NOEL L. HILLMAN, District Judge.
Presently before the Court are: (1) the Motion for Partial Summary Judgment [Doc. No. 11] of Plaintiff Bay Colony Condominium Association ("Bay Colony," "the Association," or "Plaintiff"), and (2) the Cross-Motion for Summary Judgment [Doc. No. 16] of Defendants Scottsdale Insurance Company ("Scottsdale"), C.I.A. Adjusters & Investigators, Inc.'s ("C.I.A.") and Bruce D. Guttenplan ("Guttenplan")(collectively hereinafter "Defendants"). For the reasons that follow, Plaintiff's Motion will be denied, and Defendants' Cross-Motion will be granted in part and denied in part.
This matter involves an insurance coverage dispute stemming from a fire that occurred at a two-building condominium complex in Atlantic City, New Jersey.
In 1976, Bay Colony recorded its Master Deed, which, inter alia, defined specific terms and delineated the responsibilities of the Condominium Association and the individual condominium unit owners. (Pl.'s Mot. Partial Summ. J., Ex. 3, 1975 Master Deed Creating & Est. Bay Colony Condo. ("Original Master Deed").) Section 10 of the Master Deed provided that the Association would insure the entire condominium complex, including both the parameters of the individual units and the "common elements" of the building. (
On August 4, 2008, the Condominium Association sent a letter to the individual unit owners requesting their vote on an amendment to the Master Deed that would reduce the cost of the Association's insurance obligations. (Defs.' Cross-Mot. Summ. J., Ex. J, 08/04/08 Letter Re: Proposed Am. Master Deed.) The text of the letter stated as follows:
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Section 10 of the Amended Master Deed explicitly stated that the Association was only obligated to insure the common elements of the buildings, and that the unit owners were individually responsible for purchasing insurance to cover the boundaries of their separate units. (
On February 19, 2009, Bay Colony sent a letter to all unit owners advising them of the changes made to the Master Deed, and attached a copy of the amended document. (Defs.' Cross-Mot. Summ. J., Ex. L, 02/19/09 Letter Re: Approved Master Deed Change.) In this same letter, the Association "strongly recommended" that unit owners provide a copy of the Amended Master Deed to their individual insurance agents to ensure that they maintained insurance coverage in compliance with the new provisions. (
Bay Colony thereafter purchased its own insurance policy ("the Policy") from Defendant Scottsdale to obtain coverage for the portions of the building it was obligated to insure. (Pl.'s Mot. Partial Summ. J., Ex. 2, Aff. Joseph Simonetta in Supp. of Pl.'s Mot. Partial Summ. J. ("Simonetta Aff.")¶33.) The terms of the Policy provided that both buildings in the condominium complex would receive blanket building coverage, and that "business income, bulkheads, pilings, boardwalks and railings" would also be covered. (Pl.'s Mot. Partial Summ. J., Ex. 9, Scottsdale Ins. Co. Comm. Prop. Coverage Part Supplemental Decl. ("Scottsdale Supp. Decl.").) The limit of the Policy was set at $1,974,000.00. (
Most relevant to the instant dispute, the Policy explicitly stated that Scottsdale would provide Bay Colony with coverage for: "direct physical loss of or damage to Covered Property at the premises[.]" (Pl.'s Mot. Partial Summ. J., Ex. 6, Condo. Assoc. Coverage Form ("Scottsdale Ins. Policy") at 1.) According to the Policy's terms,"covered property" was defined to include both "the building or structure" and "permanently installed machinery and equipment" within it. (
In the event that Scottsdale and Bay Colony disagreed as to the value of any loss or damage to covered property, the insurance agreement provided that the two entities could choose to partake in an appraisal. The appraisal process was described in the text of the Policy as follows:
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On September 2, 2009, a fire occurred at the Bay Colony condominium complex. (Defs.' Cross-Mot. Summ. J., Ex. A., 09/02/09 Atl. City Fire Dep't Rep.) The fire allegedly affected a significant portion of the building, damaging a majority of the complex's common elements and individual units. (Simonetta Aff. ¶5.) Bay Colony immediately notified Scottsdale of the fire, and retained the services of a licensed insurance adjuster to address its loss claim.
Over the course of several months, the parties attempted to reach a mutually-agreed upon amount reflecting Bay Colony's loss due to the fire. (
As the "umpire" to the dispute, MacKinney assessed both parties' submitted estimates and conducted his own inspection of the property. (
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To date, Scottsdale has paid Bay Colony approximately $291,000.00 in insurance proceeds.
Plaintiff filed its Complaint in New Jersey state court on August 2, 2011. (Notice of Removal ¶1.) Defendant C.I.A. removed the case to federal court on August 24, 2011. (
Summary judgment is appropriate where the Court is satisfied that "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."
An issue is "genuine" if it is supported by evidence such that a reasonable jury could return a verdict in the nonmoving party's favor.
