NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1614-19
OLVIN LEONEL RODRIGUEZ- ORTIZ,
Plaintiff,
v.
INTERSTATE RACKING & SHELVING, II, INC., LIT/GREEK RT. 130, LLC, MEDICA, and TITAN RACK & SHELVING, LLC,
Defendants,
and
INTERSTATE RACKING & SHELVING, II, INC.,
Plaintiff-Appellant,
BERKSHIRE HATHAWAY, INC., GUARD INSURANCE COMPANY, a/k/a AMGUARD INSURANCE COMPANY, and BERKSHIRE HATHAWAY GUARD, a/k/a BERKSHIRE HATHAWAY GUARD INSURANCE COMPANY,
Defendants-Respondents. _____________________________
Argued January 27, 2021 – Decided September 3, 2021
Before Judges Ostrer, Accurso, and Enright.
On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket Nos. L-1477-15 and L-1563-18.
H. Alton Neff argued the cause for appellant.
Robert M. Wolf argued the cause for respondent AmGuard Insurance Company (Finazzo Cossolini O'Leary Meola & Hager, LLC, attorneys; Jeremiah O'Leary and Robert M. Wolf, on the brief).
PER CURIAM
Interstate Racking & Shelving, II, Inc. (Interstate) contends that its
workers' compensation and employer's liability insurer, AmGuard Insurance
Company (AmGuard), should have provided it a defense to a tort suit brought
by an Interstate employee who was injured on the job. The employee was
already receiving workers' compensation benefits. His lawsuit sought additional
damages based on common law claims that Interstate (and others) acted
intentionally as well as negligently, recklessly and carelessly. Eventually,
A-1614-19 2 Interstate sued AmGuard for a defense. While Interstate's claim was pending,
the court dismissed the employee's underlying suit — which Interstate defended
with its own attorney — because he could not prove an intentional wrong to
surmount the Workers' Compensation Act's exclusivity provision, N.J.S.A.
34:15-8. Later, on cross-motions for summary judgment in the coverage action,
the trial court dismissed Interstate's complaint seeking defense costs and denied
Interstate's motion for a declaration of coverage. The court held that exclusions
in the employer's liability part of Interstate's policy barred its claim.
On appeal, Interstate challenges the trial court's interpretation of the
policy. Interstate also argues that, to the extent the policy does bar recovery, it
is void because it limits the scope of statutorily mandated coverage. Interpreting
the employer's liability policy anew, we conclude it excludes coverage for
Interstate's defense costs. However, AmGuard concedes that the workers'
compensation portion of its policy afforded coverage of defense costs of
negligence-based claims. Therefore, we reverse in part and remand for a
determination whether, and to what extent, Interstate may recover costs
associated with defending the negligence-based claims.
A-1614-19 3 I.
The facts are largely undisputed. Interstate employee Olvin Rodriguez-
Ortiz fell off a warehouse racking system that he was dismantling and suffered
serious injuries. He was not wearing a harness or other safety equipment. At
the time, AmGuard insured Interstate under a Workers' Compensation and
Employer's Liability Policy. Rodriguez-Ortiz filed a petition for workers'
compensation benefits, on which AmGuard has paid in excess of $1 million.
Almost a year after the accident, Rodriguez-Ortiz also sued Interstate in
Superior Court, seeking compensatory and punitive damages arising out of the
same injuries. Rodriguez-Ortiz also sued numerous mainly fictitiously-named
business entities and individuals who were somehow connected to the accident
or the property and equipment involved. The prolix complaint, as later amended,
alleged: Interstate and others failed to warn Rodriguez-Ortiz, to provide him
needed safety equipment, or to take other measures to assure his safety; they
created or permitted a "known dangerous hazard . . . which presented an
unreasonable risk of harm"; their "negligence, recklessness and carelessness"
caused Rodriguez-Ortiz's fall; and they were "strictly liable in tort." Rodriguez-
Ortiz also alleged that Interstate's conduct "was especially egregious, wanton
A-1614-19 4 and/or intentional and amounted to conduct of a character so reprehensible as to
warrant the award of punitive damages."
