# ATAIN SPECIALTY INSURANCE COMPANY v. NORTHEAST MOUNTAIN GUIDING, LLC

> District Court, D. New Jersey · January 30, 2020

URL: https://www.frixlaw.com/law-library/cases/10267387

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** January 30, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10267387

## How later opinions describe it (automated extraction)

- observing “many potentially relevant witnesses may no longer be employed by” a defendant company
- noting the jury’s finding that broker was obligated to procure workers’ compensation insurance for client

## Opinion text

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
ATAIN SPECIALTY INSURANCE CO. :
:
Plaintiff, :
: Case No. 3:16-cv-05129-BRM-LHG
v. :
: OPINION
NORTHEAST MOUNTAIN :
GUIDING, LLC, et al., :
:
Defendants. :
:
MARTINOTTI, DISTRICT JUDGE
Before this Court are Motions for Summary Judgment (ECF Nos. 70 & 73) filed by
Plaintiff Atain Specialty Insurance Co. (“Atain”) and Third-Party Defendants Donald Pachner,
Pachner & Associates, LLC, and Pachner Risk Management (collectively, “Pachner”).
Defendant Michael Manchester (“Manchester”) opposes both motions. (ECF No. 80.)
Defendants Northeast Mountain Guiding, LLC (“NMG”), Joseph Vulpis (“Vulpis”), and Bryan
Enberg (“Enberg”) also oppose both motions. (ECF No. 86.) Pachner supports part and opposes
part of Atain’s motion. (ECF No. 81.) Atain opposes part of Pachner’s motion and takes no
position as to the remainder. (ECF No. 85.)
Having reviewed the parties’ submissions filed in connection with the motions and
having declined to hear oral argument pursuant to Federal Rule of Civil Procedure 78(b), for the
reasons set forth below and for good cause having been shown, Atain’s motion is DENIED and
Pachner’s motion is GRANTED IN PART and DENIED IN PART.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Northeast Mountain Guiding and Its Guides
Vulpis is the founder and sole member of NMG, a limited liability company in the
outdoor adventure and education industry. (ECF No. 86-14 ¶ 4.) Vulpis has significant training
and experience, as well as multiple certifications, in the field in which NMG operates. (ECF No.

86-14 ¶¶ 5-7.) Enberg provided administrative assistance to NMG, developed a search and
rescue training for NMG to provide to clients, and served as a mountaineering guide for NMG.
(ECF No. 86-15 ¶ 3.) Manchester performed work for NMG as a Lead Backpacking Guide and
Assistant Rock Guide. (ECF No. 70-8, at 16:6-20.)
B. Pachner Procures Insurance from Atain for Northeast Mountain Guiding
Donald Pachner is the sole member of Pachner & Associates, LLC and Pachner Risk
Management, LLC. (ECF No. 73-3 ¶ 1.) Donald Pachner and Pachner & Associates, LLC
possess insurance broker licenses under New Jersey law. (ECF No. 73-31, at 1-2.)
Vulpis retained Pachner to obtain general commercial liability insurance for NMG. (ECF

No. 73-3 ¶ 7.) As part of this process, Pachner and Vulpis worked together to fill out an
application (the “Application”) for insurance. (ECF No. 73-3 ¶¶ 8-10; ECF No. 73-33, at
ATN000331-41.) The Application required Vulpis to estimate NMG’s gross revenues for the
coming year. (ECF No. 73-33, at ATN000332.) On Pachner’s advice, Vulpis checked the “No”
box when answering the Application’s question concerning whether NMG “hire[s]
Concessionaires, Independent Contractors, or Subcontractors.” (ECF No. 73-33, at ATN 000334;
ECF No. 73-12, at 221:11-222:11.) As part of the Application, Vulpis initialed next to a
requirement NMG (1) obtain from all participants an Atain-approved waiver of liability form,
and (2) maintain those forms for three years. (ECF No. 70-17, at ATN000339.)
In response to NMG’s Application, Atain issued an insurance quote (the “Quote”), which
Vulpis reviewed with Pachner. (ECF No. 72-1, at 233:24-234:23.) Among other things, the
Quote contains a summary of several of the terms the Policy would contain. (ECF No. 73-37, at
2.)
Pachner procured insurance (the “Policy”) from Atain for NMG. (ECF No. 73-3 ¶ 12.)

The Policy limits coverage to “GUIDED MOUNTAINEERING INCLUDING TOP ROPE
CLIMBING & RAPPELLING; GUIDED KAYAK TRIPS; GUIDED SNOWSHOEING;
GUIDED HIKING/BACKPACKING INCLUDING CAMPING.” (ECF No. 86-6, at Atain 47.)
The Policy excludes coverage for injuries suffered “in the course of employment by or service
to” NMG. (ECF No. 70-5, at ATN000402.)
C. Manchester’s Injury
On November 21, 2015, Manchester suffered an injury (the “Injury”) while using certain
equipment (the “Equipment”) to engage in a certain activity (the “Activity”). Much of the
dispute in this case centers on the proper characterization of the Activity and the Equipment. The

essence of the Activity is that the participant uses the Equipment to move between two points.
(ECF No. 73-12, at 16:2-7.) The evidence conflicts concerning whether the Equipment is a
“Tyrolean Traverse” or a “Clifftop Zipline.” (ECF No. 86-14 ¶¶ 33-36; ECF No. 73-12, at 75:1-
10, 186:6-191:4.) Ziplines were derived from Tyrolean Traverses, but the differences are too fine
for untrained individuals to differentiate between the two. (ECF No. 73-12, at 58:5-7.)
On November 21, 2015, three NMG guides—Christy DeMarco, Enberg, and Vulpis—
went to Allamuchy State Park to test the Equipment NMG expected to offer in the future for its
customers. Vulpis and the other three guides set up the Equipment. (ECF No. 86-14 ¶ 46.)
Manchester was present at the time, and engaged in the Activity by traveling on the Equipment.
(ECF No. 86-14 ¶¶ 46-47.) While engaged in the Activity, Manchester suffered the Injury. (ECF
No. 86-14 ¶ 47.)
D. Litigation
Following his Injury, Manchester filed a state court negligence action against Vulpis,
Enberg, and NMG. (ECF No. 1 ¶ 12.) NMG made a claim for coverage with Pachner and Atain.

