Opinion
DOCKET NO. A-1715-15T1 DOCKET NO. A-5269-15T3
04-28-2017
AJD CONSTRUCTION COMPANY, INC., Plaintiff-Appellant, v. CRUM AND FORSTER SPECIALTY INSURANCE COMPANY, Defendant-Respondent. PORT LIBERTE II CONDOMINIUM ASSOCIATION, INC., Plaintiff-Respondent, v. CRUM AND FORSTER SPECIALTY INSURANCE COMPANY, Defendant-Appellant.
Eric Jesse argued the cause for appellant AJD Construction Company, Inc. in A-1715-15 (Lowenstein Sandler LLP, attorneys; Mr. Jesse and Lynda A. Bennett, on the briefs). Denise Marra DePekary argued the cause for respondent in A-1715-15/appellant in A-5269-15 Crum & Forster Specialty Insurance Company (Carroll McNulty & Kull LLC, attorneys; Ms. DePekary and Blake Palmer, of counsel and on the briefs). Gene Markin argued the cause for respondent Port Liberte Condominium Association, Inc. in A-5269-15 (Stark & Stark, attorneys; Mr. Markin and John Randy Sawyer, of counsel; Mr. Markin, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3. Before Judges Sabatino, Nugent, and Currier. On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3377-14, and Hudson County, Docket No. L-1096-16. Eric Jesse argued the cause for appellant AJD Construction Company, Inc. in A-1715-15 (Lowenstein Sandler LLP, attorneys; Mr. Jesse and Lynda A. Bennett, on the briefs). Denise Marra DePekary argued the cause for respondent in A-1715-15/appellant in A-5269-15 Crum & Forster Specialty Insurance Company (Carroll McNulty & Kull LLC, attorneys; Ms. DePekary and Blake Palmer, of counsel and on the briefs). Gene Markin argued the cause for respondent Port Liberte Condominium Association, Inc. in A-5269-15 (Stark & Stark, attorneys; Mr. Markin and John Randy Sawyer, of counsel; Mr. Markin, on the brief). PER CURIAM
In these matters arising out of the construction of a condominium complex, we address two appeals regarding insurance coverage issues stemming from a series of lawsuits alleging construction defects in the building. In the first case, A-1715-15, plaintiff AJD Construction Company, Inc. (AJD) appeals from the trial court's dismissal of its complaint and denial of its motion for reconsideration, contending that the trial judge erroneously applied preclusion doctrines to bar its case against defendant Crum & Forster Specialty Insurance Company (C&F).
We have consolidated the appeals for the purpose of this opinion.
In the second case, A-5269-15, C&F appeals from the trial court's denial of its motion to dismiss the complaint. C&F argues that the plaintiff in that matter, Port Liberte II Condominium Association (the Association) lacks standing to bring a declaratory judgment action against it and is precluded from litigating C&F's coverage obligations to AJD.
After a review of the record in light of the applicable principles of law, we affirm the decision in A-1715-15 and reverse the ruling in A-5269-15.
I.
A. Underlying Port Liberte Actions
On July 10, 2008, the Association commenced the first of three construction defect lawsuits (the Port Liberte actions) against multiple defendants, including AJD. These actions, all venued in Hudson County, alleged design and construction defects with the common elements in the construction of a condominium complex project on which AJD served as the general contractor. C&F, which had issued commercial general liability (CGL) insurance policies covering AJD during the applicable period of the construction, denied coverage for the Port Liberte Actions. Arrowood Indemnity Company (Arrowood) and Assurance Co. of America (Assurance) had also issued CGL policies to AJD during the pertinent timeframe. Arrowood assumed the defense of AJD with a reservation of rights regarding its duty to indemnify AJD.
B. The Arrowood Declaratory Judgment Action
On April 22, 2010, Arrowood filed an action for declaratory judgment against C&F, also in Hudson County, naming Assurance and AJD as defendants (the Arrowood Action). Arrowood sought a declaratory judgment that C&F was "obligated to contribute to the defense costs incurred by Arrowood in defending the [Port Liberte Actions]." Although served with the complaint, AJD did not respond and was administratively dismissed, after notice, under Rule 1:13-7 for lack of prosecution.
