ALMEEN PALMER VS. NEW JERSEY STATE PAROLE BOARD (NEW JERSEY STATE PAROLE BOARD)

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2472-14T2

STATE OF NEW JERSEY and NEW JERSEY DEPARTMENT OF EDUCATION,

Plaintiffs-Appellants,

v.

STAR INSURANCE COMPANY and MEADOWBROOK, INC.,

Defendants-Respondents. ______________________________

Argued March 8, 2016 – Decided June 10, 2016

Before Judges Reisner and Hoffman.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2923-12.

Carlton T. Spiller argued the cause for appellants (Greenbaum, Rowe, Smith, & Davis, L.L.P., attorneys; Mr. Spiller, of counsel and on the briefs, Steven B. Gladis, on the briefs).

Thomas E. Schorr argued the cause for respondents (Smith, Stratton, Wise, Heher & Brennan, L.L.P., attorneys; Mr. Schorr, on the brief).

In this insurance coverage dispute, plaintiffs State of New

Jersey and New Jersey Department of Education (collectively, the

State), appeal from a December 17, 2014 order granting summary judgment in favor of defendants Star Insurance Company and

Meadowbrook, Inc. (collectively, Star).

We review the grant of summary judgment de novo, using the

same legal standard as the trial court. Town of Kearny v.

Brandt, 214 N.J. 76, 91 (2013); see Brill v. Guardian Life Ins.

Co. of Am., 142 N.J. 520, 540 (1995). Like the trial court, we

consider whether there are material facts in dispute, and if

not, whether the undisputed facts, viewed most favorably to the

non-moving party, "'are sufficient to permit a rational

factfinder to resolve the alleged disputed issue in favor of the

non-moving party.'" Town of Kearny, supra, 214 N.J. at 91

(quoting Brill, supra, 142 N.J. at 540). We owe no deference to

the trial court's legal interpretations, including its

construction of an insurance contract. See Selective Ins. Co.

of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597,

605 (2012) (citations omitted); Princeton S. Inv., LLC v. First

Am. Title Ins. Co., 437 N.J. Super. 283, 287 (App. Div. 2014).

Having reviewed the record with those standards in mind, we

agree with the trial court that the commercial general liability

policy, which Star issued to the Newark Public Schools (the

District), did not cover the State. Accordingly, we affirm the

order on appeal.

I

2 A-2472-14T2 The Star policy was issued on July 1, 2007. The

declarations page listed "Newark Public Schools" as the named

insured, and "2 Cedar Street Newark, NJ 07012" appeared as the

insured's address on both the policy and the application for

insurance. In addition to the named insured and its employees,

the policy provided coverage to anyone "acting as [a] real

estate manager" for the named insured. The policy did not

define the term "real estate manager." The policy did not list

the State as an additional insured, nor did it identify the

Newark Public Schools as a State-operated school district.

The coverage dispute concerned litigation arising from a

2007 incident in which six gang members attacked four

individuals who were sitting in a District school yard at night.

Aeriel v. State Operated School Dist. for the City of Newark,

No. ESX-L-4320-08. Three of the victims were killed and the

fourth was severely injured. In 2008, the surviving victim and

the administrators of the deceased victims' estates (the Aeriel

plaintiffs) filed a complaint against the attackers, the

District, and its State-appointed school superintendent, Dr.

Marion Bolden.1

1 When a local school district fails or is unable to provide a thorough and efficient system of public education, the Education Act (Act) authorizes the State Department of Education to intervene by removing the local board of education and creating a state-operated school district. See N.J.S.A. 18A:7A-1 to -52; (continued)

3 A-2472-14T2 The Aeriel plaintiffs also sued the State, on the theory

that, because the District was under the State's control,

pursuant to the Education Act, the State was liable for failing

to maintain the school yard in a safe condition. In defending

against the Aeriel lawsuit, the State produced legally competent

evidence that it had no responsibility for managing or

maintaining the District's real estate. That evidence, which

included Dr. Bolden's sworn testimony, was later presented as

part of Star's summary judgment motion in the insurance coverage

case.

In the Aeriel lawsuit, Star defended and indemnified the

District as its named insured and the superintendent as a

District employee. In 2012, a few months before the scheduled

trial date, the State asserted for the first time that it was

(continued) Contini v. Bd. of Educ. of Newark, 286 N.J. Super. 106, 128-29 (App. Div. 1995), certif. denied, 145 N.J. 372 (1996). However, "[a] school district placed under full or partial State intervention" does not thereby become a State agency; rather it "shall remain a corporate entity." N.J.S.A. 18A:7A-37. The State intervened in the District in 1995. See Contini, supra, 286 N.J. Super. at 113. Due to its intervention, the State was authorized to appoint a State district superintendent to "[p]erform all acts and do all things, consistent with law and the rules of the State board, necessary for the lawful and proper conduct, equipment and maintenance of the public schools of the district." N.J.S.A. 18A:7A-38. A superintendent appointed under the Act is paid by the District and is considered a District employee, not a State employee, but is entitled to tort immunity as though she were a State officer. N.J.S.A. 18A:7A-35(b).