(ECF No. 86-14 ¶ 51-52.) When reporting the claim to Atain, Pachner described Manchester as
an independent contractor for NMG. (ECF No. 70-21, at 161:11-13.)
Atain filed this coverage action against its Vulpis, Enberg, and NMG, and also joined
Manchester as a defendant. (ECF No. 1 ¶ 1-5.) Atain seeks declaratory judgments against
Vulpis, Enberg, NMG, and Manchester, authorizing Atain to disclaim coverage Manchester’s
Injury. (ECF No. 1 ¶¶ 31-51.) Additionally, Atain seeks a declaratory judgment voiding the
Policy under common law rescission principles and the New Jersey Insurance Fraud Prevention
Act, N.J. Stat. Ann. § 17:33A-1 et seq. (ECF No. 1 ¶¶ 52-65.)
Vulpis, Enberg, and NMG brought a third-party action against NMG’s insurance broker

Pachner, alleging Pachner’s negligence caused any failure of coverage by Atain. (ECF No. 29
¶¶ 28-34.) Manchester brought a similar action against Pachner. (ECF No. 28, at 3-7.)
II. LEGAL STANDARD
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). A factual
dispute is genuine only if there is “a sufficient evidentiary basis on which a reasonable jury could
find for the non-moving party,” and it is material only if it has the ability to “affect the outcome
of the suit under governing law.” Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006);
see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or
unnecessary facts will not preclude a grant of summary judgment. See id. at 248. “In
considering a motion for summary judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence; instead, the non-moving party’s

evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor.’” Marino v.
Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255)); see
also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, (1986); Curley v.
Klem, 298 F.3d 271, 276-77 (3d Cir. 2002). “Summary judgment may not be granted . . . if there
is a disagreement over what inferences can be reasonably drawn from the facts even if the facts
are undisputed.” Nathanson v. Med. Coll. of Pa., 926 F.2d 1368, 1380 (3rd Cir. 1991) (citing
Gans v. Mundy, 762 F.2d 338, 340 (3d Cir.)); Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90
F.3d 737, 744 (3d Cir. 1996).
The party moving for summary judgment has the initial burden of showing the basis for

its motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party bears the
burden of persuasion at trial, summary judgment is appropriate only if the evidence is not
susceptible to different interpretations or inferences by the trier of fact. Hunt v. Cromartie, 526
U.S. 541, 553 (1999). On the other hand, if the burden of persuasion at trial would be on the
non-moving party, the party moving for summary judgment may satisfy Rule 56’s burden of
production by either (1) “submit[ting] affirmative evidence that negates an essential element of
the non[-]moving party’s claim” or (2) demonstrating “that the nonmoving party’s evidence is
insufficient to establish an essential element of the nonmoving party’s claim.” Celotex, 477 U.S.
at 330 (Brennan, J., dissenting). Once the movant adequately supports its motion pursuant to
Rule 56(c), the burden shifts to the non-moving party to “go beyond the pleadings and by her
own affidavits, or by the depositions, answers to interrogatories, and admissions on file,
designate specific facts showing that there is a genuine issue for trial.” Id. at 324; see also
Matsushita, 475 U.S. at 586; Ridgewood Bd. of Ed. v. Stokley, 172 F.3d 238, 252 (3d Cir. 1999).
In deciding the merits of a party’s motion for summary judgment, the court’s role is not to

evaluate the evidence and decide the truth of the matter, but to determine whether there is a
genuine issue for trial. Anderson, 477 U.S. at 249. Credibility determinations are the province
of the factfinder. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir.
1992).
There can be “no genuine issue as to any material fact,” however, if a party fails “to make
a showing sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322-23. “[A]
complete failure of proof concerning an essential element of the non[-]moving party’s case
necessarily renders all other facts immaterial.” Id. at 323; Katz v. Aetna Cas. & Sur. Co., 972

F.2d 53, 55 (3d Cir. 1992).
III. DECISION1
A. Coverage for “Guided Mountaineering”
Atain and Pachner both argue Manchester’s Injury is not covered under the Policy
because the Policy covers only “guided mountaineering,” and Vulpis and Enberg both testified
Manchester’s Injury did not occur during a “guided” activity. (ECF No. 72-1, at 221:4-10; ECF
No. 70-7, at 115:19-116:6.) Conflicting evidence prevents the Court from granting summary
judgment. First, Vulpis’s testimony was more nuanced than Atain and Pachner suggest. While
Vulpis testified he would not consider the Activity to be “guided,” Vulpis did consider the

1 The Court has jurisdiction pursuant to 28 U.S.C. § 1332.
Activity to be “part of guided mountaineering.” (ECF No. 72, at 115:22-116:2.) Second, Vulpis
testified Manchester received training and instruction from both Vulpis and Enberg for the
Activity immediately prior to Manchester’s Injury. (ECF No. 72, at 85:20-86:12.) A reasonable
jury could conclude Vulpis’s and Enberg’s training and instruction “guided” Manchester, who
had little previous experience with the Equipment. (ECF No. 72, at 28:7-10.)

The Court is unpersuaded by Atain’s and Pachner’s argument alleging Vulpis’s and
Enberg’s testimonies demonstrate the parties’ “intent” the Policy not cover the Activity.
“[W]hen interpreting an insurance contract, the basic rule is to determine the intention of the
parties . . . .” Simonetti v. Selective Ins. Co., 859 A.2d 694, 698 (N.J. Super. Ct. App. Div. 2004).
While the contractual language is the Court’s primary tool, the Court may consider evidence of
the parties’ intention beyond the four corners of the contract when, as here, the language of the
insurance contract is ambiguous. See, e.g., Welcome v. Just Apts., No. L-9821-01, 2008 WL
2696252, at *3-4 (N.J. App. Div. July 11, 2008).
Vulpis’s and Enberg’s testimonies are two such pieces of evidence, but not the only

evidence, of NMG’s intent when agreeing to the Policy. Other evidence suggests NMG did
intend the Policy to cover the Activity. For instance, Vulpis testified he considered the Activity
to be “part of guided mountaineering.” (ECF No. 72, at 115:22-116:2.) Enberg testified he
understood a “guided” activity to be an activity in which there is “a guide who is leading the
activity.”2 (ECF No. 70-7, at 115:17-18.) According to Vulpis’s testimony, this is exactly what
2 Pachner also argues the Activity could not be “guided” as the Policy uses the term unless
Vulpis or Enberg met the definition of “guide” in NMG’s Guide Handbook—“specially
trained and experienced mountaineers, climbers, instructors, and outdoor professionals for
hire.” (ECF No. 73-35, at 7.) The Court rejects this argument—which Pachner raises for the
first time in a reply brief—because “arguments raised for first time in [a] reply brief will not
be considered.” Washington v. Doran, 717 F. App’x 151, 155 (3d Cir. 2017).
Were the Court to consider Pachner’s argument on its merits, the argument would fail. First,
Pachner offers no evidence the parties intended the Guide Handbook’s definition of “guide”
happened. Vulpis and Enberg lead the Activity, instructing Manchester before Manchester
participated. (ECF No. 72, at 85:20-86:12.) Manchester did not have the requisite training to
serve as a guide on the Activity. (ECF No. 86-14 ¶ 11.) In light of this conflicting evidence, a
genuine issue of material fact exists concerning whether or not the parties intended for the Policy
to cover the Activity. Accordingly, the Court cannot grant summary judgment on this ground.