C&F presented a motion for summary judgment, arguing it did not have a duty to defend AJD under the policies. After a review of the applicable law and the complaint, the motion judge granted summary judgment to C&F on April 15, 2011, finding that C&F had no duty to defend AJD in the Port Liberte actions. The judge relied on the then well-established law in Weedo v. Stone-E-Brick, Inc., 81 N.J. 233 (1979), holding that a CGL policy did not afford coverage for an insured's faulty workmanship. She found that the allegations in the complaint supported the Association's claim for the recovery of costs related to the replacement and repair of AJD's work on the building project. AJD's expert engineering reports confirmed the damage at issue in the lawsuits was limited to AJD's work on the project, not some other "occurrence." The judge concluded that C&F's policy did not provide coverage under those circumstances, and therefore, it did not have a duty to defend AJD.
In her ruling, the judge noted that
the only issue is whether Crum [&] Forster is obligated to contribute to the defense costs incurred by Arrowood in defending the underlying suits . . . . the duty to defend is much broader than that on the duty to indemnify, and extends to suits that are later found to be groundless, false, even fraudulent. . . . for which an insurer may have to provide a defense, even if [they] are untimely.
C. The AJD I Action
In February 2013, AJD filed a declaratory judgment action in Monmouth County against C&F (and several other insurers), alleging that C&F had a duty to defend and indemnify AJD with respect to three other lawsuits alleging defective construction work unrelated to the condominium project. AJD had served as the general contractor on those projects. C&F had denied coverage to AJD in those actions.
The respective parties filed motions and cross-motions for summary judgment for a determination of C&F's duty to defend AJD pursuant to the policies it had issued to AJD covering those projects. The judge ruled in April 2014 that C&F had a duty to defend AJD as its policies were triggered by the allegations of consequential property damage caused by AJD's subcontractors.
Consequently, AJD sought leave to amend its complaint to include the Port Liberte actions but the motion was denied in August 2014 with the judge noting on the order that there was "no plausible explanation provided for [the] failure to include these actions in the underlying complaint."
The Association intervened in that suit and filed an answer and cross claim seeking a declaration that C&F had a duty to indemnify AJD in connection with any judgment or settlement reached in the Port Liberte cases. C&F moved for summary judgment, arguing that the Association lacked standing to seek declaratory relief from C&F, and that the Arrowood decision precluded the Association from re-litigating coverage issues with respect to the Port Liberte actions under the doctrines of claim and issue preclusion.
Counsel advised at oral argument on the motions that C&F and AJD had reached a settlement on the issues between them, but the cross claim of the Association against C&F remained unresolved.
On August 18, 2015, the motion judge rejected both arguments in an oral decision. He found that the Association had standing to proceed with the action, and since the Association had not been involved in the Arrowood case, preclusion doctrines were not applicable to the present matter.
In December 2015, after the discovery end date of April 2015 had expired, the Association moved for leave to amend its cross claim against C&F seeking a declaration that: (1) C&F owed coverage to the Association for damages caused by AJD; (2) a determination of the damages suffered by the Association attributable to AJD's negligence; and (3) a judgment that C&F pay the damages for which AJD was responsible in excess of the amount paid by and behalf of AJD in settlement. The motion advised that the Port Liberte actions in Hudson County had settled between the Association and AJD "for a significant amount" in September 2014 prior to a trial of the cases.
In January 2016, the judge denied the motion and noted on the order: "Discovery end date has passed, to permit amendment would be unduly prejudicial."
D. The AJD II Action
In September 2014, AJD filed a declaratory judgment action against C&F in Monmouth County, alleging that C&F had a duty to defend and indemnify AJD in the Port Liberte actions and, in refusing to do so, had breached its contract with AJD. C&F moved to dismiss the action on the grounds of claim preclusion, issue preclusion, and the entire controversy doctrine, arguing that AJD's rights to coverage for the Port Liberte matters had already been determined in the Arrowood case.
