In American Wrecking Corp. v. Burlington Ins. Co., et al., the fundamental issue was the impact of a “Cross Liability Exclusion” which was added, at the time of renewal, to the liability insurance policy purchased by plaintiff American Wrecking (AW), and provided by defendant Burlington. The question, decided November 29, 2007, was triggered by the filing of certain construction worksite personal injury claims, thus requiring the court to determine whether a fair interpretation of the Exclusion compelled indemnification or supports disclaiming. The court recites the history of the claims and the pertinent policy language and concludes that it would be against public policy and the law as the court understands it to uphold the Exclusion here. The construction contract between Roche, as owner, and plaintiff AW, as contractor, clearly provided that the owner was to be indemnified by AW, and AW’s plight, in turn, was to seek relevant insurance coverage. The original 2002 policy undisputedly provided liability coverage for AW and its additional insureds. In the more costly 2003 renewal policy, however, Burlington inserted the Exclusion, eliminating coverage for “any insured.” Thus, the Exclusion effectively eliminated liability coverage for AW and any entities listed as additional insureds under the policy. This result is fundamentally inconsistent with commercially reasonable standards. While the Exclusion is not ambiguous, clarity of meaning does not defeat the need to ensure that the policy language conforms to public expectations and commercially reasonable standards.
This decision further demonstrates New Jersey courts’ willingness to overlook unambiguous policy language in favor of obtaining a result in the best interest of the insured. Carriers must be careful not to include exclusionary provisions, even if clearly drafted, which can be seen as effectively excluding the main operations for which the insurance is purchased.