Gloucester,
Gloucester County Sheriff Department and County Prosecutors Office.” Appellee
Princeton is an insurance company that issued an insurance policy expressly covering
“Gloucester County Health Department c/o County of Gloucester.” The latter policy was
at the heart of the dispute before the District Court; appellants argued that an underlying
complaint triggered appellee’s duty to defend.
The underlying complaint was filed on May 2, 2001 in the Law Division of the
Superior Court of New Jersey for Gloucester County by Thomas McCorkle. In his
complaint, McCorkle alleged that while he was in the custody of the Gloucester County
Sheriff Department at the Gloucester County Jail between June 29 and July 1, 1999 his
numerous requests for medications went ignored. After being released from custody,
McCorkle suffered a stroke, and his complaint alleged that his stroke and subsequent
injuries resulted from the defendants’ negligence in failing to provide him with the
requested medication. McCorkle named as defendants “County of Gloucester, Sheriff’s
Department, and John Does (A-Z), as agents, servants and employees of the County of
Gloucester.”
Prior to filing his complaint in Superior Court, on July 26, 1999, McCorkle filed a
notice of tort claim for damages against the “County of Gloucester – Sheriff’s Office,”
claiming to be at fault “Gloucester County Sheriff’s Officers, including but not limited to
John Does A-Z; nurses and infirmary personnel[].” Pursuant to General Star’s insurance
policies, General Star and Summit assumed the legal defense of the County of Gloucester
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and the County Sheriff Department. The County filed a general liability notice of
McCorkle’s claim dated August 9, 1999 with appellee and subsequently sent a copy of
McCorkle’s civil complaint to appellee.
In a letter dated November 11, 2003, appellee’s counsel, responding to the County
of Gloucester’s attempts to seek appellee’s monetary contribution for the defense of the
McCorkle complaint, asserted to the County of Gloucester that it had never been placed
on notice that its insured, the Gloucester County Health Department, had been sued and
that “[s]eeking monetary contribution from Princeton is wholly inappropriate under these
facts.” According to appellee’s policy with the Gloucester County Health Department,
“A claim for injury shall be considered as being first made when a written claim for injury
is first made against the insured.” Appellee was required under the terms of the policy to
pay all sums which its insured “shall become legally obligated to pay as damages because
of injury to which this insurance applies caused by a medical incident,” which was
defined as “any act or omission in the furnishing of professional medical . . . or nursing
services.”
On November 24, 2003, the County of Gloucester and Mr. McCorkle entered into
a Release and Settlement for the sum of $150,000.00. At no time prior to settlement was
McCorkle’s complaint amended to identify the John Does.
On March 17, 2004, the County of Gloucester filed a complaint in the Superior
Court of New Jersey for Gloucester County against appellants and appellee, and the case
subsequently was removed to the United States District Court for the District of New
Jersey. The County asserted breach of contract claims against appellants and appellee,
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seeking to recover the $100,000.00 that it contributed to the settlement in the McCorkle
matter plus legal fees. Appellants filed an answer to the County’s complaint and asserted
a cross-claim against appellee for the $50,000.00 that appellant General Star contributed
to the settlement in the McCorkle matter plus legal fees. Appellants subsequently settled
with the County. As part of the settlement, appellants obtained all claims and rights of
the County against appellee. Appellants then filed a motion to amend the County’s
complaint in the district court to substitute themselves as plaintiffs by virtue of the
assignment. The motion was granted by the Honorable Joel B. Rosen on April 7, 2006,
and appellants filed their amended complaint on April 13, 2006.
On June 23, 2006, appellants and appellee filed motions for summary judgment in
the District Court. After considering the motions and briefs of each party and hearing
argument, the District Court on December 20, 2006 issued an order granting appellee’s
motion for summary judgment and denying appellants’ motion for summary judgment.
Appellants timely filed a notice of appeal on January 18, 2007. Appellants raise
five issues on appeal: 1) whether the District Court properly granted summary judgment
in favor of appellee; (2) whether the District Court properly denied plaintiffs’ motion for
summary judgment; (3) whether the District Court applied the correct standard of review
to interpret the insurance contract at issue; (4) whether the District Court properly
dismissed appellants’ bad faith claims; and (5) whether the District Court abused its
discretion when it denied appellants’ request at oral argument for additional discovery.
II.
Review of the District Court’s decision to grant summary judgment is plenary, see
5
Couden v. Duffy, 446 F.3d 483, 491 n.3 (3d Cir. 2006). Summary judgment is appropriate if
“the pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56; see
also Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). An issue is “material” only if the dispute over facts “might
affect the outcome of the suit under the governing law.”
Anderson, 477 U.S. at 248. If
the record taken as a whole in a light most favorable to the nonmoving party “could not
lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for
trial.’” Matsushita Elec. Co. v. Zenith Radio,
475 U.S. 574, 587 (1986) (citation
omitted).
We also have plenary review over the District Court’s interpretation of state law,
Chem. Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 89 F.3d 976, 983 (3d Cir.
