Subrogation Group Wins Partial Motion For Summary Judgment Applying Retail Price Valuation

March 30, 2021 / News

CM Partner Robert A. Stern was retained to investigate a water loss at a mall in New Jersey.  Our Insured was a retail store.  The Insured submitted a claim to CM’s client for the damage to its high-end ceramic dinnerware, and formal dishware, flatware and glassware.  After adjustment, CM’s client indemnified the Insured at full retail price, pursuant to the Policy.  The mall was undergoing renovations at the time of the water loss.  After investigation, CM filed a subrogation suit on behalf of its client against the General Contractor, Mall Owner and Management Company.  After some discovery, Defendants filed a Partial Motion for Summary Judgment seeking a declaration from the Court that CM’s client’s recoverable damages should be limited to wholesale costs.  After briefing and oral argument, the Court issued a five (5) page Decision denying the Motion and holding that the proper measure of recoverable damages is the retail cost.  If you have questions regarding Subrogation or Recoverable Damages, please feel free to e-mail Robert ([email protected]) or call him (212-805-3900).



Docket No.: BER-L-3887-19


Before this court is defendants The Whiting-Turner Contracting Company and Riverside Square Limited Partnership’s motion for partial summary judgment to set forth the measure of damages. Opposition and reply were reviewed. Oral argument was heard.

I. Factual Background

This matter arises from a property damage subrogation claim filed by plaintiff AXA XL Insurance America, Inc., the insurance carrier for Villeroy & Boch USA Inc. (V&B). The genesis of the property damage arises out of a water leak that occurred when a water pipe, located in the ceiling of the Shops at Riverside shopping center (Riverside Shops), froze causing water to leak into the storeroom of the V&B retail store located within Riverside Shops. Plaintiff alleges this occurred after defendant failed to respond to V&B’s complaints that the storage room was extremely cold.

As a result of the water leak, V&B claimed damage to the “high-end ceramic dinnerware” and “formal dishware, flatware and glassware” located in the area of the leak. The original claimed loss was for the total sale price of $162,334.15, representing the retail price of the ceramics, while defendant claims it should be a “net loss” of $142,042.38, representing the retail price subtracted by the “salvage” value of $20,291.77.

Under the terms of the AXA insurance policy, damages were “calculated at the regular cash selling price, less all discounts and charges to which such Finished Stock would have been subject had no Damage occurred.” While V&B had the right to retain the possession of such damaged goods, they similarly had the right to determine “whether the damaged goods or products are suitable for marketing.” According to such policy, “[V&B’s] determination hereunder shall have no effect on the determination of whether the goods and/or products sustained Damage under this policy.”

At some point during the computation of the damages, V&B reevaluated stock originally claimed as damage and determined the stock could be sold. The salvage company estimated that amount of stock not destroyed totaled approximately $6,500.00. After considering the salvage value of the stock and the stock V&B determined was undamaged, plaitiff determined that the loss totaled $141,975.64. After applying V&B’s deductible, the loss totaled $136,336.64, the “wholesale calculation” that defendant seeks as damages in this motion. Plaintiff seeks to recover $141,975.64 the “retail value” which is “calculated at the regular cash selling price, less all discounts and charges to which such finished stock would have been subject had no damage occurred.”

II. Legal Analysis

A. Summary Judgment Standard

New Jersey’s standard for summary judgment as set forth in Brill v. Guardian Life Ins. Co. Am., 142 N.J. 520, 540 (1995) entitles a movant to summary judgment if the adverse party, having all facts and inferences viewed most favorably towards it, has not demonstrated the existence of a dispute whose resolution in its favor will entitle him to judgment. A motion for summary judgment must be granted if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact challenged. R. 4:46-2(c); Brill, 142 N.J. at 528-29. Bare conclusions in the pleadings without factual support in affidavits will not defeat a motion for summary judgment. Brae Asset Fund, L.P. v. Newman, 327 N.J. Super. 129, 134 (App. Div. 1999).

Only when the party opposing the motion has come forward with specific facts that create a genuine issue for trial should a court deny a summary judgment motion; the opposing party may not rest upon the mere allegations or denial of its pleadings. See Brill, 142 N.J. at 529; Brae, 327 N.J. Super. at 134. At this stage, the Court’s function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a “genuine issue as to any material fact challenged.” Brill, 142 N.J. at 529. In doing so, the court must construe the facts and inferences in the light most favorable to the non-moving party. Id. at 540.