Interstate's attorney forwarded the summons and complaint to Interstate's
commercial general liability insurer, Essex Insurance Company (Essex), and
demanded a defense and indemnification up to the policy's limit, if necessary.
Separately, Interstate's owner sent a similar demand to Interstate's insurance
producer, who evidently procured both the Essex and AmGuard policies.
Shortly after Interstate filed its answer, Rodriguez-Ortiz's attorney delivered a
copy of the complaint to AmGuard. Interstate's attorney also communicated
with AmGuard about the suit. But the record includes no express written
demand for a defense like the one sent to Essex.
Three years into the employee's pending tort action, Interstate sued
AmGuard for its defense costs, an assumption of the defense, and a declaratory
judgment of coverage under the employer's liability portion of its policy.
Interstate contended it was entitled to a defense from AmGuard because
Rodriguez-Ortiz alleged that Interstate acted intentionally. The "verified"
complaint stated that Interstate demanded a defense "by notification through its
A-1614-19 5 insurance agent."1 In addition to its breach of contract claim, Interstate asserted
a breach of the covenant of good faith and fair dealing, a breach of the duty of
care, fraud, wrongful denial of insurance coverage, and violation of the
Consumer Fraud Act, N.J.S.A. 56:8-1 to -224. Interstate also sought attorney's
fees and punitive damages.
In its answer, AmGuard asserted that its policy excluded coverage of
Rodriguez-Ortiz's intentional tort claim because it excluded claims for
intentional wrongs and actions that the insured knows are "substantially certain"
to cause death or injury; and the policy excluded a duty to defend uncovered
claims. Interstate's coverage action was consolidated with Rodriguez-Ortiz's
tort suit.
After discovery in the tort suit, Interstate succeeded in having the
complaint dismissed on summary judgment. The court, citing Millison v. E.I.
du Pont de Nemours & Co., 101 N.J. 161 (1985) and Laidlow v. Hariton
Machinery Co., 170 N.J. 602 (2002), held that Rodriguez-Ortiz could not satisfy
1 We say "verified" in quotes because Interstate's president, Miguel Suarez Hernandez, certified only that the statements in the complaint were "true to the best of [his] knowledge and information," which is not a proper verification. See Jacobs v. Walt Disney World, Co., 309 N.J. Super. 443, 454 (App. Div. 1998) (stating that factual assertions based merely upon information and belief are inadequate under Rule 1:6-6). A-1614-19 6 the "intentional wrong" exception to the Workers' Compensation Act's
exclusivity provision, N.J.S.A. 34:15-8.2 The court concluded that Rodriguez-
Ortiz failed to prove that Interstate knew its actions were substantially certain
to cause Rodriguez-Ortiz's injury, and failed to prove that Rodriguez-Ortiz's
injury was more than what may "commonly arise within an industrial life."
And, a few months later, on cross-motions for summary judgment in the
coverage action, the court held that the AmGuard employer's liability policy
excluded coverage for Interstate's defense costs. The court noted that the
employer's liability policy excluded coverage for claims that the workers'
compensation part of the policy covered. And the employer's liability policy
also excluded coverage for intentional wrongs, including those that would
satisfy the "substantially certain" test in Millison and Laidlow. Because the
2 The Court in Laidlow, 170 N.J. at 617, summarized the test this way:
[U]nder Millison, in order for an employer's act to lose the cloak of immunity of N.J.S.A. 34:15-8, two conditions must be satisfied: (1) the employer must know that his actions are substantially certain to result in injury or death to the employee, and (2) the resulting injury and the circumstances of its infliction on the worker must be (a) more than a fact of life of industrial employment and (b) plainly beyond anything the Legislature intended the Workers' Compensation Act to immunize. A-1614-19 7 policy denied a duty to defend uncovered claims, Interstate was not entitled to
its defense costs.
