DOUGLAS DASILVA VS. JDDM ENTERPRISES, LLC VS. UTICA FIRST INSURANCE COMPANY (L-1840-14, BURLINGTON COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE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.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3302-16T2
DOUGLAS DASILVA,
Plaintiff-Respondent,
v.
JDDM ENTERPRISES, LLC, DAVID COHEN
T/A JDDM CUSTOM CONSTRUCTION,
Defendants-Appellants,
v.
UTICA FIRST INSURANCE COMPANY,
Third-Party Defendant-Respondent,
and
2 HAND BROTHERS CONSTRUCTION, LLC,
Third-Party Defendant.
___________________________________
Argued April 25, 2018 – Decided July 27, 2018
Before Judges Fuentes, Koblitz, and Manahan.
On appeal from Superior Court of New Jersey,
Law Division, Burlington County, Docket No.
L-1840-14.
Scott E. Becker argued the cause for
appellants.
Gretchen B. Connard argued the cause for
respondent Utica First Insurance Company
(Farber Brocks & Zane, attorneys; Gretchen B.
Connard, on the brief).
PER CURIAM
At all times relevant to this case, plaintiff Douglas DaSilva
was an employee of 2 Hand Brothers Construction, LLC (Hand
Brothers). JDDM Enterprises, LLC (JDDM) was the general contractor
of the construction project at which Hand Brothers was a
subcontractor. Hand Brothers did not have a workers compensation
insurance policy at the time JDDM retained it to work as a
subcontractor. On August 1, 2014, plaintiff filed a negligence
cause of action against JDDM and its principal, David Cohen,
seeking compensatory damages for injuries he suffered while
working at the construction site as an employee of Hand Brothers.
At the time, JDDM had a Contractor's Special insurance policy with
Utica First Insurance Company (Utica).
JDDM reported plaintiff's claim to Utica and requested it to
defend JDDM and Cohen in this suit and to indemnify them both
against any civil liability up to the policy's coverage limit. In
a letter to JDDM dated October 17, 2014, Utica denied coverage
pursuant to the policy's Workers' Compensation Exclusion and
Employee Exclusion. According to Utica, the policy did not
provide coverage if JDDM was required to provide plaintiff with
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workers' compensation benefits under the Workers' Compensation
Act, N.J.S.A. 34:15-1 to -146. Because plaintiff's employer, the
subcontractor, did not have a workers' compensation policy, under
N.J.S.A. 34:15-79(a), the general contractor is liable for any
compensation which plaintiff would have been entitled to receive
from his employer.
JDDM and Cohen filed a responsive pleading to plaintiff's
complaint and a third-party declaratory judgment action against
Utica, seeking declaratory relief on the issue of coverage and an
injunction compelling Utica to defend JDDM and Cohen in the civil
action filed by plaintiff. After joinder of issue, Utica moved
for summary judgment before the Law Division arguing the third-
party complaint should be dismissed based on the policy's workers'
compensation exclusion. The motion judge agreed with Utica and
dismissed JDDM's and Cohen's third-party complaint as a matter of
law. JDDM and Cohen thereafter entered into a Consent Judgment
in which they agreed to be jointly and severally liable to
plaintiff in the sum of $55,000.
In this appeal, JDDM and Cohen argue the motion judge erred
when she concluded Utica was entitled to deny coverage under the
workers' compensation exclusion in the policy. We review an order
granting a motion for summary judgment de novo, without any
deference to the Law Division's conclusions of law. Town of Kearny
3 A-3302-16T2
v. Brandt, 214 N.J. 76, 91 (2013). We also consider the evidence
and the parties' factual contentions in the light most favorable
to the non-moving party. Murray v. Plainfield Rescue Squad, 210
N.J. 581, 584 (2012); R. 4:46-2(c). Applying these standards to
the record developed by the parties here, we affirm.
I
A
JDDM is a limited liability company; Cohen is its sole member.
