Bardis v. Stinson, 444 N.J. Super. 448 (App. Div. 2016). This insurance coverage matter is a case with an unusual sequence of appellate events. The case was argued before the Appellate Division on December 4, 2013. The panel issued a 2-1 decision on October 8, 2014. Judge Maven wrote the majority opinion, in which Judge Hoffman joined. Judge Sapp-Peterson dissented. The majority opinion reversed a summary judgment that plaintiffs’ homeowners insurance policy, which protected against losses from “hidden decay,” did not cover the collapse of a basement wall that allegedly resulted from “hidden defects.”
The 2-1 split allowed an appeal as of right to the Supreme Court, which the Court added to its docket on February 23, 2015 . The Court heard oral argument on January 19, 2016. But not until February 19, 2016 was the Appellate Division’s opinion approved for publication. Frequently, a decision of a lower court that is under consideration at a higher level is not approved for publication while the appeal of that decision remains pending. But here the Appellate Division’s opinion was approved for publication despite the pendency of the Supreme Court appeal.
Speaking for the majority of the Appellate Division, Judge Maven offered a comprehensive catalog of principles of interpreting insurance policies, including the need to effectuate the reasonable expectations of the insured. The majority could not “imagine a homeowner, who has purchased homeowners insurance, who would not expect the policy to cover a basement collapse.” Because “hidden decay” was not defined in the policy, it could be found to include “hidden defects.” Judge Maven thus concluded that there was an issue of fact for trial as to whether the policy language that included coverage of “hidden decay” encompassed “hidden defects” as well, since causation for the collapse was in dispute based on the evidence presented.
Judge Sapp-Peterson found no ambiguity in the policy. She agreed with the Law Division that “the plain meaning of the term ‘decay’ is not the same as the plain meaning of the term ‘defect.'” To Judge Sapp-Peterson, “[a] ‘defect’ connotes imperfection from the outset, while ‘decay’ connotes a decline from a condition that was originally sound.”
The Supreme Court will have the last word, and in these unusual circumstances we already have some insight into what the Court might be thinking, since the oral argument before the Court already occurred. At that oral argument, the Court seemed to have more challenging questions for plaintiff, especially to the extent that some Justices seemed to emphasize that plaintiff’s case rested on treating “hidden defect” as a synonym for “hidden decay,” and whether that constituted rewriting the policy of insurance. That might be a sign that a reversal is in the offing, though reading tea leaves based on questions posed does not always produce an accurate prediction of the result.