AJD opposed the motion, contending that because it was administratively dismissed from the Arrowood action months before the order was entered, it could not be bound by the court's decision. AJD argued that in the absence of a final adjudication on the merits against it, C&F was not entitled to invoke preclusion doctrines. AJD also urged the trial court to consider the recent change in the law at the crux of the Arrowood decision set forth in Cypress Point Condominium Ass'n v. Adria Towers, LLC, 441 N.J. Super. 369 (App. Div. 2015).
The Supreme Court later affirmed this court's decision in Cypress Point Condominium Ass'n v. Adria Towers, LLC, 226 N.J. 403 (2016).
In an October 8, 2015 oral decision, the motion judge granted C&F's motion to dismiss, finding AJD was precluded by the Arrowood decision from re-litigating C&F's defense and indemnification obligations in the Port Liberte Actions. The judge considered the doctrines of issue and claim preclusion and entire controversy, and concluded that AJD had chosen "not to follow the mandates of our Supreme Court by bringing all possible claims" in the Arrowood action. She stated that:
A different judge handled this matter than had ruled in the AJD I action.
[t]he judgment in the Arrowood matter is valid, final and on the merits. The parties are identical. The claim admittedly grows out of the same transaction.
. . . .
[I]n both cases [Arrowood and AJD II] the key issue was an analysis of the same policy
language with the allegations below to determine whether the policies provided coverage, indemnification obligations and a duty to defend to AJD with respect to the litigations at issue. It's the same, that determination, that coverage determination was essential in the Arrowood case.
On December 2, 2015, a subsequent motion for reconsideration was denied. AJD now appeals from the grant of C&F's motion for dismissal and the denial of the reconsideration motion.
In light of these rulings, C&F moved for summary judgment in AJD I, arguing that the adjudication that AJD had no right to coverage in the Port Liberte actions as a result of the Arrowood determination served to extinguish any rights asserted by the Association, which were solely derivative of those belonging to AJD. The judge agreed, and granted summary judgment to C&F on May 13, 2016, finding that his colleague's determination in AJD II that AJD had no right to coverage in the Port Liberte actions required the dismissal of the Association's cross claim against C&F.
E. The Association Case
On March 14, 2016, the Association filed a declaratory judgment complaint in Hudson County, seeking a declaration that C&F was obligated to pay for damages attributable to AJD's negligence that were in excess of the settlement amount that AJD contributed to in the resolution of the Port Liberte actions.
This new lawsuit followed the denial of the Association's motion to amend its cross claim in the Monmouth County litigation (AJD I) in which it had sought identical relief.
Subsequently, C&F filed a motion to dismiss the Association's complaint, arguing the Association lacked standing to bring the case, and that preclusion doctrines barred the Association from re-litigating these coverage issues. In a June 22, 2016 oral decision, the motion judge denied C&F's motion to dismiss the complaint. He found that the Association had standing to proceed with its case as it only sought a declaration of C&F's coverage responsibilities to the Association, not monetary damages. He also determined that the Association was not bound by the Arrowood determination as there had been no litigation regarding the Association's right to a coverage determination concerning AJD.
C&F filed a motion for leave to appeal, which we granted in August 2016.
II.
We begin by addressing the appeal of AJD from the dismissal of its action against C&F in AJD II following the judge's determination that it was barred from bringing the suit as a result of the Arrowood decision. AJD argues that a dismissal without prejudice under Rule 1:13-7 is not an adjudication on the merits against the dismissed party. Therefore, AJD states it cannot be bound by the court's orders subsequent to its dismissal.
We are mindful that in reviewing a Rule 4:6-2(e) dismissal, we employ the same standard as that applied by the trial court. Donato v. Moldow, 374 N.J. Super. 475, 483 (App. Div. 2005). Our review is limited to the "legal sufficiency of the facts alleged in the complaint." Id. at 482. We "assume the facts as asserted by plaintiff are true[,]" and we give the plaintiff "the benefit of all inferences that may be drawn . . . ." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 166 (2005) (quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)). Dismissal is appropriate only if "the complaint states no basis for relief and discovery would not provide one . . . [.] " Id. at 166.