Interstate serves up a dozen points on appeal. Reduced to their essence,
Interstate presents three main arguments: (1) AmGuard was required to defend
because Rodriguez-Ortiz grounded claims in negligence, and the AmGuard
employer's liability policy did not exclude negligence claims; (2) the exclusion
of intentional wrongs, including actions substantially certain to cause injury,
was void because it limited coverage Interstate was compelled to obtain; and (3)
AmGuard was estopped from denying coverage.
II.
As the record discloses no genuine issue of material fact, Interstate's
appeal turns on purely legal issues that we review de novo: does the AmGuard
policy exclude coverage; does the compulsory insurance law override its terms;
and was AmGuard estopped from denying coverage. See Abboud v. Nat'l Union
Fire Ins. Co. of Pittsburgh, Pa., 450 N.J. Super. 400, 406 (App. Div. 2017)
(stating that interpreting an insurance policy is a legal question that we review
de novo); Pickett ex rel. Est. of Pickett v. Moore's Lounge, 464 N.J. Super. 549,
555 (App. Div. 2020) (stating that resolution of insurance policy interpretation
A-1614-19 8 issue will determine whether insurer was entitled to summary judgment where
"the record discloses no genuine issue of material fact").
A.
Turning first to the AmGuard policy, we are "guided by general principles:
'coverage provisions are to be read broadly, exclusions are to be read narrowly,
potential ambiguities must be resolved in favor of the insured, and the policy is
to be read in a manner that fulfills the insured's reasonable expectations.'" Sosa
v. Mass. Bay Ins. Co., 458 N.J. Super. 639, 646 (App. Div. 2019) (quoting
Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J.
597, 605 (2012)). We apply the policy language's "plain, ordinary meaning."
Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). We liberally construe
the policy in the insured's favor "to the end that coverage is afforded 'to the full
extent that any fair interpretation will allow.'" Progressive Cas. Ins. Co. v.
Hurley, 166 N.J. 260, 273 (2001) (quoting Kievit v. Loyal Protective Life Ins.
Co., 34 N.J. 475, 482 (1961)). "In determining whether there is ambiguity, we
consider whether an average policyholder could reasonably understand the
scope of coverage, and whether better drafting could put the issue beyond
debate." Sosa, 458 N.J. Super. at 646.
A-1614-19 9 We must examine the scope of the policy's coverage because "the duty to
defend comes into being when the complaint states a claim constituting a risk
insured against." Danek v. Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953),
aff'd o.b., 15 N.J. 573 (1954). The duty exists even if "the cause of action . . .
cannot be maintained against the insured either in law or in fact — in other
words, because the cause is groundless, false or fraudulent." Ibid.; see also
Abouzaid v. Mansard Gardens Assocs., 207 N.J. 67, 79 (2011). "The complaint
should be laid alongside the policy and a determination made as to whether, if
the allegations are sustained, the insurer will be required to pay the resulting
judgment" with doubts resolved in the insured's favor. Abouzaid, 207 N.J. at
79-80 (quoting Danek, 28 N.J. Super. at 77).
In Danek, an injured employee's husband brought a per quod action
against his wife's employer. Whether the Workers' Compensation Act excluded
the claim was an open issue until the Supreme Court declared it was excluded
in that very litigation. See Danek v. Hommer, 9 N.J. 56 (1952). In the
subsequent suit over defense costs, the court held that the employer was entitled
to recover because, when the husband filed his suit, Hommer had a plausible
claim for coverage. Danek, 28 N.J. Super. at 80. The court held that the insurer
could not "escape defending such an action because, as the Supreme Court later
A-1614-19 10 decided, there was no legal liability on the part of the employer to pay the
claim." Id. at 78.
To perform the exercise of laying Rodriguez-Ortiz's complaint alongside
the policy, we must be mindful that the AmGuard policy actually combines two
policies of insurance: workers' compensation in part one, and employer's
liability in part two. The workers' compensation insurance "applies to bodily
injury by accident or . . . by disease." AmGuard promises to "pay promptly
when due the benefits required . . . by the workers compensation law." AmGuard
also assumes "the right and duty to defend" at its expense "any claim, proceeding
or suit against [Interstate] for benefits payable by this insurance," and di savows
any "duty to defend a claim, proceeding or suit that is not covered by [the
workers' compensation] insurance."