Utica issued a Contractor's Special liability policy to JDDM
effective from July 11, 2012 to July 11, 2013. The policy's
declarations page identifies JDDM as the named insured. The policy
defines "'you' and 'your'" as "the person, persons, or
organizations named as the insured on the 'declarations.'" It
defines "insured" as:
b. "you" and all "your" partners or members
and their spouses, but only with respect to
the conduct of "your" business, if shown on
the "declarations" as a partnership or joint
venture;
c. "you" and all "your" members and managers,
but only while acting within the scope of
their duties, if shown on the "declarations"
as a limited liability company . . . .
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Coverage L, found on page nine of a forty-two-page policy
document,1 defines Bodily Injury Liability/Property Damage
Liability:
"We" pay all sums which an "insured" becomes
legally obligated to pay as "damages" due to
"bodily injury" or "property damage" to which
this insurance applies. The "bodily injury"
or "property damage" must be caused by an
"occurrence" which takes place in the
"coverage territory", and the "bodily injury"
or "property damage" must occur during the
policy period.
The section titled "Defense Coverage" states: "Payments under
this coverage are in addition to the 'limits' for the Commercial
Liability Coverage[2] . . . We have the right and duty to defend a
suit seeking 'damages' which may be covered under the Commercial
Liability Coverage." Finally, the policy contains several
exclusions from coverage:
"We" do not pay for a loss if one or more of
the following excluded events apply to the
loss, regardless of other causes or events
that contribute to or aggravate the loss,
whether such causes or events act to produce
the loss before, at the same time as, or after
the excluded event.
1
The policy contains a Table of Contents with clearly worded
descriptions of the various subject areas. "Definitions" is
properly labeled with subheadings. Subheading "Coverage L" is the
first subheading under "Definitions."
2
The Declarations Page discloses the limit for each occurrence as
$1,000,000. The General Aggregate Limit is $2,000,000.
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EXCLUSIONS THAT APPLY TO BODILY INJURY,
PROPERTY DAMAGE, PERSONAL INJURY, AND/OR
ADVERTISING INJURY
. . . .
12. [The Workers' Compensation Exclusion]
"We" do not pay for "bodily injury" or
"personal injury" if benefits are provided or
are required to be provided by the "insured"
under a workers' compensation, disability
benefits, occupational disease, unemployment
compensation, or like law.
The policy excludes from coverage injuries to employees,
contractors, and employees of contractors:
[The Employee Exclusion]
This Endorsement only applies to worksites
within the State of New York[.]
. . . .
This insurance does not apply to:
(i) bodily injury to any employee of any
insured, to any contractor hired or retained
by or for any insured or to any employee of
such contractor, if such claim for bodily
injury arises out of and in the course of
his/her employment or retention of such
contractor by or for any insured, for which
any insured may become liable in any capacity;
(ii) any obligation of any insured to
indemnify or contribute with another because
of damage arising out of the bodily injury
. . . .
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B
On August 8, 2012, JDDM was functioning in the capacity of
general contractor when it hired Hand Brothers, as a subcontractor,
to perform work at a construction site located in the Township of
Livingston. Hand Brothers drafted the proposal that described the
work it agreed to perform, but improperly listed "JDDM Custom
Construction, LLC," as the general contractor. In a deposition
taken on August 23, 2016, plaintiff testified that at the time of
the accident on August 15, 2012, he was employed by a man named
Evan Soto, whom he later learned owned Hand Brothers, to do framing
work at the job site.
In the Workers' Compensation – First Report of Injury or
Illness he filed with the Division of Workers' Compensation on
November 30, 2012, plaintiff named JDDM as his employer. In an
amended Employee Claim Petition, plaintiff described the accident:
"Fell one story through [a] cutout stairwell" at the job site.
Cohen testified that in response to his question, the "owner"3 of
Hand Brothers told him he had workers' compensation insurance.
However, he did not ask him to produce proof of insurance at this
encounter. When Hand Brothers provided Cohen a Certificate of
Liability Insurance, the Certificate was issued to "Top Line
3
Cohen did not remember the name of the man who identified himself
as the "owner" of Hand Brothers.