In the Arrowood case, Arrowood as an insurer of AJD, provided a defense to its insured in the Port Liberte actions. The complaint demanded that C&F, who also had issued insurance policies to AJD in the pertinent timeframe but had declined coverage, contribute to and participate in AJD's defense of the lawsuits. Arrowood sought reimbursement from C&F of defense costs it had incurred in defending their mutual insured. AJD was named as a defendant in the Arrowood suit and described as an interested defendant "who should be bound by the outcome of any declaratory judgment entered." The complaint sought a judgment that C&F had "a duty to defend[] or participate in the defense of [] AJD" in the Port Liberte actions, and that C&F "must reimburse Arrowood all defense costs and expenses that Arrowood has paid in the defense of AJD" in the Port Liberte actions that should have been paid by C&F. There was no relief sought from AJD.
After AJD failed to answer the complaint served upon it by Arrowood, it was administratively dismissed pursuant to Rule 1:13-7. That rule "is an administrative rule designed to clear the docket of cases" in which a party has failed to perform certain obligations including the failure to file an answer. Pressler & Verniero, Current N.J. Court Rules, comment 1.1 on R. 1:13-7 (2017). The rule expressly states that dismissal under it is without prejudice. The rule is "complementary to . . . Rule 4:37-2(a) providing for dismissal without prejudice for failure to . . . comply with the rules or a court order." Ibid. There are mechanisms under the rule by which a defendant may be reinstated. A plaintiff may also request the entry of default and default judgment to prevent the dismissal of a defendant.
No party, including AJD, took any action to reinstate AJD. Instead, Arrowood and C&F litigated the issue that was the focus of the complaint — whether C&F should be required to defend AJD in the Port Liberte actions, and whether Arrowood was entitled to a contribution from C&F for defense costs it had incurred in AJD's defense. The issue before us is whether the Arrowood judge's determination that C&F did not owe a duty to defend AJD under its insurance policies covering the Port Liberte project is binding on AJD in all subsequent litigation, despite AJD having been dismissed from the action prior to the ruling. Under these circumstances, we conclude that the Arrowood ruling is binding upon AJD, and therefore, affirm the Monmouth County judge's ruling in AJD II.
AJD argues that a party dismissed from an action pursuant to Rule 1:13-7 cannot be bound by court orders issued subsequent to the dismissal because there has been no adjudication on the merits as against that dismissed party. We agree that generally the dismissal of a party or a claim without prejudice does not bar the reinstitution of the same claim in a later action. Woodward-Clyde Consultants v. Chem. & Pollution Scis., Inc., 105 N.J. 464, 472 (1987). We, however, find the discrete circumstances before us require a different conclusion.
The issue before the court in Arrowood was whether C&F owed AJD a duty to defend under the terms of its insurance policies, and the concomitant contribution to defense costs for AJD for the Port Liberte suits. Despite AJD's decision to not respond to the complaint and participate in the litigation, the judge ruled upon the issue; she determined after an extensive analysis of the language in the insurance policies and the existing state of the law that C&F did not owe coverage. She stated:
Counsel for C&F represents that it served a copy of the summary judgment motion upon counsel for AJD.
As the case law requires me to do, I've reviewed the . . . policy provisions, including most definitely the definitions, and the allegations. Considering them as a whole I don't see where it is alleged that any property damage [was incurred] within the meaning of the Crum and Forster policy.
. . . .
Because the underlying complaint and the extrinsic evidence don't support the conclusion, in my view, that Crum and Forster's policy is triggered by, again, this language, property damage caused by an[] occurrence, Crum and Forster has properly denied the tender of defense and I'm granting their summary judgment motion.
As the complaint requested, the judge's ruling in 2011 adjudicated the coverage obligations of the respective parties to AJD for the Port Liberte litigation. That was the sole issue presented to the court in the Arrowood action. Arrowood did not appeal from the decision, nor did it seek leave for reinstatement of AJD in the litigation.