Like part one, the employer's liability insurance also "applies to bodily
injury by accident or . . . disease." AmGuard promises to "pay all sums that
[Interstate] legally must pay as damages because of bodily injury to your
employees, provided the bodily injury is covered" by the employer's liability
insurance. The policy then identifies four forms of damages that this promise
"include[s]": (1) damages owed third parties who suffered a loss as a result of
the employee's injury; (2) costs of care and loss of services; (3) damages for
A-1614-19 11 consequential bodily injury to identified family members of the injured
employee; and (4) damages for bodily injury the employee claims against
Interstate in a non-employer capacity. 3
Two exclusions warrant our scrutiny to determine if Interstate was entitled
to a defense under the employer's liability policy. Under the heading "C.
Exclusions," the policy excludes the duty to pay: "4. Any obligation imposed
by a workers compensation, occupational disease, unemployment compensation,
or disability benefits law, or any similar law" and "5. Bodily injury intentionally
caused or aggravated by you."4 An endorsement amplifies the "intentional
injury" exclusion, stating:
3 We reject AmGuard's contention this is an exclusive list. Although "include" could mean "the thing which is stated is the only thing intended," it may also mean "the thing which is stated constitutes only one of the things intended," and the word "include" "[o]rdinarily . . . is a word of enlargement and not of limitation." See Cuna v. Bd. of Fire Comm'rs, 42 N.J. 292, 304 (1964). That is, "include" or "includes" "conveys the conclusion that there are other items includable, though not specifically enumerated." Zorba Contractors, Inc. v. Hous. Auth. of Newark, 282 N.J. Super. 430, 434 (App. Div. 1995). In any event, we would resolve any ambiguity on that score against the insurer. Sosa, 458 N.J. Super. at 651. 4 The policy also excludes: "2. Punitive or exemplary damages because of bodily injury to an employee employed in violation of law" and "3. Bodily injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers." We reject AmGuard's argument that because Rodriguez-Ortiz, an immigrant, lacked
A-1614-19 12 With respect to Exclusion C5, this insurance does not cover any and all intentional wrongs within the exception allowed by N.J.S.A. 34:15-8 including but not limited to, bodily injury caused or aggravated by an intentional wrong committed by you or your employees, or bodily injury resulting from an act or omission by you or your employees, which is substantially certain to result in injury.
The duty to defend extends no farther than covered claims and suits. The
policy states: "We have no duty to defend a claim, proceeding or suit that is not
covered by this insurance. We have no duty to defend or continue defending
after we have paid our applicable limit of liability under this insurance."
B.
We conclude that even if Rodriguez-Ortiz succeeded in his various claims
of Interstate's negligence — whether denominated careless, reckless, or
violations of duty of care — Interstate would not be entitled to indemnification
under the employer's liability portion of its policy. That is so because
Rodriguez-Ortiz's remedy for such claims rests exclusively within the workers'
compensation system.
authorization to work, AmGuard could avoid liability on the "violation of law" ground. See Fernandez-Lopez v. Jose Cervino, Inc., 288 N.J. Super. 14, 21 (App. Div. 1996) (stating that "[u]nless and until the Legislature expressly excludes undocumented aliens from workers' compensation benefits, the compassionate public policy which animates this social legislation favors inclusion of all injured workers not specifically excluded by the Legislature") . A-1614-19 13 It is undisputed that Rodriguez-Ortiz did not opt out of workers'
compensation. See N.J.S.A. 34:15-9; Peck v. Newark Morning Ledger Co., 344
N.J. Super. 169, 176 (App. Div. 2001) ("There is a presumption that employers
and employees accept the provisions of Article II of the [Workers'
Compensation] Act . . . unless there is an express written election not to be
bound by the article."). In return for the certainty of compensation within the
Workers' Compensation system for workplace injury "without regard to the
negligence of the employer," N.J.S.A. 34:15-7, the Act provides that an injured
employee may not sue his or her employer when the employer's negligence is
responsible for the injury, see N.J.S.A. 34:15-8 (stating "[s]uch agreement shall
be a surrender . . . of . . . rights to any other method, form or amount of
compensation or determination thereof than as provided in this article"). As we
noted in Estate of D'Avila v. Hugo Neu Schnitzer East, 442 N.J. Super. 80, 99
(App. Div. 2015), "N.J.S.A. 34:15-8 directs that an employer may not be sued
by an employee . . . for negligence that caused injury or death to the employee."
