Watford Specialty Ins. Co. v. MDF 92 River St.

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WATFORD SPECIALTY INSURANCE COMPANY, Plaintiff-Respondent, v. MDF 92 RIVER STREET, LLC, d/b/a WILD MOOSE SALOON & THE BIRCH, Defendant-Respondent, and MATTHEW GARCIA and DASHON BROWN, Defendants, and DENIS MUCHA, Defendant-Appellant.

No. A-3505-21

Superior Court of New Jersey, Appellate Division

December 22, 2023

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.

Argued November 15, 2023

On appeal from the Superior Court of New Jersey, Law Division Morris County, Docket No. L-1168-21.

William L. Gold argued the cause for appellant (Bendit Weinstock, PA, attorneys; William L. Gold, on the briefs).

Timothy M. Jabbour argued the cause for respondent (Tressler LLP, attorneys; Timothy M. Jabbour and Neli Kharbedia, of counsel and on the brief).

Before Judges Currier, Firko, and Vanek.

PER CURIAM

This insurance coverage dispute arises from an incident in which defendant Denis Mucha^[1] sustained injuries after he was assaulted by employees at defendant MDF 92 River Street, LLC d/b/a Wild Moose Saloon and The Birch (MDF) (the bar) in Hoboken while a patron. Plaintiff Watford Specialty Insurance Company (Watford) insures MDF. Watford filed a declaratory judgment action seeking a declaration that its obligation to provide insurance coverage to MDF arising out of Mucha's lawsuit were satisfied under its endorsement for assault and battery claims, and Watford's $1,000,000 limit of liability had been exhausted.

Mucha appeals from two Law Division orders entered on June 21 2022, denying his motion for summary judgment and granting Watford's cross-motion for a declaratory judgment barring coverage beyond the $192,325.51 amount that was already paid to Mucha. After reviewing the terms of the insurance contract in light of the governing legal principles, relevant facts, and arguments of the parties, we affirm both orders.

I.

Viewed in the light most favorable to Mucha, Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016), the pertinent facts are as follows. In March 2018, Mucha was a patron at the bar, leased by MDF from Newark and River, LLC. Mucha alleged defendants Matthew Garcia and Dashon Brown, bouncers at the bar, negligently assaulted him resulting in "severe and permanent" injuries. Mucha alleged Garcia's and Brown's conduct was "intentional but having unintended results," and was "malicious, wanton, and reckless." In his complaint, Mucha also alleged MDF "recklessly, carelessly, and/or negligently fail[ed] to properly hire, retain, train and/or supervise competent security," resulting in his injuries.

Watford issued a Commercial General Liability Policy (the Policy) to MDF. The Policy provided coverage up to $1,000,000 per occurrence and in the aggregate. There were five losses during the relevant Policy period, including Mucha's claim. The Policy contained a "Commercial General Liability Coverage Part," (Commercial Liability Part), which states:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

The Policy's Endorsement for "Assault or Battery Exclusion" modifies the Commercial Liability Part, which provides in pertinent part:

This insurance does not apply to, and we have no duty to defend or indemnify any insured or any other person against, any loss, claim or "suit" for "bodily injury", "property damage", "injury" or "personal and advertising injury", including claims or "suits" for negligence, directly or indirectly, actually or allegedly, arising out of or related to any: assault, battery, . . . whether committed by any insured, patron, agent, employee, or any other individual.

This Exclusion applies regardless of fault or intent.

The Policy's Endorsement for "Limited Coverage Assault or Battery Related Claims" (Assault or Battery Related Claims Endorsement) also modifies the Commercial Liability Part and provides in pertinent part:

In consideration of premiums paid, it is agreed that the specific coverage excluded by Form ER 10 05 10 15, Assault or Battery Exclusion is reinstated on a limited basis in accordance with the following additional terms and conditions:

Subject to the limits set forth below this insurance applies to any loss, claim, "suit" or expense for "bodily injury," "property damage," or "personal and advertising injury" including claims or "suits" for negligence, directly or indirectly arising out of, actually or allegedly arising out of, or related to any: assault, battery, molestation, abuse, harmful or offensive contact, false arrest, wrongful detention, false imprisonment, malicious prosecution or threat; whether committed by a patron, employee, or any other individual.

This endorsement applies regardless of fault or intent.

For purposes of this endorsement, negligence includes but is not limited to allegations or claims for: negligent hiring, negligent employment, negligent training, negligent supervision, failure to intervene, failure to render aid, failure to contact law enforcement, failure to contact emergency medical services or failure to detain potentially responsible parties.

The Policy also contains a "Non-Stacking of Limits Endorsement," and a provision entitled "Coverage B-Personal and Advertising Injury Liability" (Coverage B), which states in pertinent part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or "suit" that may result.

The Policy defines "Personal and Advertising Injury Liability," in relevant part, as follows:

"Personal and advertising injury" means injury, including consequential "bodily injury", arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; . . . .

On June 22, 2018, Watford sent a letter to MDF regarding Mucha's claim, advising there was a sublimit of coverage for assault or battery related claims up to $1,000,000 per occurrence and in the aggregate. On December 22, 2020, Watford advised Mucha's counsel that there were five losses during the Policy period, including Mucha's claim. The letter advised that as of December 18, 2020, the four other losses were resolved for a total pay-out of $799,920.53, leaving a remainder of $200,079.47 on the Policy's eroding limits.^[2]

A week later, Mucha filed a motion for leave to file and serve an amended complaint to add a claim for wrongful eviction. Mucha alleged MDF, Garcia, and Brown "wrongfully evicted [him] from the premises that he was occupying causing him severe bodily injury," in addition to alleging Garcia "negligently assaulted" him.

On April 26, 2021, Mucha made a settlement demand of $550,000. As of that time, $199,062.51 remained on MDF's Policy, which Watford offered to Mucha in exchange for a full and complete release of all claims, subject to further reduction based upon ongoing litigation expenses.^[3] Watford advised MDF that $800,937.49 in payments had been made under its Policy. Watford advised MDF it was offering the remaining available limits under its Policy in exchange for a full and complete release of all claims in the Mucha lawsuit. The matter did not settle. Watford advised MDF to consider retaining personal counsel in light of the potential exposure MDF could face in the Mucha lawsuit. On May 26, 2021, Watford filed a complaint for declaratory judgment seeking a declaration that it had satisfied all of its obligations to MDF under its Policy. On June 10, 2021, Watford filed an amended declaratory judgment action, the operative pleading in this action, seeking to declare:

(1) the Watford Policy affords coverage to MDF, Garcia, and Brown in connection with the Mucha Lawsuit under the Endorsement for Limited Coverage Assault or Battery Related Claims;

(2)that subject to the eroding limits, the per Occurrence and Aggregate Limits in the Endorsement for Limited Coverage Assault or Battery Related Claims is the most Watford must pay in connection with the Mucha Lawsuit;

(3) that Watford will not be obligated to pay any judgments, settlements, defense costs, loss adjustment expenses, claim(s) or "suit(s)" or to defend or to continue to defend any loss, claim or "suit" after the applicable limit of liability has been exhausted by payments of judgments, settlements, defense costs, or loss adjustment expenses; [and]

(4)for counsel fees and costs.

Mucha filed an answer and counterclaim contending he was entitled to "coverage for his loss," and "co-defendants are entitled to a full defense."

On September 30, 2021, an arbitration award was entered in the Mucha lawsuit in Mucha's favor in the...