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Quality Construction, Inc.", and not to Hand Brothers. When asked
about this discrepancy, Cohen explained that he was not certain
who owned Top Line Quality Construction, Inc., but believed it was
another company owned by the owner of Hand Brothers. Ultimately,
the Certificate of Liability Insurance Hand Brothers produced was
"fake." The record shows that Hand Brothers did not have any
workers' compensation insurance during the time JDDM retained it
as a subcontractor.
After it investigated the claim, Utica denied coverage in a
letter dated October 17, 2014. Citing paragraph 11 (the Employee
Exclusion) and paragraph 12 (the Workers' Compensation Exclusion)
in the policy's "EXCLUSIONS," Utica explained that it would be
unable to provide coverage to you or any other
party seeking coverage under this policy of
insurance for damages arising out of this
incident. We will not defend any legal action
against our insured or any other party; we
will not indemnify our insured or any other
party for any judgment awarded; and we will
not make any payment on our insured for any
other party's behalf in connection with
damages arising out of this event.
On March 31, 2017, the Law Division entered an Order of
Dismissal Through Settlement in which the court dismissed the
underlying civil action between plaintiff and JDDM without
prejudice. (Emphasis added). This order further provided: "The
parties may file a stipulation or order setting forth the specific
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settlement terms." As part of the record in this appeal, JDDM
included an unsigned copy of an Order of Judgment with Stipulation
of Settlement. In this document, JDDM and Cohen agreed that
plaintiff could enter judgment against them both "jointly,
severally, and/or in the alternative for the sum of $55,000.00."
The balance of the Stipulation of Settlement states:
3. Provided Defendants file a timely appeal,
Plaintiff agrees to stay [the] execution and
docketing of the within judgment during the
pendency of said appeal to the filing of an
opinion (R. 1:36-1) of the Appellate Division,
whereupon:
a. Defendants shall pay the sum of $27,500.00
within thirty (30) days;
b. And thereafter, Defendants shall pay an
additional sum of $27,500 within one hundred
eighty (180) days;
4. Provided Defendants meet all obligations
under this Order, Plaintiff agrees to suspend
execution upon the Judgment.
In his brief before this court, JDDM's appellate counsel
acknowledged that plaintiff’s workers’ compensation claim has not
been decided.
II
JDDM argues that the Workers' Compensation Exclusion in
Utica's policy is ambiguous and should be construed in favor of
coverage because the parties have unequal bargaining powers. In
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contrast, Utica argues that the Workers' Compensation Exclusion
is unambiguous and the exclusion should be given its plain meaning.
"Insurance policies are construed in accordance with
principles that govern the interpretation of contracts; the
parties' agreement 'will be enforced as written when its terms are
clear in order that the expectations of the parties will be
fulfilled.'" Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J.
512, 525 (2012) (quoting Flomerfelt v. Cardiello, 202 N.J. 432,
441 (2010)). "The terms of insurance contracts are given their
'plain and ordinary meaning,' with ambiguities resolved in favor
of the insured." Ibid. (quoting Flomerfelt, 202 N.J. at 441).
Exclusionary clauses are presumed valid if they are
"specific, plain, clear, prominent and not contrary to public
policy." Flomerfelt, 202 N.J. at 441 (quoting Princeton Ins. Co.
v. Chunmuang, 151 N.J. 80, 95 (1997)). "If the terms used in an
exclusionary clause are ambiguous, 'courts apply the meaning that
supports coverage rather than the one that limits it.'" Mem'l
Props., LLC, 210 N.J. at 528 (quoting Flomerfelt, 202 N.J. at
442). If however, "the words used in an exclusionary clause are
clear and unambiguous, 'a court should not engage in a strained
construction to support the imposition of liability.'" Ibid.(quoting Flomerfelt, 202 N.J. at 442).
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The burden is on the insurer to show that an exclusionary
clause applies, and "[a]s a result, exclusions are ordinarily
strictly construed against the insurer, and if there is more than
one possible interpretation of the language, courts apply the
meaning that supports coverage rather than the one that limits
it." Flomerfelt, 202 N.J. at 442 (citations omitted). However,
"courts must be careful not to disregard the 'clear import and
intent' of a policy's exclusion." Ibid. (citing Westchester Fire
Ins. Co. v. Cont'l Ins. Cos., 126 N.J. Super. 29, 41 (App. Div.