In short, "workers' compensation is the exclusive remedy, absent proof of an
intentional wrong." Ibid.
Thus, Rodriguez-Ortiz's negligence-based claims were, in the words of
Exclusion C4, "obligation[s] imposed by a workers compensation . . . law."
A-1614-19 14 Those claims — even if proved — fell outside the employer's liability coverage.
And, because the employer's liability policy stated AmGuard had "no duty to
defend a claim, proceeding or suit that is not covered by this insurance," the
employer's liability policy imposed on AmGuard no "duty to defend" Rodriguez-
Ortiz's negligence-based claims.
However, that does not end the matter of a defense of the negligence-
based claims. AmGuard concedes that Interstate was entitled to a defense of
those claims under the workers' compensation part of the policy. While its
employer's liability policy "expressly excludes . . . claims compensable through
workers' compensation" (e.g., the negligence claims in Rodriguez-Ortiz's
complaint), AmGuard acknowledges that "[c]overage and a defense for such
claims is afforded in Part One of the Policy concerning claims cognizable within
the workers' compensation framework."
That is so because Rodriguez-Ortiz's negligence-based claims were for
"bodily injury by accident," to which the workers' compensation insurance
applied; and the policy imposed upon AmGuard a "duty to defend . . . any claim,
proceeding or suit against [Interstate] for benefits payable by this [workers'
compensation] insurance"; and its duty to defend only excluded "a claim,
proceeding or suit that is not covered by this [workers' compensation]
A-1614-19 15 insurance." In other words, AmGuard does not dispute that if an employee
brings a negligence-based claim in Superior Court — whether it is instead of, or
in addition to, filing a petition in the Workers' Compensation Division — the
workers' compensation policy covers the cost of defending and, presumably,
securing the lawsuit's dismissal and transfer to the Workers' Compensation
Division. See N.J.S.A. 34:15-49(a) ("The Division of Workers' Compensation
shall have the exclusive original jurisdiction of all claims for workers'
compensation benefits . . . .").
The workers' compensation coverage creates a duty to provide a defense
to the negligence-based claims, notwithstanding that the policy excluded a duty
to defend intentional-tort claims. "When multiple alternative causes of action
are stated, the duty to defend will continue until every covered claim is
eliminated." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 174 (1992).
However, an insurer is obligated "to pay only those defense costs reasonably
associated with claims covered under the policy." SL Indus., Inc. v. Am.
Motorists Ins. Co., 128 N.J. 188, 215 (1992).
A-1614-19 16 Therefore, we reverse in part and remand for the court to determine
whether, and to what extent, Interstate may be entitled to reimbursement of its
costs associated with defending Rodriguez-Ortiz's negligence-based claims.5
C.
We turn next to the employer's liability policy's exclusion of intentional
wrongs, including acts "substantially certain to result in injury." Interstate does
not seriously contest that the policy's plain language would defeat its claim for
the costs of defending Rodriguez-Ortiz's claims of intentional tort. Rather,
Interstate contends that enforcing the provision violates public policy.
The employer's liability endorsement clearly intends to make the policy's
exclusion co-extensive with bodily injury claims that satisfy the "intentional
wrong" exception to the Workers' Compensation Act's exclusivity provision. 6
5 We leave it to the trial court to determine the viability of other defenses AmGuard may have to a claim for these costs, such as AmGuard's affirmative defense that Interstate breached its obligation under part four of the policy to provide AmGuard prompt notice of Rodriguez-Ortiz's lawsuit, and to not voluntarily assume expenses except at its own cost. We acknowledge that AmGuard adverted to this provision in its brief before us, but it did so only in a footnote. For that reason, we are not obliged to decide it. Almog v. Isr. Travel Advisory Serv., Inc., 298 N.J. Super. 145, 155 (App. Div. 1997). 6 The policy provision is an apparent response to our decisions in New Jersey Manufacturers Insurance Co. v. Delta Plastics Corp., 380 N.J. Super. 532, 539 (App. Div. 2005), aff'd, 188 N.J. 582 (2006), and Charles Beseler Co. v.