Two years later, AJD filed AJD I, a declaratory judgment action in Monmouth County against C&F (and several other insurers). This case alleged that C&F had a duty to defend and indemnify AJD with respect to three other lawsuits arising out of construction work unrelated to the condominium project. AJD had served as the general contractor on these projects and was charged with defective construction work. C&F had denied coverage to AJD in those actions. A judgment for coverage from C&F for Port Liberte was not included in this lawsuit.
After a favorable ruling in 2014 determining that C&F owed coverage to AJD for its work on those other projects, AJD moved the court for leave to amend its complaint to add claims against C&F from the denial of coverage for the Port Liberte project. The judge denied the motion, finding that the amendment was precluded by AJD's failure to assert the claims in its original complaint.
The following month, AJD instituted AJD II, also in Monmouth County, alleging that C&F had a duty to defend and indemnify AJD in the Port Liberte actions. In a comprehensive oral decision, the judge found AJD was barred from re-litigating the coverage issue previously determined in the Arrowood case under preclusion and entire controversy doctrines.
In its brief on appeal, AJD's sole argument is that because it was dismissed under Rule 1:13-7 prior to the ruling in Arrowood, it was not bound by that decision. AJD challenges the Hudson County judge's rulings on preclusion principles, stating that they have no application because of the dismissal, and reiterating that there was no adjudication on the merits in the Arrowood case as to AJD. We disagree.
The only issue before the Arrowood court was whether C&F had a duty to defend — a coverage obligation — to AJD. The only determination and adjudication the Arrowood judge made was the ruling that C&F did not have a duty to defend AJD in the Port Liberte actions and did not owe coverage to its insured. The issue that AJD sought to re-litigate in AJD I and II was exactly the same issue presented to and resolved by the Arrowood court — an adjudication that C&F owed coverage for the Port Liberte lawsuits.
We find AJD's reliance on Woodward-Clyde, supra, 105 N.J. at 472, not instructive as the facts are distinguishable from the matter before us. The defendant there asserted a counterclaim in response to the complaint. Because of a simultaneous criminal investigation, the defendant invoked its Fifth Amendment privilege against self-incrimination, thus rendering it unable to provide discovery on the counterclaim. The result was a dismissal without prejudice of the counterclaim under Rule 4:37-2(a) for failure to comply with a court order. Following the resolution of the civil and criminal cases, the defendant instituted a new action asserting the same claims it had presented in the dismissed counterclaim.
The Supreme Court held that the new action did not violate the entire controversy doctrine because defendant had previously asserted its claims in the counterclaim, stating that "[t]o satisfy the doctrine, a party is obliged only to assert the claim." Id. at 473.
[A] party is required to assert in one action all claims arising from a single controversy. Hence, it is mandatory that a defendant assert a counterclaim based upon a breach of the contract that is the basis for the complaint. Accordingly, at the risk of being precluded in a later action, defendant here was obliged to assert its counterclaim for breach of contract and related matters against plaintiff.
[Ibid.]
AJD was not hampered by any Fifth Amendment privilege restrictions in the Arrowood case. It was served with the complaint notifying it that C&F's coverage obligations for the Port Liberte lawsuits were going to be adjudicated. AJD was provided a copy of the summary judgment motion in which C&F urged the court to find a denial of coverage for AJD. Despite that knowledge, AJD chose not to participate in the litigation, thereby foregoing its opportunity to present its position on the coverage issue. After the Arrowood court denied coverage to AJD from C&F, there was no motion for reinstatement; no party sought appellate review.
AJD also relies on Watkins v. Resorts International Hotel & Casino, 124 N.J. 398 (1991), in support of its argument that a Rule 1:13-7 dismissal cannot preclude it from asserting its coverage claim against C&F in subsequent litigation. We do not find Watkins helpful to our analysis. In that case, initially filed in federal court, the plaintiffs claimed to have been the targets of discriminatory practices by the defendants. They sought relief under federal anti-discrimination laws. When the plaintiffs failed to timely serve the summons and complaint, the federal court dismissed the complaint without prejudice. The court also found that plaintiffs did not have standing to sue as individuals and dismissed the remaining counts with prejudice.
