United States District Court,

D. New Jersey.

ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff

v.

K.S.I. TRADING CORPORATION and Astro Automotive, Inc., Defendant

Feb. 17, 2006.

OPINION

DENNIS M. CAVANAUGH, U.S.D.J.:

This matter comes before the Court upon the motion of Plaintiff Royal Insurance Company for summary judgment against Defendants KSI Trading Corporation & Astro Automotive, and a cross-motion for summary judgment by Defendants against Plaintiff. Oral argument was heard in this matter on December 14, 2005. For the following reasons, Plaintiff’s motion for summary judgment is granted, and Defendants’ motion for summary judgment is denied.

I. BACKGROUND

Procedural History

On February 24, 2004, Plaintiff Royal Insurance Corporation (“Royal”) filed a Complaint for Declaratory Judgment against Defendants KSI Trading Corporation and Astro Automotive (collectively “KSI”). KSI filed an Answer and Counterclaims on April 1, 2004. Royal filed an Answer to KSI’s Counterclaims on April 20, 2004. On May 12, 2004, KSI filed a Third Party Complaint against The LIG Insurance Agencies, Jeffrey Joiner, and James Barrett (collectively “LIG”). LIG filed an Answer to the Third Party Complaint on June 2, 2004.

On June 13, 2005, Royal filed a motion for summary judgment against KSI. On that same date, KSI cross-moved against Royal for summary judgment. This Court heard oral argument on these summary judgment motions on December 14, 2005.

Factual History

The following facts are taken from statements of facts submitted by Royal and KSI in conjunction with the filing of their motions for summary judgment. Royal, an Illinois corporation, is in the business of writing marine cargo insurance policy. KSI, a New Jersey corporation, is a wholesale distributor of after-market auto body parts that purchases inventory from both domestic and international suppliers. KSI maintains various warehouse locations throughout the country to hold inventory until sold. On or around July 1, 1999, Royal and KSI entered into an insurance contract based on a quotation for coverage issued to KSI by Royal dated May 19, 1999. Sometime after the coverage was bound, Royal issued Marine Open Cargo Policy No. POC 102991, covering KSI and certain subsidiaries including Defendant Astro. The policy renewed automatically on an annual basis until the parties cancelled the policy effective July 1, 2003.

A fire at a warehouse in Franklin, Massachusetts on April 1, 2003 resulted in a significant loss of KSI inventory. At that time, Astro was a leasehold tenant of the Franklin warehouse and had been using it to store inventory it purchased from both international and domestic sources. KSI claims that the inventory destroyed or ruined by fire was in excess of the $2.5 million limit scheduled for the Franklin warehouse under KSI’s insurance policy with Royal.

KSI submitted a claim to Royal for its loss of inventory pursuant to the Warehouse Storage Insurance section of the Policy. By letter dated March 9, 2004, Royal disclaimed coverage for that portion of the loss related to merchandise acquired by KSI from domestic sources. In that same letter, Royal estimated the net value of KSI’s loss to be $768,766.10, which Royal calculated to be the value of the destroyed inventory from international sources, less salvage and a $5,000.00 deductible. KSI rejected Royal’s offer and seeks coverage for the full amount of the policy coverage.

The Policy at issue consists of three sections. Section I, captioned “Ocean Cargo”, states “This Policy, covers … shipments of lawful goods and merchandise consisting principally of MERCHANDISE INCIDENTAL TO THE ASSURED’S BUSINESS, CONSISTING PRINCIPALLY OF AUTOMOBILE PARTS.” (See Royal SOF, Exhibit A, Sect. I, ¶ 2-3). The policy further states that “this policy covers Property Insured at and from ports and/or places in the world to ports and/or places in the world excluding shipments originating in the United States or Canada for shipment to destinations in the Continental United States or Canada.” Id. at ¶ 5.

Section III of the policy, captioned “Warehouse Storage Insurance”, states:

It is understood and agreed, that subject to terms and conditions which do not conflict with the provisions set forth herein, this Policy is extended to cover property insured under Section I which is the property of the Assured or the property of others from whom the Assured has written instruction to insure which temporarily stored in warehouses at located listed in the attached Schedule.

(See Royal SOF, Exhibit A, Sect. III, ¶ 1).