A-1614-19 17 The Court in Millison held that "the intentional wrongs of an employer . . . fall
outside of the boundaries of the Compensation Act," although N.J.S.A. 34:15-8
expressly refers only to intentional wrongs of co-employees. Millison, 101 N.J.
at 185. And to establish the requisite intentional wrong to surmount the
exclusivity bar, a plaintiff must show two things: first, the employer knew its
"actions [were] substantially certain to result in injury or death to the employee,"
and second, "the resulting injury and the circumstances of its infliction on the
worker must be (a) more than a fact of life of industrial employment and (b)
plainly beyond anything the Legislature intended the Workers' Compensation
Act to immunize." Laidlow, 170 N.J. at 617.
With that as a backdrop, the policy endorsement excludes coverage of
"any and all intentional wrongs within the exception allowed by N.J.S.A. 34:15-
8." The endorsement specifies that the exclusion "includ[es] but [is] not limited
to, bodily injury caused or aggravated by an intentional wrong committed by
you or your employees or bodily injury resulting from an act or omission by you
or your employees, which is substantially certain to result in injury."
O'Gorman & Young, Inc., 380 N.J. Super. 193, 198 (App. Div. 2005), aff'd, 188 N.J. 542 (2006), that exclusions of claims "intentionally caused or aggravated by [the insured]" did not encompass all intentional wrongs that lie outside the exclusivity provision. A-1614-19 18 The exclusion clearly covers Rodriguez-Ortiz's intentional tort claims.
And, "indulgently interpreted," see Green v. Morgan Props., 215 N.J. 431, 456
(2013), the complaint also encompassed claims that Interstate engaged in acts
"substantially certain to result in injury." Although the complaint did not
include the "substantially certain" magic words, it alleged that Interstate created
or permitted "a known dangerous hazard . . . which presented an unreasonable
risk of harm." In discovery, Rodriguez-Ortiz's counsel attempted (but failed) to
elicit evidence to satisfy the "substantially certain" requirement.
Therefore, upon placing Rodriguez-Ortiz's complaint alongside the
policy, we conclude that AmGuard had no duty to defend the complaint's
intentional tort claims, because the employer's liability policy excludes from the
duty to defend any claims that are not covered by the insurance.
Interstate contends that enforcing the exclusion violates public policy,
because it restricts coverage that Interstate was mandated to obtain. But the
compulsory insurance Interstate invokes assures employees' recoveries against
their employers, not employers' recoveries against their insurers. Therefore, we
are unconvinced that the employer's liability policy's duty-to-defend exclusion
is void as against public policy.
A-1614-19 19 Soon after the Workers' Compensation Act was in place, there were calls
to implement "a system of compulsory insurance" to assure that workers
received compensation if their employers became insolvent, and to assure that
employers could manage the risk of payouts to employees. The commission that
recommended adoption of New Jersey's workers' compensation system and then
monitored its implementation concluded "the law was gravely defective in that
the injured person or his dependents had no assurance of payment in the event
of the insolvency of the employer." Report of the Employers' Liability Comm'n
For the Year 1914 at 6 (1915). The commission stated:
As this serious defect can only be remedied by a system of compulsory insurance, we now recommend the passage of a compulsory insurance act, for the protection of the employer from financial disaster and the assurance to those persons entitled to compensation, of the payments provided by law. In recommending this, we have in mind the fact that it is quite as necessary for the protection of the employer as for the employee, as otherwise he may be forced out of business and into bankruptcy owing to his failure to voluntarily cover his liability by insurance.
[Ibid.]