4 A-2472-14T2 entitled to coverage under the Star policy. Star denied

coverage, and in December 2012, the State filed the insurance

coverage lawsuit that gave rise to this appeal. In 2013, the

Aeriel lawsuit was settled mid-trial, with Star paying two

million dollars on behalf of the District and the

superintendent, and the State paying three million dollars.

II

On this appeal, as in the trial court, the State claims

coverage under three theories: the State should be deemed

covered under the policy as the District's "real estate

manager"; the State was an additional insured because the listed

insured's name - "the Newark Public Schools" - was ambiguous and

should be construed as covering the State; and the State was an

"implied insured" under the policy. We find no merit in any of

those contentions.

Relying on First National Bank of Palmerton v. Motor Club

of America Insurance Company, 310 N.J. Super. 1 (App Div. 1997),

the State contends that it is entitled to coverage under the

policy definition of "an insured," which includes "[a]ny person

(other than your employee), or any organization while acting as

your real estate manager."

In Palmerton, the bank, which was the mortgagee in

possession of an apartment complex, sought defense and indemnity

under the mortgagor's insurance policy, after someone fell and

5 A-2472-14T2 was injured on the complex premises. In that case, the mortgage

documents required the mortgagor to insure the property, and

provided that, "in the event of default, the Bank could take

possession of the premises," id. at 3, and could also "assume

operation of the property, including leasing, collecting rent,

repairing, and maintaining the premises." Id. at 4.

The mortgagor's insurance policy contained the same clause

as in this case, extending coverage to the insured's "real

estate manager." However, the policy also clearly acknowledged

the existence of the mortgage and specifically "allowed the

mortgagee to receive loss payments after the commencement of a

foreclosure." Ibid. Under those circumstances, we held that

[w]hether plaintiff was a "real estate manager" is to be determined by the language of the mortgage and security agreement, and the language of the insurance policy. Pursuant to the mortgage and security agreement, in the event of a default, the mortgagors consented to plaintiff having the right to take possession and assume operation of the property, and for plaintiff to act in the mortgagors' place. A reasonable interpretation of the insurance policy is that a "real estate manager" would include a mortgagee in possession such as plaintiff.

[Id. at 5.] We also considered that the insurance company was well

aware that the insured had a mortgage, and the policy included

coverage for mortgagees. In that context, there was "no added

6 A-2472-14T2 risk" involved in deeming the mortgagee in possession to be a

real estate manager:

In a situation such as this, where an insurer issues a policy knowing that the property is subject to a mortgage, and in fact the policy itself contains a standard mortgage clause extending coverage to mortgage holders, there is no added risk. At the time the policy was issued, it was foreseeable that a mortgagee could take possession and control of the property in the event of default. We perceive no meaningful distinction between the role of a receiver, real estate manager, or that of a mortgagee in possession.

[Id. at 9-10 (citations omitted).]

We agree with the trial judge that Palmerton is not on

point here. Unlike Palmerton, the insurance policy here did not

acknowledge the District's relationship with the State or put

the insurer on notice that it might be called upon to insure the

State as well as the District.

Moreover, we conclude that it is too great a stretch to

consider the State as the District's "real estate manager" based

on Bolden's general statutory authority as superintendent under

the Education Act. In support of its argument, the State cites

the superintendent's "power to perform all acts and do all

things that the [State Education] commissioner deems necessary

for the proper conduct, maintenance and supervision of the

schools in the district." N.J.S.A. 18A:7A-35(e). The State also

argues that, under the Act, the State district superintendent

7 A-2472-14T2 "may be given the power to . . . [p]erform all acts and do all

things, consistent with law and the rules of the State board,

necessary for the lawful and proper conduct, equipment and

maintenance of the public schools of the district." N.J.S.A.

18A:7A-38(b).

However, the aim of the Act is not to make the

superintendent into a real estate manager, or its equivalent,

but to put the superintendent in charge of the District's

educational policies and practices. N.J.S.A. 18A:7A-35, -49;

see also Contini, supra, 286 N.J. Super. at 128-29. By

contrast, a mortgagee's central and predictable purpose in

taking possession of a foreclosed property is to manage the real

estate. For that reason, Palmerton found "no meaningful

distinction" between a receiver, a real estate manager, and a

mortgagee in possession.2 See Palmerton, supra, 310 N.J. Super.

at 9-10.