In the instant matter, defendant’s summary judgment motion seeks the court’s ruling that the measure of damages for personalty destroyed by a tortfeasor, when there is a market value, is the market value at the time of the loss. To support its argument, defendant cites to Lane v. Oil Delivery, Inc., 216 N.J. Super. 413, 419 (App. Div. 1987), where the court noted that “[t]he rationale for such a rule is consonant with the goal of tort damages to fully compensate the injured party, thereby making it possible to replace the lost property with a comparable substitute.” Ibid. Further, defendant cites to The Restatement (Second) of Torts, § 911 (1979), and the comments thereto, which states that damages for the profits that the wholesale dealer or the retail dealer would normally anticipate from a sale are not ordinarily allowed.

Employing this authority, defendant argues that any insurance agreement between plaintiff and V&B, namely the agreement to insure based on retail price, has no bearing on the calculation of damages for the items themselves. Rather, plaintiff’s “rights can rise no higher than those of” its subrogor. Defendant citing to Holloway v. State, 125 N.J. 386, 396 (1991); Feigenbaum v. Guaracini, 402 N.J. Super. 7, 20 (App. Div. 2008) (citing Hayes vs. Pittsgrove, 269 N.J. Super. 449, 455 (App. Div. 1994). As such, the Defendant concludes that V&B’s recovery rights should be the same as if they were uninsured, i.e., the wholesale cost at $136,336.64.

Meanwhile, Plaintiff AXA seeks to recovery $141,975.64, which was calculated at the regular cash selling price, less all discounts and charges to which such Finished Stock would have been subject had no Damage occurred. To support its argument, the Plaintiff cites to Holloway v. State, 125 N.J. 386, 398 (1991) which states that “the general rule in this country is that a subrogee is entitled to indemnity only to the extent of the money actually paid to discharge the obligation.”

The Plaintiff further details that under this rule when an insurer makes payment to the insured pursuant to a policy claim, “it is only equitable and just that the insurer should be reimbursed for his payment to the insured, because otherwise . . . the third party would go free despite the fact that he has the legal obligation in connection with the loss or damage.” Standard Acc. Ins. Co. v. Pellecchia, 15 N.J. 162, 171 (1954). Accordingly, because “New Jersey Courts are clear that in subrogation matters, the damages are calculated by looking to the amount the subrogee paid the subrogor.” Standard Acc. Ins. Co., 15 N.J. 162; Colonial Penn Ins. Co., 172 N.J. Super. 242.

While defendant cites extensively to the 2nd Restatement of Torts to implore the Court to adopt a strict “wholesale value” calculation, plaintiff’s New Jersey authority is more persuasive to the court. There, plaintiff alternatively the court to set the damages to at its “retail value” of $141,975.64, which is the same figure plaintiff paid V&B.

In doing so, plaintiff compares its claim of damages of other retailers where the court recognized that retailers should be entitled to the retail value of their damaged property. Zemel v. Commercial Warehouses, 132 N.J.L. 14 (N.J. 1944). Plaintiff argues that a wholesale calculation ignores the fact that value of a retailer’s property is predicated upon the retailer’s ability to sell the property.

At oral argument, defendant contended that Zemel was later overruled by a higher court and that this was overlooked by both the court and plaintiff due to the abolishment of the Court of Errors and Appeals through the 1947 State Constitution. While the 1947 reorganization of the state courts certainly creates confusion, defendant misinterprets that Zemel was overruled by the defunct Court of Errors of Appeals.

After a review of the decision, it is clear that the subsequent decision affirms the Supreme Court’s ruling. Specifically, it was the Court’s view that “without regard to profits, the recoverable value of the alcohol, which was a standardized commercial article, was the price at which it could be replaced in the market, market meaning, in this connection, that phase of commercial activity in which articles are bought and sold.” Zemel v. Commercial Warehouses, 132 N.J.L. 341 (N.J. Court of Appeals & Errors 1945). Accordingly, the amount at issue is the insure claim for $141,975.64.

III. Conclusion

For the aforementioned reasons, defendants’ motion for partial summary judgment is DENIED.

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