The Legislature first passed a law requiring insurance to cover liability
under the workers' compensation system, see L. 1917, c. 178, and then passed a
law requiring that employers insure themselves against liability to employees
A-1614-19 20 who are covered under section I of the Act, N.J.S.A. 34:15-1 to -6, see L. 1917,
c. 262.7 Our modern law continues to require employers to make "sufficient
provision for the complete payment of any obligation which he [or she] may
incur to an injured employee, or his [or her] dependents under the provisions of
said article 2 [the workers' compensation system]." N.J.S.A. 34:15-71
(emphasis added).8 They may do so by self-insuring if they have the financial
capacity, N.J.S.A. 34:15-77, or by obtaining insurance, N.J.S.A. 34:15-78.
Likewise, employers are required to "make sufficient provision for the complete
payment of any obligation which [the employer] may incur to an injured
employee or his [or her] administrators or next of kin under said article 1 of this
chapter [N.J.S.A. 34:15-1 to -6, the tort system for those employees who opt out
of workers' compensation]." N.J.S.A. 34:15-72 (emphasis added). Nothing
requires employers to make "provision" for their defense costs.
7 Section I has been called "the employers' liability section of the statute," which governs employees who opt out of the workers' compensation system, and which covers "liability [that] is made to depend not upon any implied contract for compensation, but upon the negligence of the employer, either at common law or resulting from the requirements of the act itself." Taylor v. Seabrook, 87 N.J.L. 407, 408 (Sup. Ct. 1915). 8 Although current law collects workers' compensation system provisions under "article 2" and the non-elected common law system provisions under "article 1," the original workers' compensation statute placed them under "section 2" and "section 1" and old cases use that nomenclature. See L. 1911, c. 95, §§ 1, 2. A-1614-19 21 We recognize that the Supreme Court has broadly read these compulsory
insurance provisions. In a case involving a claim for bodily injury arising out
of acts of sexual harassment, the Court held that "N.J.S.A. 34:15-72 required
[the employer] to obtain sufficient coverage for the payment of any obligation
it might incur on account of bodily injuries to an employee." Schmidt v. Smith,
155 N.J. 44, 51 (1998) (emphasis added). The Court held that the defendant-
employer — which obtained a combined workers' compensation and employer's
liability policy — contracted with its insurer "for the coverage of bodily injuries
falling both inside and outside of the workers' compensation structure." Ibid.
In particular, "[t]he employers liability section of the contract was to provide
compensation for bodily injuries to workers falling outside the workers'
compensation system." Id. at 51-52. That included, the Court said, "injuries
intentionally caused by fellow employees, for example." Id. at 52. In other
words, the coverage included claims placed outside the exclusivity provision by
N.J.S.A. 34:15-8.
The Court explained that the Legislature required employers to obtain
insurance "to assure that this statutory remedy [of workers' compensation] given
in lieu of a common law remedy is not illusory." Id. at 49. The employer's
liability coverage "is intended to serve as a 'gap-filler' providing protection to
A-1614-19 22 the employer in those situations where the employee has a right to bring a tort
action despite provisions of the workers' compensation statute." Id. at 49-50
(quoting Producers Dairy Delivery Co. v. Sentry Ins. Co., 718 P.2d 920, 927
(Cal. 1986)).
The Court also held that policies issued pursuant to the compulsory
insurance requirements could not undermine that goal: "In short, the terms of a
policy issued pursuant to N.J.S.A. 34:15-78 cannot conflict with the statutory
mandate that there be coverage provided for all occupational injuries." Id. at 49
(emphasis added).
This broad view of the scope of mandated coverage may well override the
AmGuard exclusion of claims for intentional wrongs or actions substantially
certain to cause injury. But, we need not decide that question in this case.
Interstate does not seek indemnification for a liability or "obligation" it has
incurred to its "injured employee," N.J.S.A. 34:15-71. Interstate seeks
indemnification for its own defense costs. That lies outside the statutory
mandate and the public policy that motivated it. Therefore, there is no basis to
set aside the policy's exclusion of costs to defend Rodriguez-Ortiz's intentional
tort claims.
A-1614-19 23 D.
