Wakefern Food Corp. v. Liberty Mut. Fire Ins. Co.
Superior Court of New Jersey, Appellate Division
March 9, 2009, Argued; April 22, 2009, Decided
DOCKET NO. A-2010-07T3
[*528] [**726] The opinion of the court was delivered by
Plaintiffs, Wakefern Food Corporation and related companies, appeal from [**727] two orders entered by the Law Division on November 23, 2007, denying plaintiffs' motion for summary judgment and [*529] granting summary judgment in favor of defendant Liberty Mutual Fire Insurance Company (Liberty).
To summarize, on August 14, 2003, problems with the interconnected North American power system (the "electrical grid") resulted in a four-day electrical blackout over much of the northeastern United States and eastern Canada. As might be expected, plaintiffs, a group of supermarkets, suffered losses due to food spoilage during the blackout, in addition to incurring loss of business. Having paid a $ 5.5 million premium for insurance, covering (among other things) damage due to the loss of electric power, plaintiffs turned to their insurer, Liberty, to pay for their losses. Liberty, however, denied coverage, contending that its policy only applied in case of "physical damage" to off-premises electrical plant and equipment and that, although the power grid was physically incapable of supplying power for four days, it suffered no "physical damage" and therefore there was no coverage. The policy did not define the term "physical damage."
The trial court granted summary judgment for [***3] Liberty, holding that the grid was not physically damaged because it could be returned to service after the interruption. The court also concluded that "the protective system [within the grid] worked to prevent physical damage to the types of equipment included in 1.B.(3) of the Services Away Extension." In other words, because the grid had safety features that shut down the generators and transmission equipment, and kept them turned off, the loss of power was not due to "physical damage," even though the event rendered the system incapable of producing electricity for four days. Concluding that the decision is inconsistent with well-settled principles of insurance law, we reverse and remand this matter to the trial court.
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406 N.J. Super. 524 *; 968 A.2d 724 **; 2009 N.J. Super. LEXIS 86 ***
WAKEFERN FOOD CORPORATION; SHOPRITE OF OAKLAND, INC; KEARNY SHOPRITE, INC; JANSON SUPERMARKETS, INC.; GRADE A MARKETS, INC.; FOOD PARADE, INC.; BROOKDALE SHOPRITE, INC.; SHOPRITE SUPERMARKETS, INC.; INSERRA SUPERMARKETS, INC.; AND GLASS GARDENS, INC., PLAINTIFFS-APPELLANTS, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY D/B/A LIBERTY MUTUAL, DEFENDANT-RESPONDENT.
Subsequent History: [***1] Approved for Publication April 22, 2009.
Certification denied by Wakefern v. Liberty Mut. Fire Ins. Co., 2009 N.J. LEXIS 851 (N.J., July 16, 2009)
Prior History: On appeal from the Superior Court of New Jersey, Law Division, Union County, L-2959-05.
physical damage, electrical, generators, interconnection, blackout, insured, coverage, transmission line, electric power, grid, damaged, cascading, outage, insurance policy, interruption, plaintiffs', physical loss, supermarkets, relay, summary judgment, power outage, restored, causes, losses, lines, electric utility, consequential, transmission, premises, food
Civil Procedure, Appeals, Standards of Review, De Novo Review, Summary Judgment Review, Standards of Review, Judgments, Summary Judgment, Evidentiary Considerations, Entitlement as Matter of Law, Genuine Disputes, Evidence, Burdens of Proof, Allocation, Insurance Law, Policy Interpretation, Ambiguous Terms, Coverage Favored, Reasonable Expectations, Reasonable Person, Coverage, Triggers, Manifestation Triggers, Commercial General Liability Insurance, Persons Insured, Third Parties, Claim, Contract & Practice Issues, General Overview, Contracts Law, Contract Interpretation, Construction Against Insurers, Exclusions, Adhesion Contracts, Business Insurance, Property Claims