The plaintiffs filed a subsequent suit in state court, alleging the same facts but asserting violations entirely of state law. The trial court dismissed the complaint, finding it barred by the entire controversy doctrine as the cause of action had already been decided in federal court. After this court affirmed, the Supreme Court granted certification. In a discussion of the applicable federal rules, the Court determined that the dismissal of the complaint for insufficient service of process was not a judgment on the merits for res judicata purposes. Id. at 424. In its consideration of the dismissal of the complaint for lack of standing, the Court noted that the determination of whether plaintiffs had standing to sue in federal court was a threshold justiciability requirement that had to be resolved before a court could proceed to consider the merits of a case. Ibid. The Supreme Court found that because of the federal court's ruling that the plaintiffs lacked standing to bring their claims, the court never reached the merits of their case. Therefore, the dismissal of the federal court case was not entitled to preclusive effect.
Here, the Arrowood court considered and ruled on the merits of the Port Liberte coverage issues vis-a-vis C&F and AJD. We are satisfied that the judge's analysis in AJD II of issue and claim preclusion and the entire controversy doctrines was supported under the circumstances in these matters. Any other resolution would defeat the goals of the entire controversy doctrine — judicial administration and fairness to litigants. The doctrine recognizes that it is neither fair nor efficient to fragment a single controversy into separate actions as such fragmentation can harass litigants, delay final adjudication and waste judicial resources. Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 350-52 (1984). We affirm the ruling in AJD II on those grounds.
III.
We next turn to a consideration of C&F's appeal of the Hudson County court's refusal to dismiss the Association's case. In that action, the Association sought a declaration from the court that C&F was obligated to pay damages attributable to AJD's negligence that were in excess of the settlement amount that AJD contributed to the resolution of the Port Liberte actions.
C&F argues, as it did to the trial judge, that (1) the Association lacked standing to bring the complaint; (2) the complaint should be dismissed on grounds of comity; (3) the relief sought constitutes a double recovery for the Association; (4) preclusion doctrines bar the complaint, and (5) the complaint should be dismissed as it has been determined that AJD has no right to coverage under the C&F policies.
We begin with a discussion of the standing issue. In its complaint, the Association demanded a declaration that C&F's policies provided coverage for AJD, and a "determination of the damages suffered by the Association attributable to AJD's negligence" and a "judgment that Crum must pay those covered damages that AJD is responsible for in excess of the amount paid by and on behalf of AJD in settlement." On appeal, the Association clarifies that it is only seeking declaratory relief; a determination of "the viability and extent of Crum's indemnification obligations to AJD, specifically as they relate to consequential damages caused by AJD's negligence at the Port Liberte []development."
It is well established law that "an individual or entity that is 'a stranger to an insurance policy has no right to recover the policy proceeds.'" Ross v. Lowitz, 222 N.J. 494, 512 (2015) (citing Gen. Accident Ins. Co. v. N.Y. Marine & Gen. Ins. Co., 320 N.J. Super. 546, 553-54 (App. Div. 1999 )).
We have explained further that an injured third party may not file a direct claim against an insurance company absent an assignment of rights. See Murray v. Allstate Ins. Co., 209 N.J. Super. 163, 165 (App. Div. 1986), appeal dismissed, 110 N.J. 293 (1988)). Without an assignment of rights, an injured party must prove that the contracting parties intended it to be a third-party beneficiary of the agreement at the time the contract was executed. Ross, supra, 222 N.J. at 514.
The Association does not contend that it was assigned AJD's contract rights under the C&F policies, nor does it claim that it received an assignment of AJD's rights in the settlement agreement between itself and AJD.