We next dispatch Interstate's argument that because AmGuard did not
respond to the civil suit, it should be estopped from denying coverage. The
governing principles are well-established. "[W]here, after timely notice,
adequate opportunity to investigate a claim, and the knowledge of a basis for
denying or questioning insurance coverage, the insurance carrier fails for an
unreasonable time to inform the insured of a potential disclaimer, it is estopped
from later denying coverage under the insurance policy." Griggs v. Bertram, 88
N.J. 347, 363-64 (1982). And "[p]rejudice justifying an estoppel against the
insurer will be presumed where 'there has been a long lapse of time without any
indication by the insurance carrier of a loss or rejection of coverage, during
which the insured justifiably expects to be protected by the carrier .'" Reliance
Ins. Co. v. Armstrong World Indus., Inc., 292 N.J. Super. 365, 375-76 (App.
Div. 1996) (quoting Griggs, 88 N.J. at 362).
However, AmGuard did not fail to respond to the suit "for an unreasonable
time," Griggs, 88 N.J. at 363, "during which [Interstate] justifiably expect[ed]
to be protected," id. at 362. First, the workers' compensation claim did not
necessarily put AmGuard "on notice of the potential for a common law claim
until the filing of the complaints." See N.J. Mfrs. Ins. Co. v. Joseph Oat Corp.,
A-1614-19 24 287 N.J. Super. 190, 197-98 (App. Div. 1995), abrogated on other grounds
by Beseler, 188 N.J. at 548 n.2. If Interstate expected to be protected by
AmGuard, it would have demanded a defense from AmGuard instead of Essex;
and it would not have filed an answer to Rodriguez-Ortiz's complaint even
before AmGuard received the complaint (from Rodriguez-Ortiz's attorney). An
insured is not entitled to recover expenses "prior to the insured's tendering the
defense to the insurer." SL Indus., 128 N.J. at 200. While mere notice
conceivably may imply a tender, the circumstances here imply the opposite: that
Interstate was not seeking AmGuard's defense.
E.
We briefly comment on Interstate's contention that denying it a defense
would frustrate its reasonable expectations. Interstate relies on the statement of
its co-owner, Miguel Suarez Hernandez, that his insurance producer told him
that Interstate "would be protected" "if an employee was hurt on one of the jobs
. . . [and] if the employee sued Interstate in the Workers Compensation Court or
in . . . Superior Court." That is not enough to overcome plain policy language.
We reviewed the "reasonable expectations" doctrine in Abboud, where we
explained that an insured's "reasonable expectations" will override the plain
meaning of a policy only in "exceptional circumstances." 450 N.J. Super. at 408
A-1614-19 25 (quoting Doto v. Russo, 140 N.J. 544, 556 (1995)). "Courts may vindicate the
insured's reasonable expectations over the policy's literal meaning 'if the text
appears overly technical or contains hidden pitfalls, cannot be understood
without employing subtle or legalistic distinctions, is obscured by fine print, or
requires strenuous study to comprehend.'" Id. at 409 (quoting Zacarias, 168 N.J.
at 601). Also, the expectations must be "real" and "'objectively reasonable.'"
Id. at 410 (quoting Templo Fuente de Vida Corp. v. Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa., 224 N.J. 189, 210 (2016)).
Interstate has failed to demonstrate that AmGuard's policy is so obscure
that Suarez Hernandez's alleged expectation should triumph over the policy's
language. Furthermore, his general statement that his agent told him Interstate
"would be protected" falls short of establishing a real and reasonable expectation
that defense costs would be covered, no matter what. This is not a case where
"the scope of coverage is so narrow that it 'would largely nullify the insurance'
and defeat the purpose for which it was obtained." Id. at 410 (quoting Sparks v.
St. Paul Ins. Co., 100 N.J. 325, 337-39 (1985)).
To the extent not addressed, plaintiff's remaining arguments lack
sufficient merit to warrant written discussion. R. 2:11-3(e)(1).
A-1614-19 26 Affirmed in part, reversed in part and remanded. We do not retain
jurisdiction.
A-1614-19 27