B. Injury “In the Course of Employment . . . or Service”
Atain next argues the Court should grant it summary judgment because the Employer’s
Liability Exclusion precludes coverage for Manchester’s Injury because Manchester was acting
“in the course of employment by or service to” NMG. (ECF No. 70-5, at ATN000402.)
Pachner3 seeks summary judgment against Atain on this claim, arguing the Employer’s Liability
Exclusion does not apply. Neither party is entitled to summary judgment concerning the effect
of the Employer’s Liability Exclusion because the evidence conflicts concerning whether
Manchester was, in fact, acting in the course of his NMG employment.
Several facts weigh in favor of finding Manchester was a participant acting outside the

scope of his NMG employment at the time of his Injury. Manchester testified he had come to
participate in the Activity because he “thought it would be fun.” (ECF No. 70-8, at 61:25-62:1.)
Vulpis testified similarly: Manchester “came just to travel along the Tyrolean traverse. He
wanted to try it out.” (ECF No. 72, at 85:13-14.) Manchester testified he never informed NMG
to govern the Policy’s coverage for “guided” activities, nor any evidence the parties even
considered the Guide Handbook’s definition at the time Atain issued the Policy. Second,
even if the Guide Handbook’s definition did govern the Policy’s coverage for “guided”
activities, Vulpis and Enberg meet the definition. Both Vulpis and Enberg possess special
training, and were available for hire. (ECF No. 86-14 ¶¶ 4-7; ECF No. 86-15 ¶¶ 2-3.) The
Guide Handbook’s definition does not require Manchester in fact have hired Vulpis or
Enberg to guide Manchester on the day of the incident.
3 Manchester joins Pachner’s arguments. (ECF No. 80, at 19.) NMG, Vulpis, and Enberg also
join Pachner’s arguments. (ECF No. 86, at 30.)
he would be attending the Activity and further testified NMG did not know he would be
attending. (ECF No. 70-8, at 62:18-20, 68:5-7.) Manchester did not consider himself an
employee or representative of Vulpis or Enberg at the time of the Injury. (ECF No. 70-8, at
20:10-19.)
However, other factors weigh in favor of finding Manchester was acting within the scope

of his employment or service to NMG. Most importantly, Manchester acknowledged he
performed work for NMG as a Lead Backpacking Guide and Assistant Rock Guide. (ECF No.
70-8, at 16:6-20.) Vulpis and Manchester both testified Manchester came to be at Allamuchy
State Park on the date of his Injury because Vulpis posted an invitation to a Facebook group
whose members consisted only of NMG guides and staff. (ECF No. 72, at 56:11-57:14; ECF No.
70-8, at 162:8-21.) Enberg testified although Manchester was not involved in setting up the
Equipment and mostly observed others do so, Manchester did help Enberg “pull tension once, so
just pull on a rope for me.” (ECF No. 70-7, at 95:23-96:8.) Enberg also testified, “[A]s far as I
know, we just there all volunteering and testing the system.” (ECF No. 70-7, at 96:19-20.)

In short, the conflicting evidence creates a genuine issue of material fact. Accordingly,
no party is entitled to summary judgment either for or against Atain’s claim concerning whether
the Employer’s Liability Exclusion precludes coverage.
C. Rescission of the Policy
Atain also argues it is entitled to rescind the Policy in light of NMG’s material
misrepresentations in the Application. Pachner argues the Court should grant summary judgment
against Atain because Atain ratified the Policy despite knowing of the misrepresentations. The
Court cannot grant summary judgment either for or against rescission because genuine issues of
material fact remain (1) concerning whether NMG knowingly misrepresented any material facts,
and (2) about the factual bases for rescission.
“In the field of insurance, rescission has long been recognized as an available and
necessary remedy to combat fraudulent behavior by an insured.” Rutgers Cas. Ins. Co. v.
LaCroix, 946 A.2d 1027, 1035 (N.J. 2008). “It is settled that a material factual misrepresentation

made in an application for insurance may justify rescission [of the resulting insurance policy] if
the insurer relied upon it to determine whether or not to issue the policy.” Citizens United
Reciprocal Exch. v. Perez, 121 A.2d 374, 378 (N.J. 2015). “Rescission voids the [insurance
policy] ab initio, meaning that it is considered ‘null from the beginning’ and treated as if it does
not exist for any purpose.” First Am. Title Ins. Co. v. Lawson, 827 A.2d 230, 237 (N.J. 2003).
Rescission of an insurance policy for fraudulent misrepresentation is appropriate if four
conditions are satisfied: (1) the applicant must make an “untruthful” representation to the insurer,
(2) the representation must be “material to the particular risk assumed by the insurer,” (3) the
insurer must “actually and reasonably rel[y] upon [the representation] in the issuance of the

policy,” and (4) if the “insurance application . . . calls for subjective information,” then “the
insured [must] kn[o]w that the information was false when completing the application.” Id.
Examples of subjective information include when an insurer asks
an insured to indicate a belief about the status of his or her health,
or when . . . an insurer asks whether an applicant is aware of any
circumstances which may result in a claim being made against the
firm[.] [A] subjective question will not constitute equitable fraud
if the question is directed toward probing the knowledge of the
applicant and determining the state of his mind and . . . the answer
is a correct statement of the applicant’s knowledge and belief[.]
Id. (citations omitted).
A “mere oversight or honest mistake” will not support rescission. Rutgers, 945 A.2d at
1035 (quoting Longobardi v. Chubb Ins. Co. of N.J., 582 A.2d 1257, 1261 (N.J. 1990)). “The lie
must be willful.” Longobardi, 582 A.2d at 1261. The insurer bears the burden of demonstrating
the applicant “knew and believed” the information provided on the application was false and
“knowingly misrepresented” the information provided to be true, but need not demonstrate the
applicant “harbored an intent to defraud.” Mass. Mut. Life Ins. Co. v. Manzo, 584 A.2d 190, 195
(N.J. 1991).