Based on a reading of the above relevant parts of the Policy, both KSI and Royal maintain that they are entitled to summary judgment as to coverage. Royal maintains that the Warehouse Section of the Policy only covers goods that originated overseas, and does not cover goods that originated domestically. KSI, on the other hand, argues that the Policy covers all of KSI’s inventory, regardless of origin.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is granted only if all probative materials of record, viewed with all inferences in favor of the non-moving party, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing that there is no genuine issue of fact and it must prevail as a matter of law, or that the non-moving party has not shown facts relating to an essential element of the issue for which he bears the burden. Celotex, 477 U.S. at 331. If either showing is made then the burden shifts to the non-moving party, who must demonstrate facts which support each element for which he bears the burden and must establish the existence of genuine issues of material fact. Id. The non-moving party “may not rest upon the mere allegations or denials of his pleading” to satisfy this burden, Fed.R.Civ.P. 56(e), but must produce sufficient evidence to support a jury verdict in his favor. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

III. ANALYSIS

The main issue to be decided in the cross-motions is whether domestically acquired goods were covered under the Policy. Because this is an issue of contract interpretation, and there are no underlying material facts in dispute, it is properly the basis of summary judgment. See McMillan v. State Mut. Life Assurance Co. of Am., 922 F.2d 1073, 1074 (3d Cir.1990); Little v. MGIC Indemnity Corporation, 836 F.2d 789, 792 (3rd Cir.1987).

Courts generally apply state law when interpreting the language of marine insurance policies. See, Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 321, 75 S.Ct. 368, 99 L.Ed. 337, (applying Texas law to interpret a marine insurance policy); Advani Enterprises, Inc. v. Underwriters at Lloyds, 140 F.3d 157, 162 (2d Cir.1998) (applying English law); Bank of San Pedro v. Forbes Westar, Inc., 53 F.3d 273, 275 (9th Cir.1995) (applying California law). Here, the parties do not dispute that New Jersey law applies to the interpretation of this Policy.

In New Jersey, the terms of an insurance policy, absent ambiguity, should be given “their plain ordinary meaning.” Zacarias v. Allstate Ins. Co., 168 N.J. 590, 775 A.2d 1262 (2001). Having reviewed the sections in dispute in the instant action, namely Sections I and III, the Court does not find that the policy is ambiguous and as such, will accord the disputed sections their plain meaning.

KSI filed its claim for losses under the Warehouse Storage Insurance, or Section III. Section III clearly states, in Paragraph 1, that it is extended to cover all property insured under Section I which is the property of the Assured. As such, it is necessary to turn to Section I to determine what exactly is encompassed by property insured under Section I. Turning to Section I, the Court notes that Paragraph 3 states that “this policy covers … shipments of lawful goods and merchandise consisting of principally of Merchandise Incidental to the Assured’s Business, Consisting Principally of Automobile Parts.” Continuing to read Section I, the Court notes that Paragraph 5 further states that “this policy covers Property Insured at or from ports and/or places in the world to ports and/or place in the world excluding shipment originating in the United States …”

In sum, after a review of Sections I and III, the Court finds that Section III is an extension of Section I. Section III, Warehouse Storage Insurance is clearly read as applying to goods insured under Section I. Section I goods are merchandise incidental to the assured’s business, with the exclusion of domestically originating shipments. In other words, only goods acquired internationally are covered.

In light of the above, the Court finds that only internationally acquired goods are covered by the Policy. As such, Royal’s motion for summary judgment must be granted, and KSI’s motion for summary judgment must be denied.

IV. CONCLUSION

In light of the above, Plaintiff Royal Insurance Company of America’s motion for summary judgment is granted. Defendants KSI and Astro-Automotive’s motion for summary judgment is denied.

Superior Court of New Jersey,

Appellate Division.

Carol BASTEK, Executrix of the Estate of James Bastek, M.D., SCott Bastek,

Carol Bastek, and Jamie Bastek, Individually, Plaintiffs-Appellants,

v.

COMMERCE AND INDUSTRY INSURANCE COMPANY, Defendant-Respondent,

and

AIG Claim Services Inc., and/or American International Group Inc., Defendants.