1996), as well as its conclusion as to the legal operation of an insurance policy, New
Castle County v. Hartford Accident & Indem. Co.,
933 F.2d 1162, 1183 (3d Cir. 1991).
New Jersey law applies to this case, and we apply that state’s substantive law. See Borse
v. Piece Goods Shop, Inc.,
963 F.2d 611, 613 (3d Cir. 1992).
Denial of discovery, however, is reviewed under an abuse of discretion standard.
See Mass. Sch. of Law at Andover, Inc. v. Am. Bar Assoc., 107 F.2d 1026, 1032 (3d Cir.
1997). An abuse of discretion exists only where the District Court’s decision rests upon a
clearly erroneous finding of fact, an errant conclusion of law, or an improper application
of law to fact. Doebler’s Pa. Hybrids, Inc. v. Doebler,
442 F.3d 812, 819 (3d Cir. 2006).
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III.
Under New Jersey law, determination of the proper coverage of an insurance
contract is a question of law. Atl. Mut. Ins. Co. v. Palisades Safety & Ins., Ass’n., 837
A.2d 1096, 1098 (N.J. Super. Ct. App. Div. 2003). “[T]he first step in examining an
insurance contract is determining whether ambiguity exists,” Pittston Co. Ultramar Am.
Ltd. v. Allianz Ins. Co.,
124 F.3d 508, 520 (3d Cir. 1997), and this determination is a
question of law for the court, Int’l Union, United Auto. v. Mack Trucks, Inc.,
917 F.2d 107, 111
(3d Cir. 1990). Ambiguity exists if “the phrasing of the policy is so confusing that the
average policyholder cannot make out the boundaries of coverage.” Weedo v.
Stone-E-Brick, Inc.,
405 A.2d 788, 795 (N.J. 1979). An insurance contract is often
viewed as a contract of adhesion, and thus its terms when ambiguous are to be construed
against the drafter, i.e., the insurance company. See Voorhees v. Preferred Mut. Ins. Co.,
607 A.2d 1255, 1260 (N.J. 1992); see also Allianz Ins.
Co., 124 F.3d at 520 (“Under New
Jersey law, contra proferentum requires any ambiguities in an insurance contract to be
resolved in favor of the insured.”), citing Kampf v. Franklin Life Ins. Co.,
161 A.2d 717
(N.J. 1960).
An insurance policy should be interpreted according to its plain meaning. See
Benjamin Moore & Co. v. Aetna Cas. & Sur. Co., 843 A.2d 1094, 1103 (N.J. 2004).
“When the terms of an insurance contract are clear . . . it is the function of a court to
enforce it as written and not make a better contract for either of the parties.” State v.
Signo Trading Int’l, Inc.,
612 A.2d 932, 938 (N.J. 1992) (citation omitted); see also
Longobardi v. Chubb Ins. Co. of N.J.,
582 A.2d 1257, 1260 (N.J. 1990) (“[T]he words of
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an insurance policy should be given their ordinary meaning, and in the absence of an
ambiguity, a court should not engage in a strained construction to support the imposition
of liability.”).
In this case, the District Court found that the Princeton “policy, as evidence of the
parties’ objective intentions and beliefs, insures only the Health Department as a
corporate entity separate from other county departments and agencies.” The Court stated,
“The plain meaning of the policy and the consistency with which the named insured is
identified leads this Court to conclude that there is no ambiguity as to the named insured.”
Pursuant to this conclusion of law, the District Court determined that the appellee
did not breach its duty to defend “because there was no contractual duty on the part of
Princeton to defend when the insured was not a defendant.” As the Court recognized:
[T]hat the Health Department could, and probably should, have been named
as a defendant do[es] not change the fact that it was not a named defendant.
Princeton and its counsel contacted the underlying plaintiffs’ counsel on at
least one occasion to clarify whether the Health Department was a
defendant. The Health Department was not. Moreover, and quite
importantly, the complaint was never amended to identify the unnamed
nurses. Therefore, there was never a named insured on whose behalf the
defendant, Princeton Insurance, could have answered.
We agree with the reasoning of the District Court. It is undisputed that the
underlying McCorkle complaint did not name the Gloucester County Health Department
and also never was amended to identify the unnamed defendant nurses. It is impossible to
conceive how appellee was obligated to defend the McCorkle claim where its named
insured was not implicated. There was never a named insured on whose behalf appellee
could have answered.
8
Though appellants argue that the District Court reached its conclusion that there
was no ambiguity as to the named insured “without sufficient credible evidence as to the
parties’ objective intentions and beliefs,” appellants are wrong: the court had before it as
sufficient credible evidence the Princeton insurance policy itself. From this evidence, the
court determined, and we agree, that the plain meaning of the policy with respect to its
named insured – which includes the language, “Insured name and address: Gloucester
Health Department, care of County of Gloucester,” and consistently refers to the named
insured as “Gloucester County Health Department c/o County of Gloucester” – was
unambiguous.
Appellants argue that the County of Gloucester and the County Health Department
are one legal entity, and thus the County is a named insured notwithstanding the fact that
the Princeton insurance policy expressly covers only the Gloucester County Health
Department. However, because the insurance policy nowhere indicates or even intimates
that the County of Gloucester is a named insured, appellants’ argument must fail.