1. Projected Revenues
First, Atain argues this Court should void the Policy because NMG materially
misrepresented its projected revenues on its Application. The Court disagrees because the
evidence, viewed in the light most favorable to non-movant NMG, precludes the Court from
finding NMG knowingly4 misrepresented its projected revenues.5
4 Because a genuine issue of material fact exists concerning whether NMG knowingly
misrepresented its projected revenue, the Court need not decide (1) whether NMG’s projected
revenue was material to the particular risk assumed by the Atain, nor (2) whether Atain’s
remedy is limited to a retroactive increase in the Policy premium.
5 The Court declines to consider two of Atain’s arguments concerning whether NMG
knowingly misrepresented its projected revenues. First, Atain argues—for the first time in its
reply brief (ECF No. 93, at 25)—Vulpis improperly projected zero revenue from NMG’s
Professional Services Division, which NMG had created shortly before applying for Atain’s
insurance. Second, Atain argues—again, for the first time in its reply brief (ECF No. 93, at
25-26)—even if NMG’s revenue figures were reasonable at the time of the Application,
NMG’s failure to update the figures as circumstances changed constitutes a knowing
misrepresentation. The Court will not consider either argument because an argument raised
for the first time in a reply brief is waived. See Haberle v. Borough of Nazareth, 936 F.3d
138, 141 n.3 (3d Cir. 2019).
Were the Court to consider Atain’s arguments on their merits, neither argument would
prevail. With regard to revenue from NMG’s newly created Professional Services Division,
the Court notes, “[m]ost new businesses fail. Pretty much all studies agree on that.” Thomas
J. McIntyre, Note, Discriminatory Opportunism: Why Undertaking Self-Employment to
Mitigate Damages Creates Unique Challenges, 45 Suffolk U. L. Rev. 549, 550 n.11 (2012)
(quoting Scott A. Shane, The Illusions of Entrepreneurship 98 (2008)). That Vulpis projected
no revenue from NMG’s new venture is unsurprising. In conjunction with the other evidence
and viewed in the light most favorable to non-movant NMG, a reasonable fact-finder could
still determine Vulpis did not knowingly misrepresent NMG’s projected revenue. With
regard to NMG’s failure to update its revenue figures as its circumstances changed, the
evidence viewed in a light most favorable to NMG does not rule out the possibility NMG’s
Atain argues the projected amount listed on the Application was substantially lower than
NMG’s actual revenue for the year preceding the Application and disproportionately less than the
revenue NMG actually received in the Policy year. The Court declines to find these numerical
discrepancies demonstrate a knowing misrepresentation. Vulpis testified several considerations
left him doubtful NMG would succeed financially in the coming year when he filled out the

Application for NMG. (ECF No. 86-14 ¶ 23.) First, Vulpis was divorcing his spouse, which he
believed would impact NMG’s ability to remain in business. (ECF No. 86-14 ¶ 23.) Second,
Vulpis had hired new guides, and expected revenues would be lower while his new guides gained
experience.6 (ECF No. 86-14 ¶ 23.) Third, “a chronic, life-threatening auto-immune disease”
hospitalized Vulpis shortly before he filed the Application, and he was “not sure [he] would live
through” the year, “much less have any revenues in NMG.” (ECF No. 86-14 ¶ 23.) Even taking
those factors into account, the revenue Vulpis projected on the Application was approximately
equal to NMG’s annual revenue two years prior to the Application, and was slightly lower than
the average of the revenue for the preceding three years. (ECF No. 86-14 ¶ 23.) Taking these

facts in the light most favorable to NMG, a reasonable fact-finder could determine NMG did not
knowingly misrepresent its projected income.
Atain also points to Vulpis’s testimony about how he projected NMG’s revenue by
merely “guess[ing] what I thought we might do for the season” and answered “no” when asked if
he did any math to figure out the projected revenue. (ECF No. 72-1, at 217:3-12.) Atain argues
these answers demonstrate Vulpis did not make a good faith revenue projection. The Court
failure to update its Application was a “mere oversight or honest mistake.” Rutgers, 945
A.2d at 1035 (quoting Longobardi, 582 A.2d at 1261).
6 Atain argues the existence of new hires indicates NMG’s business was growing, and is reason
to expect a good faith estimate of NMG’s revenues would have been higher. While Atain’s
argument is one permissible inference concerning this piece of evidence, the Court must draw
all inferences concerning the new hires in favor of non-movant NMG.
disagrees. When read in context, a reasonable fact-finder could determine Vulpis attempted to
accurately project NMG’s revenues. Immediately before testifying he “guessed,” Vulpis testified
he “guestimated” the revenue figures, and further testified his projection considered revenues
“from previous years of business.” (ECF No. 72-1, at 216:23, 217:13-14.) Combined with his
more detailed testimony about how Vulpis considered his divorce, new hires, and his medical

condition when projecting revenue on the Application, and viewed in the light most favorable to
NMG, genuine issues of material fact exists concerning whether Vulpis failed to make a good
faith attempt to project NMG’s revenue.
2. Independent Contractors
Atain argues it is entitled to summary judgment because a second, unrelated
misrepresentation on the Application—Vulpis’s statement claiming NMG did not use
subcontractors or independent contractors—warrants rescission of the Policy. Pachner7 argues
the Court should grant summary judgment against Atain on this ground because NMG accurately
represented it did not use independent contractors. Pachner also argues summary judgment is

appropriate against any claim Pachner negligently (1) advised Vulpis to answer “no” to the
question on the Application asking about NMG’s use of subcontractors or independent
contractors or (2) misidentified Manchester as an independent contractor when communicating
with Atain. The Court rejects all these arguments because the evidence creates genuine issues of
material fact concerning whether NMG (1) knowingly misrepresented its use of independent
contractors, and (2) used independent contractors at all.8
7 Manchester joins Pachner’s arguments. (ECF No. 80, at 19.) NMG, Vulpis, and Enberg also
join Pachner’s arguments. (ECF No. 86, at 30.)
8 Because these two genuine issues of material fact preclude summary judgment on these
issues for both Atain and Pachner, the Court need not decide (1) whether principles of
preclusion or estoppel require the Court to treat the guides as independent contractors for
purposes of this litigation, nor (2) whether NMG’s representation concerning subcontractors
i. Knowing Misrepresentation
Distinguishing independent contractors from employees is among the most contentiously
litigated issues in courts today, arising in a host of different contexts, each with a different
standard.9 The variety of tests creates a “paradoxical truth that even when the same person
performs the same acts at the same time in the same place under the same conditions,” the person