Argued Nov. 29, 2005.

Decided Feb. 22, 2006.

PER CURIAM.

Plaintiff Carol Bastek, individually and in her capacity as the Executrix of the Estate of James Bastek, M.D., and plaintiffs Scott Bastek and Jamie Bastek appeal from the December 17, 2004 and the January 27, 2005 orders of the Law Division which granted the motions of defendant Commerce & Industry Insurance Company (CIIC) to dismiss the second and first counts, respectively, of plaintiffs’ complaint. We affirm.

FN1. Two other defendants, AIG Claims Services Inc., and American International Group, Inc., were named in the complaint and participated in the proceedings in the Law Division. Both of these entities were dismissed from the litigation by stipulation while the appeal was pending.

On May 22, 1998, Dr. Bastek was killed when the vehicle in which he and the other plaintiffs were riding was struck by a tractor-trailer. The tractor was owned and driven by Isam Sabeil, who had been hired by Inter-Coast Express to haul the trailer and who was operating under Inter-Coast’s ICC license. At the time of the accident, Inter-Coast had two insurance policies issued to it by defendant CIIC. The policies were a trucker’s Commercial Motor Vehicle policy (the Auto Policy) and a Commercial General Liability policy (the CGL policy). Sabeil and Inter-Coast were defended by CIIC throughout the personal injury litigation commenced by plaintiffs against them and other defendants as a result of the accident. During the pendency of that litigation, CIIC sought leave to deposit the $1 million limit of its Auto policy into court, but withdrew that motion because plaintiffs were unwilling to accept that sum in settlement of their claims against CIIC’s insureds.

Following trial, the jury returned a verdict in favor of plaintiffs and against Sabeil, Inter-Coast and others. Molded in accordance with the percentages of fault assigned to Sabeil and Inter-Coast, the verdict was well in excess of the policy limits of the Auto Policy. After entry of the judgment, CIIC paid $982,000 to plaintiffs, representing the $1 million limit of the Auto policy, less storage and towing fees of $18,000.

In September 2004, plaintiffs filed the complaint that gives rise to this appeal. Count One of the complaint demanded that CIIC pay pre- and post-judgment interest on the sum paid pursuant to the Auto policy. Count Two of the complaint sought a declaration that the CGL policy also provided coverage for the losses represented by the jury verdict and demanded that the $1 million policy limit of that policy also be paid over to plaintiffs.

Defendant first moved to dismiss Count Two of the complaint for failure to state a claim on which relief may be granted. See R. 4:6-2(e); Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989). Judge Walsh granted that motion, setting forth his reasons in his written opinion dated December 17, 2004. Shortly thereafter, defendant moved to dismiss Count One of the complaint on the ground that it, too, failed to state a claim on which relief may be granted. Ibid. For reasons explained in his written opinion dated January 27, 2005, Judge Walsh granted that motion as well.

On appeal, plaintiffs argue that the judge failed to afford them the reasonable inferences required by the indulgent Printing Mart standard, misapplied the law and misunderstood the facts with respect to each of the motions. Moreover, they argue, for the first time on appeal, that defendant should have been equitably estoped to deny coverage pursuant to its CGL policy and that the judge should have recused himself from the matter.

We have considered these arguments in light of the record and the applicable legal precedents and have concluded that each of them is without sufficient merit to warrant discussion in a written opinion. R. 2:11- 3(e)(1)(E). We therefore affirm for substantially the reasons expressed by Judge Walsh in his written opinions dated December 17, 2004 and January 27, 2005. We add only the following brief observations.

Count Two of plaintiffs’ complaint, which sought a declaration that the CGL policy provided coverage for the accident, was properly dismissed. Plaintiffs argue that the CGL policy should have afforded coverage for Inter-Coast’s negligent hiring or supervision of Sabeil. They note, in support of this claim, that the jury in the underlying litigation found, as a matter of fact, that Inter-Coast was negligent in its hiring and supervision of Sabeil. They further point out that this finding of negligence was the only basis for the attribution of fault to Inter-Coast.