1973)). Additionally, not every "far-fetched interpretation of a
policy exclusion will be sufficient to create an ambiguity
requiring coverage," and instead, "courts must evaluate whether,
utilizing a 'fair interpretation' of the language, it is
ambiguous." Ibid. (quoting Stafford v. T.H.E. Ins. Co., 309 N.J.
Super. 97, 105 (App. Div. 1973)).
New Jersey's Workers' Compensation statute requires employers
to purchase workers' compensation insurance, and "[i]n return for
the employer assuming the burden of providing this coverage, the
employee surrenders the right to pursue any other remedy against
the employer, thus immunizing the employer from tort liability."
Eger v. E. I. du Pont de Nemours Co., 110 N.J. 133, 137 (1988)
(citing N.J.S.A. 34:15-7, -8). Because general contractors are
not part of an employment contract between a subcontractor and its
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employees, they are "not required to provide workers' compensation
coverage, and do not enjoy the immediate employer's immunity from
tort liability." Ibid.N.J.S.A. 34:15-79(a) provides that:
Any contractor placing work with a
subcontractor shall, in the event of the
subcontractor's failing to carry workers'
compensation insurance as required by this
article, become liable for any compensation
which may be due an employee or the dependents
of a deceased employee of a subcontractor. The
contractor shall then have a right of action
against the subcontractor for reimbursement.
Under this provision, a contractor who retains a
subcontractor becomes liable for workers' compensation benefits
owed to the subcontractor's employees if the subcontractor does
not provide workers' compensation insurance. Pollack v. Pino's
Formal Wear & Tailoring, 253 N.J. Super. 397, 403-04 (App. Div.
1992). This section acts as an incentive for general contractors
to confirm that the subcontractors they hire are insured, "or else
the general contractor himself [or herself] will become liable to
pay such benefits." Pollack, 253 N.J. Super. at 404; see also
Eger, 110 N.J. at 137 (explaining "this secondary liability is
imposed to ensure that a worker has some source of recovery, and
to provide an incentive for general contractors to place work with
insured subcontractors . . . ."). However, this provision "has
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no bearing on the tort liability of a general contractor to a
subcontractor's employee." Eger, 110 N.J. at 137.
Here, it is undisputed that JDDM was the general contractor
at the construction site where plaintiff was injured. It is also
undisputed that JDDM hired Hand Brothers as a subcontractor to
perform framing work at the property. Hand Brothers failed to
provide workers' compensation coverage to its employees as
required by N.J.S.A. 34:15-7, -8. Pursuant to N.J.S.A. 34:15-
79(a), because Hand Brothers failed to provide this coverage,
JDDM, as the general contractor, became liable to Hand Brothers'
employees to provide workers' compensation coverage.
Specifically, JDDM was required by N.J.S.A. 34:15-79(a) to provide
workers' compensation benefits to plaintiff. Based on the record,
it also appears that JDDM's workers' compensation carrier admitted
liability pursuant to N.J.S.A. 34:15-79(a) and agreed to pay those
benefits.
JDDM's insurance contract with Utica provides a Workers'
Compensation Exclusion to coverage, which excludes coverage for
"bodily" or "personal" injury if "benefits are provided or are
required to be provided by the 'insured' under a workers'
compensation . . . law." Because JDDM was required to provide
workers' compensation coverage to plaintiff under N.J.S.A. 34:15-
79(a), New Jersey's Workers' Compensation statute, the policy's
13 A-3302-16T2
Workers' Compensation Exclusion applied. The literal language of
the Workers' Compensation Exclusion plainly excludes exactly the
type of coverage that JDDM is seeking. We reject the argument
based on any alleged ambiguity in Utica's policy exclusion
provision. The balance of JDDM’s arguments lack sufficient merit
to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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