“may be considered an employee for one purpose and an independent contractor for another.”
EEOC v. Zippo Mfg. Co., 713 F.2d 32, 35-36 (3d Cir. 1983) (“paradoxical truth”); Hoag v.
Brown, 935 A.2d 1218, 1228 (N.J. Super. Ct. App. Div. 2007) (“may be considered”).
Given the issue’s complexity, the Court is not surprised Vulpis’s testimony suggests he
had genuine difficulty distinguishing between employees and independent contractors. Vulpis’s
testimony concerning his thinking at the time demonstrates his confusion. For instance, Vulpis
and independent contractors was material to the particular risk assumed by Atain.
9 In the copyright context, a work is “made for hire” if the work’s author or creator is an
“employee” under a non-exhaustive thirteen-factor test derived from the common law of
agency. See Cmty. for Creative Non-Violence v. Reid (“CCNV”), 490 U.S. 730, 751 (1989).
The Fair Labor Standards Act regulates the wages of individuals who meet a six-factor,
totality-of-the-circumstances test focusing on the “economic reality” of the employer-
employee relationship. See Verma v. 3001 Castor, Inc., 937 F.3d 221, 229-30 (3d Cir. 2019).
The Americans with Disabilities Act covers businesses with a minimum number of
“employees” as determined by a different six-factor, totality-of-the-circumstances test,
focusing on the employer’s right to control the employee. See Clackamas Gastroenterology
Assocs. v. Wells, 538 U.S. 440, 449-50 (2003). New Jersey’s Conscientious Employee
Protection Act protects a person from retaliation against whistle-blowing if the person is an
“employee” under the totality of the circumstances after analyzing a three-consideration,
twelve-factor test analyzing both the employer’s right to control the employee and the
economic realities of the employer-employee relationship. See D’Annunzio v. Prudential Ins.
Co. of Am., 927 A.2d 113, 120-22 (N.J. 2007). When distinguishing employees from
independent contractors in the context of federal employment taxes, the U.S. Tax Court, the
Internal Revenue Service, and the Court of Federal Claims each use a different test. The Tax
Court considers seven factors while the IRS considers twenty, and the Court of Federal
Claims adopts the Reid test from copyright law. See Ewens & Miller, Inc. v. Comm’r, 117
T.C. 263, 270 (2001); Consol. Flooring Servs. v. United States, 38 Fed. Cl. 450, 455 (1997)
(quoting CCNV, 490 U.S. at 751-52); Rev. Rul. 87-41, 1987-1 C.B. 296, 298-299). This is
not an exhaustive list.
described his guides as “1099 employees,” something of a misnomer.10 (ECF No. 86-14 ¶ 17.)
When completing the Application, Vulpis discussed how to answer the “independent contractor”
question with Donald Pachner, whose less-than-illuminating explanation was to describe the
meaning of independent contractor as a “gray area.” (ECF No. 72-1, at 221:19-222:17.) Even
when answering interrogatories in this case—presumably with the assistance of counsel—Vulpis

initially described his guides as independent contractors, then amended his answer to strike that
characterization. (ECF No. 72, at 19:7-23:20.) The Application does not instruct the applicant
on the meaning of “independent contractor,” nor does it suggest which (if any) of the legal tests
an applicant should apply—missing an opportunity to dispel Vulpis’s confusion. (ECF No. 70-
17, at ATN00034.)
Viewed in the light most favorable to non-movant NMG, a reasonable fact-finder could
determine Vulpis merely failed to appreciate every nuance of the difference between employees
and independent contractors when he wrote on the Application NMG did not use independent
contractors or subcontractors. Such a misunderstanding would constitute an “honest mistake,”

not a “lie” or a “willful” falsification. Rutgers, 945 A.2d at 1035; Longobardi, 582 A.2d at 1261.
Drawing all inferences in non-movant NMG’s favor, a genuine issue of material fact remains
concerning whether Vulpis knowingly misrepresented NMG’s use of independent contractors.
ii. Independent Contractors vs. Employees
While Atain is not entitled to summary judgment on its claim concerning Vulpis’s
knowing misrepresentation of his use of independent contractors, neither is Pachner entitled to
summary judgment against Atain on the same issue. Pachner argues Vulpis’s representation was

10 A business uses IRS Form W-2 to report payments to an employee, but uses IRS Form 1099
to report payments to a non-employee independent contractor. See Hopkins v. Duckett, Civ.
No. 02-5589, 2006 WL 3373784, at *4 & n.2 (D.N.J. Nov. 21, 2006).
accurate because NMG’s guides were not independent contractors. A host of evidence suggests
the opposite. For instance, Vulpis deducted over $10,000 for “cost of contract labor” and
“subcontractors” on the 2015 federal income tax form (and corresponding worksheet) covering
NMG’s profit and loss. (ECF No. 70-19, at sch. C, line 11.11) Manchester testified NMG
classified its guides as “subcontractors” in its accounting software. (ECF No. 70-7, at 54:12-20.)

Manchester further testified Vulpis repeatedly used the term “independent contractor” to describe
guides. (ECF No. 70-7, at 54:23-55:8.) Viewed in the light most favorable to non-movant Atain,
this evidence creates a genuine issue of material fact concerning whether NMG’s guides were in
fact independent contractors.
iii. Pachner’s Advice to Vulpis
Pachner also argues summary judgment is appropriate against any claim concerning
Pachner’s negligent advice to Vulpis to answer “no” to the question on the Application asking
about NMG’s use of subcontractors or independent contractors. However, as Pachner points out,
Pachner’s negligence in this instance “is only relevant insofar [as] Atain is seeking to rescind the

Policy based on [NMG’s] answer” concerning independent contractors or subcontractors. (ECF
No. 73-2, at 19.) Because genuine issues of material fact exist concerning whether Atain may
rescind the Policy on the basis of NMG’s use of independent contractors, see part III.C.2.i.,
supra, the same genuine issues of material fact necessarily exist concerning Pachner’s alleged
negligent advice to Vulpis concerning this question. Accordingly, the Court cannot grant
summary judgment on this ground.