Initially, the moving party has the burden of demonstrating the absence of a genuine issue of material fact.
Notably, "[t]he rule is no different where there are cross-motions for summary judgment."
Plaintiff seeks summary judgment with respect to Count I of its Complaint requesting a declaratory judgment in its favor on the grounds that there is no issue that the rough carpentry and HVAC, electrical, heating, and plumbing systems are all insured under the Master Deed and Policy. More specifically, Plaintiff contends that these items constitute "common elements" for which Bay Colony was required to obtain insurance coverage under the Amended Master Deed, and that these items are considered "covered equipment" under the terms of the Policy. (Pl.'s Br. Supp. Mot. Summ. J. 4-7.) Plaintiff further avers that the architectural and engineering expenses that it incurred as a result of the fire were directly derivative of damages sustained to common elements of the condominium complex, and that it therefore is likewise entitled to insurance coverage for these fees as well. (Pl.'s Statement of Facts ¶30.) Defendants, on the other hand, cross-move for summary judgment on the basis that these items are not "common elements" that must be insured under the Amended Master Deed, and are likewise not subsumed within the definition of "covered equipment" under the Policy. (Defs.' Resp. Opp'n 17-18.)
The Amended Master Deed is clear that Bay Colony was only required to obtain insurance coverage for the common elements of the condominium complex, and the individual unit owners were responsible for insuring the extent of their individual units:
(Am. Master Deed. §§ 10A(1), 10B(1)&(2).) As such, prior to assessing the scope of the Policy at issue, the Court must consider whether the building's framing, HVAC, electrical, heating, and plumbing systems constituted "common elements" for which Plaintiff was required to obtain insurance coverage in the first instance.
"Whether an item is a common element `may be ascertained by examination of the statutory definition and master deed." Soc'y Hill Condo. Assoc., Inc. v. Soc'y Hill Assoc., 789 A.2d 138, 142 (N.J. Super. 2002) (citing Siller v. Hartz Mountain Assoc., 461 A.2d 568, 574(N.J. 1983)).
N.J.S.A. § 46:8B-3 (emphasis added).
Similarly, Plaintiff's Amended Master Deed specifically defines "common elements" in the Bay Colony condominium complex to include "common systems and equipment, including mechanical, electrical, plumbing, ventilating, sprinkler and fire suppression systems." (Am. Master Deed § 3A(1)(n).) The deed cabins the scope of this definition, however, by providing that such items are not considered common elements if they are found within the boundaries of an individual "unit." (
(3) All cable television wiring which extends from the interior surface of the walls, floors or ceilings into the Unit; and
(6) All equipment, appliances, machinery, mechanical or other systems whether or not same are located within or without the Unit including . . . the heat pumps or HVAC units located on concrete pads upon the Common Elements and window or wall sleeve air conditioning units, if any[.]
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Based on the definitions provided by N.J.S.A. § 46:8B-3 and the Amended Master Deed, Plaintiff asserts that the buildings' electric, HVAC, plumbing, heating, and framing are common elements for which Bay Colony was required to obtain insurance coverage. Both the Amended Master Deed and the statute make clear, however, that common elements are solely comprised of central power sources that service all units. The record here indicates that the items for which Plaintiff seeks additional insurance coverage solely provided service or transmitted energy to individual condominium units. For example, Defendants' investigation of the property revealed that the condominium complex did not maintain a central air conditioning system. (Guttenplan Cert. ¶7.) Rather, each of the sixteen condominium units was serviced by its own air conditioning compressor and handler. (
Based on this structure and system layout in the complex, Scottsdale only provided coverage for the central "hubs" of energy, and refused to cover damage to the wires and pipes that serviced individual units. This satisfied the extent of the coverage that Scottsdale was required to provide under the Amended Master Deed and statute. Plaintiffs have introduced no evidence that Defendants failed to provide coverage for any portion of a common system that belonged to a centralized hub. Furthermore, the record indicates that Defendants covered a majority of the damage done to the rough carpentry of the building, and only refused to cover damage done to the framing and interior partitions found within the boundaries of a unit as defined by the deed. (
Notably, it is evident from the record that the purpose of the amendment to the Master Deed was to reduce Bay Colony's insurance costs by decreasing the amount of property for which it was required to purchase coverage. In fact, in August of 2008, the Association sent a letter to all unit owners in which it unequivocally stated that: "The way the Master Deed document is written, Bay Colony continues to be at risk with increasing insurance premiums. . . . [T]he Association does not wish to be responsible for individual unit owner property damage or insurance. This is easily remedied by [altering] . . . the Master Deed." (08/04/08 Letter Re: Proposed Am. Master Deed.) Accordingly, the Association adopted and incorporated into the deed a narrowed definition of "common elements" and an expanded definition of a "unit." (Am. Master Deed §§ 1E, 3A(1).) The Association put all unit owners on notice of their increased — and its decreased — insurance responsibility under the Amended Master Deed by way of a letter from the condominium's property manager, in which it was "strongly recommended" that unit owners provide their insurance agents with a copy of the amended deed to ensure that their policies complied with the new definitions. (See 11/19/09 Letter Re: Approved Master Deed Change.) Similarly, Defendants have introduced evidence that the Association sought to reduce its insurance obligations in response to water damage that occurred in 2007. In e-mails addressing coverage for the damage, representatives from Bay Colony explicitly stated that "the insurance provisions [] make it clear that the association only insurers the common elements and the unit owners are responsible for their own unit insurance and repair." (Docket No. 22, Defs.' Supp. Mem., Ex. C.) As such, given that the record here indicates that Plaintiff expressly intended to limit the degree of property for which it was required to purchase insurance coverage, it strains credulity to now find that Plaintiff actually intended to purchase coverage for the entirety of the building's heating, HVAC, plumbing, and electric systems.
