A federal judge in New Jersey has ruled that a New Jersey property owner is not entitled to insurance coverage for a shooting because it never disclosed it owned the banquet hall where the shooting took place on its two insurance applications.
The judge granted requests by insurers Harford Mutual and Firstline National to both dismiss the claims against them and allow them to rescind the commercial general liability policies due to the misrepresentations
The judge also ruled that the property owner, not its insurance agents, is responsible for the accuracy of the information on an insurance application. “Ultimately, the insureds—and the insureds alone—have the factual information necessary to complete an application for insurance,” wrote U.S. District Judge Renee Marie Bumb.
Insureds Ziggy and Diane Dobkowski, owners of Z&D Realty LLC, contended that they had no direct contact with Harford and Firstline and that they “fully and accurately disclosed all information” that their insurance agents asked of them. Additionally, they argued that Harford and Firstline had an “obligation to exercise due diligence to confirm the representations set forth in the insurance applications, including the precise physical locations and operation of the business entity within the insured property” but they failed to do so.
The judge found that Z&D had in fact misrepresented its properties by not including the banquet facility, thereby justifying rescission of the policies by the insurers. The judge also found that the insurance agents were not responsible.
Z&D owns and operates a variety of related businesses situated at 619–623 East Landis Avenue in Vineland, New Jersey. According to court documents, they own Z&D Realty, an apartment building and property manager; Landis Pig Roast, a family-style restaurant with a liquor license; and Grant Plaza, a banquet hall and dancing facility where the shooting took place. Z&D Realty and Landis Pig Roast share the same physical address and Grant Plaza is located next door.
The court noted that the businesses are “clearly interrelated” given that Z&D owns the land on which Landis Pig Roast and Grant Plaza operate; two interior doorways on either side of a back alley connect Landis Pig Roast to Grant Plaza; the Dobkowskis rely upon one liquor license for Landis Pig Roast and Grant Plaza; and Landis Pig Roast supplies Grant Plaza with food and liquor service.
On April 21, 2017, Raheem McClendon leased Grant Plaza to host a party for some 500 to 600 guests with an admission price, security guards, and alcohol service. That evening, a shooting occurred at Grant Plaza that left at least three people injured. The injured attendees brought various personal injury claims against McClendon and Z&D in a state court proceeding. Z&D then notified Harford and Firstline of the claims and demanded defense and indemnification, which the insurers denied.
On January 29, 2019, Harford and Firstline separately filed complaints against the Dobkowskis and the parties suing them. The nearly identical complaints alleged fraud and misrepresentation against Z&D. Harford and Firstline sought a declaration from the court that they did not have a duty to defend or indemnify the Dobkowskis and Z&D Realty, and they sought rescission of the insurance policies.
The court concluded that there was no genuine dispute whether the Z&D defendants made material misrepresentations in their applications for the Harford policy and the Firstline policy and that Z&D could not disclaim responsibility for the applications that Mr. Dobkowski signed, even if their insurance agents provided professional services.
Neither policy application mentions Grant Plaza—as an additional insured or otherwise—even though the Dobkowskis had opened the banquet hall prior to submitting their initial Harford and Firstline insurance applications. Also, both applications solicited information concerning the operation of additional or related businesses, including whether Z&D had “other on or off premises exposures not listed above”; whether Z&D had any other operations or subsidiaries; and whether there would be social events on the premises. Mr. Dobkowski denied all such questions.
Z&D argued that if Harford and Firstline had investigated, they would have discovered Grant Plaza. The Dobkowski contended that these insurance companies should have performed due diligence to confirm the representations included in the insurance applications, and they suggest that Harford and Firstline should have more thoroughly examined their insurance agents, too.
The court disagreed. “An insurer’s duty to investigate arises only when there are sufficient facts to call the insurance application into question,” the judge wrote.
As for insurers and the agents, the court found that the insurers had no duty to investigate the agents just because they assisted as intermediaries.
The judge concluded that the Z&D defendants “supplied inaccurate information to Harford and Firstline, and they omitted information material to the insurers’ decision to write insurance policies covering the categories of risk the parties intended.”
Given this record, the court concluded that rescission of both policies was justified and it would not be equitable to require Harford and Firstline to cover the underlying action or any other events arising from the shooting.
Additionally, the judge noted that the policies both contain New Jersey endorsements that add provisions permitting cancellation for risks that were not contemplated at the time the policies were written
The judge found that Z&D produced no expert reports and no evidence concerning any alleged breach of contract or deviation from the professional standards of care of the insurance agents.
Top photo courtesy of TripAdvisor.com.
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