11 The Court reminds the parties of their obligation to redact social security numbers and tax
identification numbers from filings, including copies of tax returns attached as exhibits. See
Fed. R. Civ. P. 5.2(a). The parties shall coordinate with the assigned magistrate judge to
bring all non-compliant filings into compliance with this rule.
iv. Pachner’s Misdentification of Manchester as a Contractor
Pachner asks the Court to grant summary judgment on any claim concerning Pachner’s
negligent mislabeling of Manchester as an independent contractor when Pachner first reported
Manchester’s Injury to Atain. The Court cannot grant summary judgment. As with Pachner’s
advice to Vulpis, Pachner’s statement to Atain identifying Manchester as an independent

contractor relates only to Atain’s claim for rescission of the Policy for NMG’s misrepresentation
of its use of independent contractors. Because genuine issues of material fact exist concerning
whether Atain may rescind the Policy on this basis, see part III.C.2.i., supra, the same genuine
issues of material fact exist concerning Pachner’s characterization to Atain of Manchester as an
independent contractor. Accordingly, the Court cannot grant summary judgment on this ground.
3. Training and Education Relating to “Search and Rescue” Operations
Atain also argues NMG committed a knowing misrepresentation when it failed to
disclose its training and education programs concerning search and rescue operations. The Court
declines to grant summary judgment on this claim, because Atain did not plead this claim in its

complaint.
“Each and every claim for relief that a plaintiff seeks to press must be set forth in the
Complaint.” Bravo v. Union Cty., Civ. No. 12-2848, 2013 WL 2285780, at *8 (D.N.J. May 23,
2013). Failure to do so has consequences. One consequence is that this Court may not “grant[]
summary judgment on a claim that was never pleaded.” Day v. White, 764 F. App’x 164, 166 (3d
Cir. 2019) (quoting Michelson v. Exxon Rsrch. & Eng’g Co., 808 F.2d 1005, 1009 (3d Cir.
1987)). “To the extent the plaintiff discovers new information giving rise to additional claims,
the plaintiff must amend the Complaint to assert those claims and properly put the defendant on
notice of them.” Bravo, 2013 WL 2285780, at *8; see also Tavarez v. Twp. of Egg Harbor, Civ.
No. 09-6119, 2012 WL 13186197, at *4 (D.N.J. Aug. 3, 2012); Durham v. Vekios, Civ. No. 09-
5376, 2011 WL 3667560, at *4 (D.N.J. Aug. 22, 2011).
Atain contends it “asserted a cause of action for rescission based upon material
misrepresentation” in its complaint, which Atain argues is broad enough to cover any
misrepresentation relating to NMG’s training and education programs concerning search and

rescue. (ECF No. 93, at 29.) The Court disagrees because Atain’s “Material Misrepresentation”
claim—Count Six12—alleges only a material misrepresented concerning NMG’s engagement in
“Ropes/Challenge Course Facilitation.” (ECF No. 1 ¶¶ 52-59.) Count Six does not mention
search and rescue, much less allege a material misrepresentation relating to NMG’s education
and training concerning search and rescue operations.
Atain further argues it did not learn of the misrepresentation concerning search and
rescue operations until well into the discovery period of this litigation. This fact does not excuse
Atain from seeking to amend its complaint. If Atain learned late in the litigation it had an
additional claim of which it was previously unaware, its appropriate course was to seek leave to

amend its complaint to add the new claim. See Bravo, 2013 WL 2285780, at *8. Atain did not
do so. Because Atain’s complaint does not plead any claim related to search and rescue
operations, Atain may not obtain summary judgment on this unpleaded claim. See Day, 764 F.
App’x at 166.
However, even if Atain did plead this claim, a genuine issue of material fact precludes
summary judgment concerning whether NMG knowingly failed to disclose its education and
training programs concerning search and rescue operations. The record contains evidence Vulpis
12 Atain does not contend Count Seven, a claim under the New Jersey Insurance Fraud
Prevention Act, N.J. Stat. Ann. § 17:33A-1 et seq., covers the claim for misrepresentation
concerning the training and education programs for search and rescue operations. (ECF No.
93, at 28-33.)
and Enberg both believed these activities were no different than NMG’s other activities NMG
had already disclosed on NMG’s initial Application. (ECF No. 86-14 ¶¶ 37-42; ECF No. 86-15
¶¶ 3-6.) Viewed in the light most favorable to non-movant NMG, this evidence13 is sufficient to
create a genuine issue of material fact.
4. Ratification of the Policy

Pachner14 argues the Court should grant summary judgment against Atain on its claim for
rescission because Atain has ratified the Policy. The Court disagrees because (1) the Federal
Rules of Civil Procedure prohibit this Court from construing the allegations in one claim as an
admission against an alternative or inconsistent second claim, and (2) the evidence conflicts
concerning whether Atain’s actions constitute ratification of the Policy.
i. Ratification by Lawsuit
First, Pachner argues Atain cannot file a lawsuit demanding both to disclaim coverage or,
in the alternative, to rescind the Policy. Doing so, Pachner argues, constitutes ratification of the
Policy and bars rescission. See Merchants Indem. Corp. v. Eggleston, 179 A.2d 505, 514 (N.J.

13 The Court rejects Atain’s argument asking the Court to disregard Vulpis’s and Enberg’s
declarations as “conclusory, self-serving affidavits . . . insufficient to withstand a motion for
summary judgment.” Gonzalez v. Sec’y of Dep’t of Homeland Sec., 678 F.3d 254, 263 (3d
Cir. 2012) (quoting Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 161 (3d Cir.
2009)). Vulpis’s and Enberg’s declarations “detail[] the specific circumstances” surrounding
NMG’s education and training programs concerning search and rescue operations, rendering
the declarations far from conclusory. Kirleis, 560 F.3d at 161. Notwithstanding any arguable
inconsistencies with his deposition testimony, Enberg’s declaration is not so unbelievable that
“the [C]ourt, based on all of the evidence, can say with confidence that a rational trier of fact
could not credit” Enberg’s declaration. United States v. 717 S. Woodward Street, 2 F.3d 529,
534 (3d Cir. 1993). Both Vulpis’s and Enberg’s declarations (like all declarations) are self-
serving, but this is no reason to disregard them entirely. See Paladino v. Newsome, 885 F.3d
203, 209 (3d Cir. 2018). Accordingly, the Court must consider Vulpis’s and Enberg’s
testimony, and their testimony creates a genuine issue of material fact precluding summary
judgment.
14 Manchester joins Pachner’s arguments. (ECF No. 80, at 19.) NMG, Vulpis, and Enberg also
join Pachner’s arguments. (ECF No. 86, at 30.)
1962). Assuming without deciding New Jersey law treats an action to disclaim coverage as a
ratification of the Policy and thus prohibits a claim for rescission, Pachner is still not entitled to
summary judgment because “[t]he Federal Rules of Civil Procedure permit parties to file
pleadings containing inconsistent factual and legal allegations.” W.V. Realty, Inc. v. N. Ins. Co.,
334 F.3d 306, 316 (3d Cir. 2003).