Further, because the determination of whether ambiguity in the contract exists is a
question of law for the court, appellants’ contention that the deposition testimony of
certain County agents and employees suggesting that the Princeton policy covers the
County as well as the Health Department is without consequence.
Appellants’ argument that the District Court applied the incorrect standard also
fails. Though under New Jersey law contra proferentum requires any ambiguities in an
insurance contract to be resolved in favor of the insured, the District Court properly found
no ambiguities to resolve. In the words of the District Court, the policy contains “no
9
ambiguous terms to be construed against the drafter; the contract term in dispute is
definite.”
IV.
Under New Jersey law, every insurance contract contains an implied covenant of
good faith and fair dealing. Sears Mortgage Corp. v. Rose, 634 A.2d 74, 84 (N.J. 1993).
Appellants argue that, pursuant to the New Jersey Supreme Court decision Griggs v.
Bergram,
443 A.2d 163 (N.J. 1982), appellee breached its duty of good faith and fair
dealing by not properly investigating the McCorkle complaint. In Griggs the Court
stated:
Upon the receipt from its insured of a claim or notification of an incident
that may give rise to a claim, an insurer is entitled to a reasonable period of
time in which to investigate whether the particular incident involves a risk
covered by the terms of the policy. But once an insurer has had a
reasonable opportunity to investigate, or has learned of grounds for
questioning coverage, it then is under a duty promptly to inform its insured
of its intention to disclaim coverage or of the possibility that coverage will
be denied or questioned.
Unreasonable delay in disclaiming coverage, or in giving notice of the
possibility of such a disclaimer, even before assuming actual control of a
case or a defense of an action, can estop an insurer from later repudiating
responsibility under the insurance policy.
443 A.2d at 168 (citations and quotation marks omitted).
We agree with the District Court that appellee’s contractual duty to defend was
never implicated by the McCorkle complaint and that since there was no duty to defend
there can be no Griggs violation. As stated above, appellee’s named insured was never a
party to the underlying McCorkle litigation because the McCorkle complaint failed to
identify either the Gloucester County Health Department or any Health Department
10
employee. Again, there was never a named insured on whose behalf appellee could have
answered.
The unnamed nurses referenced in the McCorkle complaint did not trigger
appellee’s duty to investigate. Appellants argue, “Instead of taking the minimal steps
necessary to determine if one of their named insured were [sic] implicated, Princeton
made the conscious decision to ignore the claim for four years.” The essence of
appellants’ Griggs argument is that appellee should have taken steps to inject its client
into the case. However, as the District Court stated, “[A]n insurer is under no obligation
to expose its insured to liability by intervening in litigation in which the insured is not a
party.” Like the District Court, we do not read Griggs to require an insurance company to
intervene in litigation where there is no chance that its insured will incur liability.
Appellants argue that appellee engaged in bad faith and should be estopped from
denying coverage for two reasons: (1) appellee took affirmative steps to involve itself in
the underlying litigation and then discontinued its defense without notice to the insured;
and (2) it was unreasonable for appellee to allow four years to elapse between first
receiving notice of a claim and disclaiming coverage. Appellants’ contention that
“Princeton notified the County that it would protect the County’s interests by assigning
counsel to defend the County” is unsupported by the record. Appellee did not notify the
County of Gloucester but its insured, the Gloucester County Health Department, that it
would protect its interests pursuant to the terms and conditions of the insurance policy
and that it had assigned counsel to the matter. Also, because its insured never was a party
to the underlying litigation, appellee naturally never took affirmative steps to involve
11
itself in the underlying litigation. Second, appellee’s duty promptly to inform an insured
of the intention to disclaim coverage or of the possibility that coverage will be denied or
questioned never was triggered in this case because, as stated above, the contractual duty
to defend was never implicated by the McCorkle complaint.
V.
The District Court did not abuse its discretion when it denied the requests for
additional discovery made by appellants. At oral argument, appellants’ counsel asserted,
“It is very important that you allow us to go back and ask the county what the structure of
the government is and what they think . . . . [I]f the whole case is going to turn on this one
issue, and that’s what it’s sounding to me right now, I think we need to go and ask the
county what the structure of the government is and whether or not the Health Department
is a separate legal entity or not.”
As the District Court noted, “[P]laintiffs suggest, for example, that discovery
should be taken on what the freeholders thought, etcetera.” However, the relevant
question of whether the naming of the Gloucester County Health Department as an
insured under the Princeton policy also implied coverage for the County of Gloucester is
one of law, not fact. As stated above, we find that the District Court properly exercised
its function to enforce the contract as written when it held the contract term was definite
and there was no question of material fact regarding whether the contract covered both
the County of Gloucester and the Gloucester County Health Department. By its express
and clear terms, the Princeton policy unambiguously covered the Health Department only,
and additional discovery would not have revealed any ambiguity in the insurance contract.
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The District Court found no reason to allow additional discovery. Because we find
no basis upon which to conclude that the District Court’s decision to disallow additional
discovery rested upon a clearly erroneous finding of fact, an errant conclusion of law, or
an improper application of law to fact, the District Court’s decision to deny appellants’
requests for additional discovery be affirmed.
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