Based on the above, the Court finds that the items for which Plaintiff seeks additional insurance proceeds are not common elements. As such, Bay Colony was not required to purchase — and Scottsdale was not required to provide — insurance coverage for these items in the first place.
Regardless of whether Bay Colony was required to obtain insurance coverage for the building's HVAC, heating, plumbing, and electric systems, it nonetheless contends that these items are expressly covered under the Policy.
Under New Jersey law,"[i]nsurance coverage is a matter of contract law determined by the language of insurance agreements."
In accordance with these principles of law, the Court turns to the relevant provisions of the insurance policy agreement between Plaintiff and Defendant Scottsdale. The opening paragraph of the Policy states that:
(Scottsdale Ins. Policy at 1.) This language clearly and unambiguously indicates that Scottsdale need only provide insurance coverage for property: (1) that is covered under the insurance policy, and (2) that is lost or damaged due to a cause specifically defined in the Policy.
In the text of the Policy, "covered property" is defined to include: "permanently installed machinery and equipment" within "the building or structure." (
Aside from the building's plumbing system, however, Plaintiff also claims that the HVAC, heating, and electric systems constitute equipment covered by the Policy. On the one hand, these items could conceivably fall within the definition of "covered equipment" because they "generate," "transmit," and/or "utilize" energy. On the other hand, however, in order to receive insurance coverage, the item in question must be both covered under the Policy and damaged as a result of a cause specifically listed in it. (
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Given that the language of Bay Colony's insurance agreement with Scottsdale is clear and unambiguous as to the extent of insurance coverage provided for "covered equipment," the Court is bound to enforce it according to this plain and ordinary meaning.
For the reasons set forth above, the Court will deny Plaintiff's Motion for Summary Judgment. Defendants' Cross-Motion for Summary Judgment will be granted with respect to Count I of Plaintiff's Complaint, but will be denied without prejudice with leave to re-file at a later date as to the remaining four counts.
An Order consistent with this Opinion follows.
28 U.S.C. § 1332(a)(1). In the instant case, there is complete diversity among the parties. Plaintiff Bay Colony is incorporated and maintains its principal place of business in New Jersey. Defendant Scottsdale is incorporated in Ohio and maintains its principal place of business in Arizona. Defendant C.I.A. is incorporated and maintains its principal place of business in New York, and Defendant Guttenplan is a citizen of New York. Moreover, the amount in controversy in this dispute exceeds the requisite $75,000.
(Defs.' Cross-Mot. Summ. J. 27-28.) If interpreted literally, this language appears to indicate that Defendants are requesting dismissal of all five counts asserted against Defendant Scottsdale in Plaintiff's Complaint.
As an initial matter, this matter is presently before the Court on summary judgment. A grant of summary judgment on a claim and the dismissal of a claim are procedurally distinct.
Moreover, even if the Court were to disregard Defendants' references to the dismissal of Plaintiffs' claims and handle them as a request for a grant of summary judgment, Defendants' request would nonetheless be denied because their Cross-Motion for Summary Judgment in no way addresses Plaintiff's claims made in Counts II, III, IV, and V. Rather, the context of Defendants' Motion is solely limited to Plaintiff's request for a declaratory judgment regarding the additional insurance coverage alleged in Count I. Given that Defendants have not sufficiently represented to the Court why they are entitled to summary judgment in their favor on Counts II through V, the Court solely limits its present discussion to whether either party is entitled to summary judgment on Count I. As such, Defendants' request as to the remaining four counts is denied without prejudice with leave to re-file at a later date.
In the instant case, there is no ambiguity in the Policy's language. Rather, as discussed in detail above, it is clear and unambiguous from the Policy's terms that the HVAC, plumbing, electric, and heating systems in Plaintiff's condominium complex are not equipment covered under the agreement.