We reject plaintiff’s assertion, as did Judge Walsh. Indeed, we have previously concluded that the CGL policy’s automobile exclusion precludes plaintiff’s claim entirely. See Scarfi v. Aetna Casualty & Surety Co., 233 N.J.Super. 509, 512-14 (App.Div.1989); see also Richards v. The Princeton Ins. Co., 178 F.Supp.2d 386 (S.D.N.Y.2001). The injuries and losses for which plaintiffs were seeking damages occurred in a motor vehicle accident. The plain language of the CGL policy, as Judge Walsh noted, excludes any coverage for bodily injury “arising out of the ownership, maintenance, use or entrustment to others of any … ‘auto’ … owned or operated or rented or loaned to any insured.” Moreover, the policy defines “auto” broadly to include the vehicle that Sabeil was operating for Inter-Coast at the time of the accident. Regardless of the jury’s factual finding about Inter-Coast’s negligence, because the injuries arose from the motor vehicle accident, the exclusion bars recourse to the CGL policy. See Conduit & Foundation Corp. v. Hartford Casualty Ins. Co., 329 N.J.Super. 91, 101 (App.Div.), certif. denied, 165 N.J. 135 (2000).

Similarly, we find no error in Judge Walsh’s dismissal of Count One of the complaint. There is no question that CIIC paid the full limit of its Auto policy to plaintiffs. In Count One of the complaint, however, plaintiffs sought an award of pre- and post-judgment interest from CIIC pursuant to the Auto policy. That claim fails for several reasons. First, the plain language of the policy excludes payments in excess of the policy limit. In general, the insurer’s obligation is limited by the terms of the policy. See Iskander v. Columbia Cement Co., 192 N.J.Super. 114, 122 (Law Div.1983), aff’d, 197 N.J.Super. 169 (App.Div.1984).

More to the point, however, plaintiffs, as persons injured by CIIC’s insured, are precluded from filing a direct claim against CIIC absent an assignment of rights. See Murray v. Allstate Ins. Co., 209 N.J.Super. 163, 165 (App.Div.1986); Biasi v. Allstate Ins. Co., 104 N.J.Super. 155 (App.Div.), certif. denied, 53 N.J. 511 (1969). Nor do we agree with plaintiffs’ assertion on appeal that they are third-party beneficiaries to the contract of insurance who are therefore entitled to make a direct claim against the policy. Third-party beneficiary status arises only where the parties to the contract intended at the outset to confer a benefit on the third-party sufficient to enforce it in court. See Broadway Maintenance Corp. v. Rutgers, 90 N.J. 253 (1982); Brooklawn v. Brooklawn Housing Corp., 124 N.J.L. 73, 77 (E. & A.1940). There is no basis on which to conclude that this insurer intended to confer a direct right upon these plaintiffs merely by issuing an insurance policy to Inter-Coast.

In addition, plaintiffs raise two arguments on appeal that they did not present during the proceedings before Judge Walsh. Although we need not address issues raised for the first time on appeal at all, see Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973), we have elected to consider them briefly. Plaintiffs first assert that defendant should be equitably estopped from denying either an obligation to pay interest under the Auto policy or more generally, a duty to pay its policy limits under the CGL policy.

Our review of the record demonstrates that the essential prerequisites for a finding of estoppel are entirely absent. See Martinez v. John Hancock Mutual Life Ins. Co., 145 N.J.Super. 301, 313-14 (1976), certif. denied, 74 N.J. 253 (1977); Harr v. Allstate Ins. Co., 54 N.J. 287, 306 (1969). There is, to begin, nothing that demonstrates that this defendant misrepresented any fact or that plaintiffs or CIIC’s insured relied on any misrepresentation to their detriment. Plaintiffs’ arguments to the effect that CIIC did not defend the litigation pursuant to a reservation is irrelevant because plaintiffs are not defendant’s insureds and thus do not fall within the class of persons for whom the estoppel theory might afford relief. See, e.g., Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519 (2005).

Finally, plaintiffs argue, for the first time on appeal, that Judge Walsh should have recused himself. They rely on the fact that Judge Walsh had, in his capacity as a judge, presided over a dispute, seven years earlier, between Dr. Bastek and a former business partner in which the judge had found for Dr. Bastek’s partner. We reject as entirely baseless the suggestion that this earlier service as a judge in a matter not concluded to plaintiffs’ satisfaction provided a basis for recusal.