Moreover, the undisputed record evidence in this case is

that Bolden did not take over the District's function of keeping

up its property, but she instead left that responsibility in the

2 In context, we understand the term "receiver" to refer to a rent receiver, typically appointed by the court to manage real property where a mortgagor is in default but the mortgagee does not wish to take possession of the premises. See Kaufman v. Duncan Inv'rs, L.P., 368 N.J. Super. 501, 506 (App. Div. 2004); Mony Life Ins. Co. v. Paramus Parkway Bldg., Ltd., 364 N.J. Super. 92, 97 n.1 (App. Div. 2003).

8 A-2472-14T2 hands of the District's employees. Further, although she took

direction from the State, by law Bolden was an employee of the

District and thus was covered under the Star policy as a

District employee. Hence, even if she were also deemed to be a

"real estate manager," she was the District's manager and not

the State's manager.

We likewise cannot agree with the State's claim that the

policy was ambiguous or that Star intended to write coverage for

the State as an additional insured. Courts "conceive a genuine

ambiguity to arise where the phrasing of the policy is so

confusing that the average policyholder cannot make out the

boundaries of coverage." Zacarias v. Allstate Ins. Co., 168

N.J. 590, 598 (2001) (citations omitted). "In that instance,

the policy should be construed to comport with the insured's

objectively reasonable expectations of coverage." Christafano

v. N.J. Mfr.'s Ins. Co., 361 N.J. Super. 228, 234 (App. Div.

2003). "Conversely, in the absence of an ambiguity, we 'should

not write for the insured a better policy of insurance than the

one purchased,'" but should instead enforce the policy as

written. Id. at 234-35 (citations omitted).

The State's citations to the record do not support its

claim that Star knew or should have known that it was writing

insurance that would cover the State, or that the District had a

reasonable expectation that the policy would cover the State.

9 A-2472-14T2 To the contrary, the request for proposals issued by the

District when it sought insurance for 2007 listed only "The

Newark Public Schools, the largest school district in the State

of New Jersey" as the proposed insured. Any reasonable reading

of the proposal would lead a bidder to understand that coverage

was being sought for the Newark public school district. There

was no mention that bidders were also being asked to write

coverage for the State or the State Education Department.

Likewise, the first line of the insurance application, which the

District submitted to Star, states: "NAME OF SCHOOL DISTRICT:

Newark Public Schools." We perceive no ambiguity in the

applicant's name, and the application did not indicate that the

District sought coverage for the State.

Nor does the record support the State's argument that Star

should have known that it was writing coverage for the State as

an additional insured, without the need for any specific notice

or application. The undisputed evidence supports the

certification submitted by Star's underwriter, attesting that

Star relied on the applicant to inform Star of any additional

insureds for whom coverage was sought. Star's and the

District's records both indicate that where the District

intended to add an insured to one of its Star-issued insurance

policies, it specifically applied for the addition of that

entity, and the addition was reflected in the declarations page

10 A-2472-14T2 of the policy. For example, the District applied to add the New

Jersey Schools Construction Corporation (NJSCC) as an additional

insured on one of its policies. Based on that application, Star

issued a policy listing NJSCC as an additional insured.

Under the Act, the District remained a corporate entity,

N.J.S.A. 18A:7A-37. It did not become synonymous with the State

by virtue of the State's intervention under the Act. In light

of Star's and the District's documented course of business

dealing, if the District intended to purchase coverage for the

State or the State Education Department as an additional

insured, it would have specifically requested that coverage.

Nor can we accept the State's theory that it was an implied

insured. The implied insured doctrine allows third parties to

be treated as beneficiaries of an insurance contract when "the

risk to the insurer is unchanged, and where a third party is

within the class intended to be benefitted by the parties to an

insurance contract." Stewart-Smith Haidinger, Inc. v. Avi-

Truck, Inc., 682 P. 2d 1108, 1113 (Alaska 1984). The State

acknowledges that our courts have not adopted that theory.

However, even if we consider the argument, it is without merit.

As previously discussed, the factual record does not support the

State's argument that it was an intended beneficiary under the

policy. Moreover, Star submitted legally competent evidence

that under its underwriting guidelines, adding the State as an

11 A-2472-14T2 insured would have been deemed an additional risk, and Star

would have charged an additional premium for adding the State as

an insured. The State's additional arguments on this point are

without sufficient merit to warrant discussion in a written

opinion. R. 2:11-3(e)(1)(E).

Affirmed.

12 A-2472-14T2