QBE INSURANCE COMPANY v. MT HAWLEY INSURANCE COMPANY (2011)

In November 2002, Michael Schopfer was injured when he fell into a refrigerator pit constructed, at least in part, by his employer, Metro Concrete & Masonry, pursuant to its subcontract with Milric Construction Corporation, which was building a supermarket in Woodbridge.   The subcontract required Metro to provide insurance coverage for Milric;  as a result, Milric was named as an additional insured on a policy issued to Metro by plaintiff QBE Insurance Company.

In May 2003, Schopfer sued Milric, and Milric tendered the claim to QBE.¹ When QBE did not immediately accept the defense, Milric filed a third-party complaint against QBE, seeking coverage, and against Metro for contractual indemnity.   In September 2003, QBE accepted the tender, retained new defense counsel to replace counsel retained by defendant Mt. Hawley Insurance Company, which insured Milric, and dismissed the claims filed by Milric against QBE and Metro.   QBE also reimbursed Mt. Hawley for its costs in defending Milric in the interim.

Nearly five years later, QBE sought Mt. Hawley's participation because Schopfer's demand exceeded QBE's policy limits.   In September 2008, shortly before it settled Schopfer's suit within its policy limits, QBE commenced this action, arguing it made a mistake five years earlier when it accepted Milric's defense.   The trial judge granted Mt. Hawley's motion for summary judgment, and QBE appeals the summary judgment entered in favor of defendant Mt. Hawley.

Insofar as the trial judge's decision rested upon estoppel grounds—that is, that QBE's actions and communications in 2003 demonstrated that it primarily covered Milric for this claim and that Mt. Hawley only had the obligation to provide excess coverage once QBE's $1,000,000 in coverage was exhausted—QBE argues that the judge:  inappropriately made credibility findings;  failed to construe the facts in the light most favorable to QBE, the motion's opponent;  and applied incorrect legal principles in finding an estoppel.   Recognizing our authority to affirm on grounds other than those espoused by the trial court,² QBE also argues that a proper interpretation of the Milric–Metro contract, in conjunction with its policy terms, reveals that QBE had no duty to indemnify Milric for damages arising from Milric's own negligence.   And, QBE lastly contends that we should remand because the trial judge failed to make adequate findings, as required by Rule 1:7–4(a).

We affirm the summary judgment entered in favor of Mt. Hawley essentially because the QBE policy provided coverage to Milric, as an additional insured, as required by the Milric–Metro contract, which required that Metro obtain coverage for Milric with respect to liabilities that may “aris[e] out of [Metro's] [w]ork.”   That is, QBE agreed to provide insurance coverage for claims against Milric that arose from Metro's performance of its obligations to Milric.   And, Metro complied with that obligation by having Milric named as an additional insured on its QBE policy.

Here, Schopfer was injured when he fell into a refrigeration pit while cleaning the area, a circumstance falling within the “scope of work” defined by the Milric–Metro contract.³  Thus, the event that formed the basis for the claim fell within the scope of QBE's promise to defend and indemnify Milric.   QBE's policy also clearly stipulated that QBE's coverage was primary and that other coverage, such as that provided by Mt. Hawley, would be available only when the claim exceeded QBE's $1,000,000.

In seeking to avoid the clear consequence of these provisions, QBE argues that its obligation to Milric is limited by the terms of the Milric–Metro contract.   In referring to certain indemnification provisions in that contract, QBE asserts that it was not bound to provide coverage for Schopfer's claim because Metro agreed to indemnify Milric only to the extent the damages sought were “caused in whole or in part by negligent acts or omissions” of Metro.   Even if we were to accept QBE's crabbed interpretation of this and other indemnification provisions found in the Milric–Metro contract, and even if we were to give credence to its contention that the facts giving rise to Schopfer's injuries arose from Milric's sole negligence, it is QBE's policy that imposes its liability to indemnify Milric, not the Milric–Metro contract.   The insurer's obligation is based on the policy terms, not the insured's promise in a separate agreement.  W9/PHC Real Estate v. Farm Family Cas. Ins. Co., 407 N.J.Super. 177, 193 (App.Div.2009).   As we have said, “[a]n insurer's duties are defined by what it contracted to do, not by what the insured contracted to do.”  Jeffrey M. Brown Assocs., Inc. v. Interstate Fire & Cas. Co., 414 N.J.Super. 160, 172 (App.Div.) (quoting 2 Allan D. Windt, Insurance Claims & Disputes:  Interpretation of Important Policy Provisions § 11.30 at 11–469 (5th ed.2007)), certif. denied, 204 N.J. 41 (2010).   QBE consented to Milric's status as an additional insured and, as a result, agreed to defend and indemnify Milric pursuant to the terms of its policy, which encompasses claims such as Schopfer's to the extent of $1,000,000.⁴

Although unnecessary to our disposition of this appeal, we also agree with the trial judge that QBE's communications were unmistakably clear;  QBE acknowledged it understood its policy terms required that it provide a defense and primary coverage up to the policy's $1,000,000 limit.   As a result of its unequivocal acknowledgement of this duty,⁵ Milric's claim against QBE for a defense and indemnification when QBE did not immediately accept the defense was dismissed.   Even though we have decided this appeal on other grounds, QBE's unambiguous representations in 2003, coupled with QBE's exclusive control over Milric's defense of the Schopfer claim for the following five years, amply supported the estoppel theory adopted by the trial judge.

Affirmed.

FOOTNOTES

FN1. Schopfer, of course, could not maintain an action against Metro based on its negligence in light of N.J.S.A. 34:15–8..  FN1. Schopfer, of course, could not maintain an action against Metro based on its negligence in light of N.J.S.A. 34:15–8.

FN2. Isko v. Planning Bd. of Livingston Twp., 51 N.J. 162, 175 (1968)..  FN2. Isko v. Planning Bd. of Livingston Twp., 51 N.J. 162, 175 (1968).

FN3. The subcontract called for Metro's construction, at least in part, of the refrigeration pit in question.   And, among other things listed in the contract section entitled “scope of work,” Metro agreed to “[d]aily clean up” the area by using “dumpsters supplied by Milric.”   This was precisely what Schopfer was doing when he stepped into the refrigeration pit..  FN3. The subcontract called for Metro's construction, at least in part, of the refrigeration pit in question.   And, among other things listed in the contract section entitled “scope of work,” Metro agreed to “[d]aily clean up” the area by using “dumpsters supplied by Milric.”   This was precisely what Schopfer was doing when he stepped into the refrigeration pit.

FN4. QBE was required only to contribute $975,000 toward the settlement reached with Schopfer..  FN4. QBE was required only to contribute $975,000 toward the settlement reached with Schopfer.

FN5. We reject QBE's argument that the judge made an impermissible credibility determination when he relied on QBE's written communications.   QBE's claims bureau plainly stated in its letter of September 29, 2003, that QBE had “agree[d] to assume the defense and indemnification of Milric Construction Corporation in accordance with their policy of insurance [, which] ․ carries a limit of $1,000,000, and the defense and indemnification of Milric Construction under our policy is to the limit of $1,000,000.”   The trial judge correctly rejected QBE's current contention that QBE may have harbored some other intention not expressed in that letter.   An examination of the letter reveals that QBE reserved no rights and sought to impose no other conditions on its promise to defend and indemnify.   The judge was not required to make a credibility determination in recognizing what the letter unambiguously professed, and his reliance on the only plausible interpretation of the letter comported with the standards enunciated in Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995)..  FN5. We reject QBE's argument that the judge made an impermissible credibility determination when he relied on QBE's written communications.   QBE's claims bureau plainly stated in its letter of September 29, 2003, that QBE had “agree[d] to assume the defense and indemnification of Milric Construction Corporation in accordance with their policy of insurance [, which] ․ carries a limit of $1,000,000, and the defense and indemnification of Milric Construction under our policy is to the limit of $1,000,000.”   The trial judge correctly rejected QBE's current contention that QBE may have harbored some other intention not expressed in that letter.   An examination of the letter reveals that QBE reserved no rights and sought to impose no other conditions on its promise to defend and indemnify.   The judge was not required to make a credibility determination in recognizing what the letter unambiguously professed, and his reliance on the only plausible interpretation of the letter comported with the standards enunciated in Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995).

PER CURIAM