“A party may state as many separate claims or defenses as it has, regardless of
consistency.” Fed. R. Civ. P. 8(d)(3). For instance, a plaintiff may simultaneously plead claims
for both breach of contract (which requires the existence of a contract) and unjust enrichment
(which requires the non-existence of a contract). See Hughes v. TD Bank, N.A., 856 F. Supp. 2d
673, 680 n.4 (D.N.J. 2012); Dewey v. Volkswagen AG, 558 F. Supp. 2d 505, 528-29 (D.N.J.
2008); cf. Showalter v. Brubaker, 283 F. App’x 33, 36 (3d Cir. 2008) (permitting defendants in a
civil rights action under 42 U.S.C. § 1983 to simultaneously plead both (1) they are entitled to
governmental immunity and (2) their actions were wholly private and therefore not under color
of state law).

Importantly, this allowance for inconsistent claims “has been interpreted to mean that a
court ‘may not construe [a plaintiff’s] first claim as an admission against another alternative or
inconsistent claim.’” Indep. Enters. v. Pitt. Water & Sewer Auth., 103 F.3d 1165, 1175 (3d Cir.
1997) (quoting Henry v. Daytop Village, 42 F.3d 89, 95 (2d Cir. 1994)). For instance, a claim for
abuse of process does not implicitly concede the legitimacy of a prosecution so as to invalidate a
simultaneous claim for malicious prosecution. See Evans v. City of Newark, Civ. No. 14-120,
2016 WL 2742862, at *5 n.7 (D.N.J. May 10, 2016).
Atain’s claims are subject to this rule. Assuming without deciding a claim to disclaim
coverage and a claim to rescind the Policy are inconsistent under New Jersey law, the Federal
Rules of Civil Procedure permit Atain to make both claims simultaneously. Accordingly, Atain’s
claim for disclaimer of coverage does not constitute a ratification of the Policy.
ii. Ratification by Action
Second, Pachner argues Atain’s actions constitute ratification of the contract. Genuine
issues of material fact preclude the issuance of summary judgment on this ground.

“[T]he remedy [of rescission] is discretionary and will not be granted where the claimant
has not acted within a reasonable time or where there has been substantial performance.” Farris
v. Cty. of Camden, 61 F. Supp. 2d 307, 336 (D.N.J. 1999) (quoting Notch View Assocs. v. Smith,
615 A.2d 676, 680 (N.J. Super. Ct. Law Div. 1992)); see also Rowen Petrol. Props., LLC v.
Hollywood Tanning Sys., Inc., Civ. No. 08-4764, 2011 WL 6755838, at *10 (D.N.J. Dec. 23,
2011) (same). “[W]here a party ‘is cognizant of fraud or misrepresentation and fails to promptly
rescind the . . . agreement or transaction, and instead engages in conduct which assumes the
validity of the [agreement], then the agreement or transaction may be deemed ratified.’” Everest
Nat’l Ins. Co. v. Sutton, Civ. No. 07-722, 2008 WL 3833586, at *8 (D.N.J. Aug. 13, 2008)

(quoting Notch View, 615 A.2d at 685).
Pachner argues Atain received notice of its potential grounds for rescission on or before
November 30, 2015, when Atain received an e-mail with a description of the events leading to
Manchester’s Injury and a discussion of how Manchester was an “independent contractor” for
NMG. (ECF No. 73-43, at Atain 73-75.) Assuming without deciding this e-mail put Atain on
notice of its potential grounds for rescission,15 the evidence of ratification following this date is
mixed, precluding summary judgment.

15 Atain argues the relevant date is January 5, 2016, when NMG received a letter from
Manchester’s attorneys providing a notice of claim. (ECF No. 85-5, at 2.)
For instance, Atain issued a “Notice of Conditional Renewal” to NMG on January 6,
2016, “to advise that [Atain is] agreeable to renewing this policy subject to” new terms and
conditions and a rate increase. (ECF No. 73-45, at 1.) This explicit statement suggests Atain
treated the Policy as valid. However, this evidence of ratification is tempered by testimony from
Atain’s former director of director of underwriting for recreational programs, Grace

Cunningham, who noted Atain issued the conditional renewal “until [Atain] received more
information about the claim.” (ECF No. 73-16, at 270:10-11.) Cunningham also testified, “We
rescinded this,” after Atain learned more. (ECF No. 73-16, at 270:16-19.)
Other evidence is also ambiguous. Although, Atain appears to have kept the Policy
premium16 rather than refund it to NMG, the normal course of rescission litigation appears to
allow an insurer to maintain the premium while litigation is pending, and to refund the policy-
holder after the litigation is successful. See, e.g., Liebling v. Garden State Indem., 767 A.2d 515,
465 n.1 (N.J. Super. Ct. App. Div. 2001). Additionally, Atain negotiated an explicit agreement
with Vulpis, Enberg, and NMG to allow Atain to follow this procedure. (ECF No. 70-13, at

ATN000051, ATN000068.) Under these circumstances, the Court cannot say Atain’s retention of
the Policy premium necessarily demonstrates Atain ratified the Policy.
The record also contains contrary evidence suggesting Atain did not act to ratify the
Policy, but instead acted with diligence concerning the possibility of rescinding the Policy. For
example, Atain wrote a letter to NMG on February 23, 2016, in which it sought to reserve its
right to rescind the Policy. (ECF No. 73-44, at 2.) Likewise, Atain negotiated and, on August 8,
16 The record is ambiguous on this point. When asked whether, after Manchester’s Injury, Atain
retained NMG’s Policy premiums or returned them to NMG, Atain’s representative testified,
“I don’t believe so. I don’t know for sure. I can’t verify.” (ECF No. 73-18, at 149:14-15.)
For the purpose of Pachner’s motion, the Court assumes Atain did not refund the Policy
premium to NMG in light of Atain’s argument claiming Atain may retain the premium
without forfeiting Atain’s right to rescission. (ECF No. 85, at 13-14.)
2016, executed non-waiver agreements with Vulpis, Enberg, and NMG to protect Atain’s right to
seek rescission of the Policy. (ECF No. 70-13, at ATN000049-53, ATN000066-70.) And, of
course, Atain filed this action on August 23, 2016. (ECF No. 1, at 21.) Pachner points to
deficiencies in Atain’s reservation-of-rights letter, but no matter the deficiencies, the letter, non-
wavier agreement, and declaratory judgment action are not the acts of a company taking action to

