Primary home insurer must defend dog bite claim on second home
The insureds found themselves at the center of an insurance dispute when their Tibetan Mountain dog bit a new cleaning service employee at their second home.
The Appellate Division affirmed a trial court ruling requiring the insurer on a couple’s primary residence to defend in a dog bite lawsuit for an incident that occurred at their second home and to reimburse the couple for defense costs not covered by any other policy.
Anthony and Janet Berardi found themselves at the center of an insurance dispute when their Tibetan Mountain dog bit a new cleaning service employee at their second home, Nirsa Lopez Rodriguez. The Berardis’ primary residence was in Sparta, New Jersey, and they had a second home in Montauk, New York. Their dog was normally at the Sparta home, but sometimes traveled to the Berardis’ secondary residence, according to the opinion.
Lopez Rodriguez filed a lawsuit claiming damages for pain and suffering, lost wages, and medical expenses in the Supreme Court of New York. Scottsdale Insurance Co. issued a policy on the Montauk home and agreed to defend the Berardis in the case, subject to a reservation of rights. The Scottsdale policy had a $1 million personal liability limit, a $5,000 medical payments to others limit, and a $10,000 dog bite limit, according to the opinion.
Defendant Franklin Mutual Insurance Co. issued the insurance policy for the Sparta home, which included a $1 million liability to others, $10,000 in medical payments to others, and a $5 million “Personal Excess Liability Umbrella Coverage” endorsement, according to the opinion.
FMI denied coverage for the dog bite incident under both the main liability coverage and the excess umbrella coverage. The Berardis filed a declaratory judgment complaint against FMI in New Jersey Superior Court, Sussex County, alleging that FMI breached its insurance contract by refusing to defend and indemnify them in the dog bite action. Meanwhile, Scottsdale filed its own declaratory judgment claim against the Berardis in New York, seeking a declaration of its limited coverage obligation under its policy, according to the opinion.
FMI moved for summary judgment in the Sussex County court, seeking to have the Berardis’ declaratory judgment complaint dismissed and the plaintiffs cross moved for summary judgment. Judge Louis S. Sceusi denied FMI’s motion and granted the Berardis’.
On appeal, FMI argued that Sceusi erred in finding coverage under the personal liability to others coverage of the FMI policy, erroneously relied on the medical payments to others coverage in the FMI policy, and that the FMI umbrella endorsement only provides coverage for claims that exceed $1 million, according to the opinion.
In a per curiam opinion, Judges Ronald Susswein and Christine M. Vanek affirmed Sceusi’s decision. The opinion first addressed FMI’s argument that Sceusi erred in finding the policy covers the dog bite at the Montauk property. In the “Locations Not Insured Exclusion,” FMI’s policy stated that it does not cover ”bodily injury or property damage arising out of any premises owned, rented, or controlled by you, other than an insured premises covered by this policy.” However, the next line reads, “[b]ut, we do cover bodily injury to a residence employee while performing such duties at other premises.”
“While this section is described as an ‘exclusion’ of locations that are not insured, it makes clear the policy coverage extends to injuries sustained by a residence employee—such as Lopez Rodriguez—while performing such duties at another premises, that is, a premises besides the Sparta property,” the opinion said.
Susswein and Vanek rejected the argument that the second sentence is preempted by the first, and held that the dog bite did not arise out of the Montauk property. In support of their position, the judges cited Flomerfelt v. Cardiello, a 2010 New Jersey Supreme Court opinion which rejected the insurer’s interpretation of ”arising out of” language to mean “incident to” or “in connection with.”
The appeals court also disagreed with FMI on its contention that the trial court was incorrect to rely on the Coverage F portion of the policy. That section provides for payment of medical expenses if the accident occurred on an insured premises or away from that premises if the accident is cause by animals owned or in the care of an insured, according to the opinion.
“It is unreasonable to interpret an ambiguous portion of the policy to exclude coverage for an accident when another provision expressly and unequivocally provides for payment of medical expenses arising from that accident,” the opinion said. “Stated another way, the explicit terms of Coverage F are relevant in determining whether the policy covers the Montauk dog bite incident.”
The final point addressed by the appeals court concerned FMI’s claim that the $5 million umbrella coverage, which was set forth in an endorsement, means that it was only responsible for umbrella coverage in excess of the overarching maximum limit of primary liability coverage, which is $1 million. The Berardis argued that FMI is responsible for providing umbrella coverage when the covered damages exceed any of the sublimits specified in the policy.
“Neither party cites published precedent specifically addressing whether a general reference to policy limits in an umbrella excess coverage endorsement includes or excludes sublimits,” the opinion said. “Accordingly, we resort to the well-established principle that ‘where the language of a policy will support two meanings, one favorable to the insured and the other favorable to the insurer, the interpretation sustaining coverage must be applied.’”
The per curiam opinion concluded that if FMI wanted the umbrella excess coverage to only apply to damages above the maximum amount of liability provided by the primary policy, not to sublimits in the policy, it could have drafted the policy to make that clear. The opinion affirmed the trial court ruling.
Counsel to the Berardis, Dimitri Teresh of The Killian Firm, in a comment to the Law Journal, said he is very happy that the court properly applied the rules of construction in interpreting insurance policies.
“The idea that a dog attack ‘arose from’ the premises and was therefore excluded, which is what FMI was trying to argue, violated those rules,” Teresh said. “Also, we appreciate that the court properly found that the term ‘limits’ as used in the policy was ambiguous and had to be construed in the policyholder’s favor.”
FMI was represented by Robert C. Blum and Russell Macnow of Macnow & Papaleo. Macnow declined to comment on the opinion.