With counsels' consent, we were provided a copy of the settlement agreement after oral argument. The agreement reflects no assignment. --------
The Association also does not contend that it has a judgment against C&F. It settled the Port Liberte actions with AJD, thus preventing an admission of liability or judicial adjudication of damages. "[A]n injured person possesses no direct cause of action against the insurer of the tortfeasor prior to recovery of judgment against the latter." President v. Jenkins, 357 N.J. Super. 288, 312 (App. Div. 2003), aff'd in part, rev'd in part on other grounds, 180 N.J. 550 (2004).
Under the principles of law set forth above, the Association is not entitled to seek damages from C&F as it holds neither an assignment of rights nor a judgment.
Despite the well-established concepts of insurance law discussed, supra, the trial judge ruled that the Association had standing to bring its complaint under the Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -62, referring to Occhifinto v. Olivo Construction Co., 221 N.J. 443 (2015), as support for his decision. Occhifinto did not address nor rule upon whether an injured party may bring a direct claim against its tortfeasor's insurer prior to an adjudication of the tort. Rather, the Court considered under what circumstances a party was a "prevailing party" entitled to recover counsel fees in the context of a successful declaratory judgment action but unsuccessful liability action. We discern nothing in the Court's decision that signifies a transformation in this area of longstanding law. We also note that three months after deciding Occhifinto, the Court reaffirmed the common law rule at issue in Ross, supra, 222 N.J. at 512, without reference to Occhifinto.
The Association also relies on dictum in Manukas v. American Insurance, 98 N.J. Super. 522 (App. Div. 1968) as support for the assertion of its complaint. In Manukas, the plaintiff brought suit against a church after sustaining injuries in a fall on the premises. After the action was dismissed on charitable immunity grounds, the plaintiff brought a new action seeking recovery from the church's insurer.
In affirming that "an injured person possesses no direct cause of action against the insurer of the tortfeasor prior to recovery of judgment," we upheld the grant of summary judgment to the insurance company. Id. at 524. We advised that the plaintiff could not maintain an action against the defendant without first establishing the church's negligence and the quantum of damages in an action against the church or to which the church was a party. We stated, "Plaintiff could have included a declaratory judgment action against American in the action against the church, or instituted a separate declaratory judgment action joining the church as a party, but it cannot maintain the present action." Id. at 525.
The Association contends that this language allows it to pursue its declaratory judgment claim. We disagree. In the nearly fifty years that have passed since the decision in Manukas, countless opinions on insurance coverage issues have emanated from both this court and our Supreme Court; none have lifted the bar on the longstanding common law rule that we rely on here. We decline the Association's invitation to "crystallize [our] holding in Manukus [and] carv[e] out a declaratory judgment exception to the general 'no direct action' rule."
The Association also urges us to consider the Court's recent Cypress Point decision, stating that it demonstrates "New Jersey courts' willingness to decide coverage issues raised by an injured third-party beneficiary in a liability action against a defendant insured." As in the instant case, Cypress Point involved construction defect lawsuits where the developer's insurer disclaimed coverage under its CGL policies for damage caused by the developer's subcontractor's faulty workmanship. Supra, 226 N.J. at 407-11. The Association maintains that "the Supreme Court took no issue with plaintiff [condominium] association's standing to bring the declaratory claims against defendant developer/general contractor's insurers in the same action where it maintained liability claims against the developer/general contractor." Nor do we.
The association in Cypress Point had standing to bring their third-party claim because it was joined to a direct claim against the defendant-developer. See Manukas, supra, 98 N.J. Super. at 525 ("Plaintiff could have included a declaratory judgment action against [the defendant's insurance company] in the action against the [defendant]."). Here, the Association did not present its declaratory judgment claims in the Port Liberte actions in 2008, or any time prior to the settlement with AJD, where a coverage determination could have been made following a resolution of liability and damages issues against defendants.
The court's ruling in the Association case is contrary to the well-established concepts of insurance law that have solidly stood in our jurisprudence for many years. We see no principled reason to disturb that law. Accordingly, we reverse the denial of C&F's motion for a dismissal of the complaint.
We affirm the ruling of the trial court in AJD II, A-1715-15, dismissing AJD's claims against C&F. We reverse the trial court's ruling in the Association's case, A-5269-15, denying C&F's motion for dismissal. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION