Primary coverage must indemnify dog bite at second residence
The 'locations not insured' exclusion had an exception for residence employees injured while working at a premises other than the primary residence.
The Appellate Division of the Superior Court of New Jersey ruled that an insurer must cover an occurrence where the policyholders’ dog attacked and injured the housekeeper at the insureds’ second residence. The case is Berardi v. Fmi Ins. Co., 2023 N.J. Super. Unpub. LEXIS 2161 (N.J. Super. Ct. App. Div. 2023). Please note that this case is unpublished and therefore has limited precedential value.
The Berardis maintained their primary residence in Sparta, New Jersey, and kept a second home in Montauk, New York, which was maintained cleaning service. On one visit to Montauk, a new cleaning person arrived two hours early. The Berardi’s Tibetan Mountain dog, who was typically locked away while cleaning services occurred, attacked the cleaning person.
The cleaning person sued, and the Berardis sought coverage from FMI, who insured their primary residence in New Jersey and Scottsdale, who provided primary coverage for the Montauk property. FMI denied the Berardis claim in whole. Scottsdale agreed to defend the Berardis subject to a reservation of rights, and later sought declaratory judgment that they owed the Berardis limited coverage. The instant case, however, concerns only the competing motions between the Berardis and FMI.
The FMI policy included coverage for personal liability, medical payments to others and personal excess liability, with respective limits of $1 million, $10,000 and $5 million. After FMI denied their claim, the Berardis filed suit for breach of the duties to defend and indemnify. FMI filed a motion for summary judgment, seeking dismissal of the case. In response, the Berardis filed a cross-motion for summary judgment.
The trial judge ruled in favor of the Berardis and FMI appealed. The company alleged the lower court had erred in finding personal liability and medical payments to others coverage for the Berardis. FMI also claimed the umbrella coverage endorsement only applied to claims in excess of $1 million.
Coverage for personal liability, medical payments to others
The Superior Court of New Jersey began with an analysis of personal liability coverage. The “locations not insured” exclusion in the FMI policy stated that neither bodily injury nor property damage would be covered if it occurred anywhere other than the insured residence, which was the Berardi’s home in Sparta. However, the exclusion gave back coverage for “bodily injury to a residence employee while performing such duties at other premises.”
This exception to the exclusion clearly encompassed the dog’s attack on the unfortunate cleaning person even though it occurred somewhere other than the Berardi’s primary residence. FMI tried to argue that the incident “arose out of” the Montauk property, which would have precluded FMI’s duty to indemnify the Berardis, but the court was not persuaded. Simply because injuries occurred at a specific location did not establish a causal connection between the two.
FMI also claimed that the trial court should not have relied on coverage for medical payments to others. The judges pointed to a specific clause in the medical payments portion of the policy that explicitly provided coverage for medical payments to others occurring away from an insured premises if the injury was caused by an animal owned by or in the care of an insured. That clause described the exact situation that had gotten the Berardis into court: Their Tibetan mountain dog attacked the cleaning person away from the insured premises, and the Berardis were now liable for the cleaning person’s medical bills.
Coverage by personal excess liability
FMI’s final argument concerned the personal umbrella endorsement attached to the Berardis primary policy. The endorsement stated that “if the occurrence is covered by a primary policy, the limit of liability . . . applies to any damages which exceed the limits of the primary policies described in this coverage form . . . ”
There was no dispute that umbrella coverage only applied after primary coverage was exhausted, only how to interpret the term “limits” as used in the endorsement. FMI argued that “limits” referred to the whole policy limit of $1 million. The Berardis argued it meant any of the available sublimits for the FMI policy, such as the $10,000 limit for medical payments to others. The umbrella endorsement did not reference sublimits. However, the judges found both arguments were valid interpretations of the policy and ruled that the clause was ambiguous. Neither the Berardis nor FMI pointed to any statutory or case law authority to support their argument. The judges therefore went back to the default principle of insurance law that, whenever an insurance policy can be reasonably interpreted in two ways, with one favoring the insurer and the other the insured, the interpretation favoring coverage will be applied. Since the Berardi’s interpretation afforded coverage for the underlying suit, it was the one applied. Had FMI intended for umbrella coverage to apply only after exhaustion of the $1 million overall policy limit, the judges said, it could have easily done so when writing the endorsement.
The grant of summary judgment in favor of the Berardis was affirmed.
Editor’s note: FMI didn’t want to pay for damages occurring at a property it did not insure, but it’s hard to argue that coverage doesn’t apply when there is explicit policy language stating otherwise. Despite the “Locations Not Insured Exclusion” in the personal liability coverage, the policy carved out an exception for a residence employee injured while working even if the injury occurred at a non-insured location. Also, the medical payments portion of the policy specifically provided coverage when an animal owned by or in the care of an insured caused injury to a person, and the injury occurred away from the residence premises.
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