ratify the Policy. Cf. Annito v. Trump Marina Hotel Casino, No. L-5622-02, 2005 WL 4344137,
at *8 (N.J. Super. Ct. App. Div. July 25, 2006) (“By paying his casino debts when he was sober,
plaintiff ratified his prior promises to repay the loans, even if they were made while he was
intoxicated and not competent to contract.”).
However, the most important evidence is missing. Pachner’s critical argument is Atain
ratified the Policy by failing to act promptly after learning of the potential grounds for rescission
as a result of the November 30, 2015 e-mail. (ECF No. 73-43, at Atain 73-75.) Pachner does not
point to any evidence—other than the mere passage of time—showing Atain failed to follow-up
on the e-mail or to investigate the potential grounds for rescission the e-mail raised. Coupled

with the ambiguous or contrary evidence above, a genuine issue of material fact exists
concerning whether Atain ratified the Policy. Accordingly, the Court cannot grant summary
judgment against Atain on its claim for rescission.
D. Failure to Maintain Signed Liability Waivers
Atain’s final argument is NMG’s failure to comply with a coverage condition—namely,
obtaining a signed waiver and release of liability from all participants in NMG’s activities, and
maintaining the signed document for three years—relieves Atain from its obligation to cover
NMG’s exposure to Manchester’s underlying litigation. The Court rejects this argument because
a genuine issue of material fact exists concerning whether the loss of Manchester’s waiver form
appreciably prejudices Atain’s defense of Manchester’s underlying state court litigation.
New Jersey law permits an insurer to escape liability for its obligations under an
insurance policy if the insured breaches a condition of coverage, but only if the insurance carrier
suffers appreciable prejudice from the breach. See, e.g., Gazis v. Miller, 847 A.2d 591, 595 (N.J.

Super. Ct. App. Div. 2005). When determining the existence of appreciable prejudice, a court
must consider two factors. “[F]irst, ‘whether substantial rights have been irretrievably lost’ as a
result of the insured’s breach, and second, ‘the likelihood of success of the insurer in defending
against the accident victim’s claim’ had there been no breach.” Hager v. Gonsalves, 942 A.2d
160, 164 (N.J. Super. Ct. App. Div. 2008) (quoting Sagendorf v. Selective Ins. Co. of Am., 679
A.2d 709, 715 (N.J. Super. Ct. App. Div. 1996)); see also Ohaus v. Continental Cas. Ins. Co.,
679 A.2d 179, 185 (N.J. Super. Ct. App. Div. 1996).
The insurer bears the burden of demonstrating appreciable prejudice. See, e.g., Kenny v.
N.J. Mfrs. Ins. Co., 746 A.2d 57, 59 (N.J. Super. Ct. App. Div. 2000). The existence of

appreciable prejudice is generally a question for the finder-of-fact, and generally not appropriate
for summary judgment. See, e.g., State Nat’l Ins. Co. v. Cty. of Camden, 10 F. Supp. 3d 568,
582-83 (D.N.J. 2014).
A genuine issue of material fact exists concerning whether the loss of Manchester’s
misplaced waiver form will appreciably prejudice Atain. First, the record is not clear whether
Manchester’s waiver form—and therefore, Atain’s ability to defend the underlying state court
litigation using Manchester’s waiver—has been “irretrievably lost.” Hager, 942 A.2d at 164.
Although NMG cannot locate the waiver at present, Atain points to no evidence NMG will be
unable to locate the waiver in the future. In fact, NMG indicates it will willing to allow opposing
counsel access to its physical files to conduct its own search for Manchester’s missing waiver.
(ECF No. 86-2 ¶ 5.) Atain does not indicate it has accepted NMG’s offer.
Second, even if Atain cannot obtain Manchester’s waiver in time to rely on the waiver
against Manchester in the underlying state court litigation, the absence of Manchester’s waiver
will not necessarily reduce “the likelihood of success of the insurer in defending against the

accident victim’s claim.” Hager, 942 A.2d at 164. NMG has provided Atain with Manchester’s
signed acknowledgment of receipt (ECF No. 86-4, at 1) of NMG’s employee handbook, which
contains a waiver form (ECF No. 86-3, at 22-24). Moreover, while Vulpis acknowledged he
could not locate the forms, Vulpis testified Manchester had previously signed a waiver (1) when
Manchester initially became was a customer of NMG prior to serving as a guide, and (2) for the
year 2015, when Manchester served as a guide. (ECF No. 72, at 55:13-56:3, 87:1-6.) The only
contrary evidence is Manchester did not sign a waiver on the day of the Injury. (ECF No. 72, at
99:18-100:4; ECF No. 70-8, at 161:23-162:1.) Atain points to no evidence contradicting Vulpis’s
testimony concerning Manchester previously signing a waiver before the day of the Injury.

Viewing the facts in the light most favorable to NMG, a genuine issue of material fact exists
concerning whether NMG’s loss of Manchester’s waiver will appreciably prejudice Atain’s
defense of Manchester’s underlying state court litigation.
E. Pachner’s Insurance Producer Licenses
Pachner argues it is entitled to summary judgment on any negligence claim relating to
Pachner’s failure to maintain insurance producer licenses. No party opposes Pachner’s
argument. Assuming without deciding Pachner owes a duty to its clients or third parties to
maintain appropriate licenses as an insurance producer, the uncontested evidence demonstrates
Pachner in fact possessed the requisite licenses at the time he assisted NMG with its search for
insurance coverage. (ECF No. 73-31, at 1-2.) Therefore, there is no genuine dispute of material
fact concerning Pachner’s licensure, and Pachner is entitled to summary judgment on this claim.
F. Pachner’s Explanation of the Policy to NMG
Pachner argues the Court should grant summary judgment against NMG’s claims relating
to Pachner’s failure to explain mountaineering-related terms in the Policy or the Application.

The Court declines to grant summary judgment because a genuine issue of material fact remains
concerning whether Pachner fulfilled his obligations to NMG as a broker.17
An insurance broker’s obligations are “(1) to procure the insurance; (2) to secure a policy
that is neither void nor materially deficient; and (3) to provide the coverage he or she undertook
to supply.” President v. Jenkins, 853 A.2d 247, 569 (N.J. 2004). “[A]n insurance broker owes a
duty to his principal to exercise diligence in obtaining coverage in the area his principal seeks to

17 As part of its argument, Pachner contends the testimony of Grace Cunningham is irrelevant
because Cunningham was not designated as Atain’s organizational representative under
Federal Rule of Civil Procedure 30(b)(6) and because she did not work at Atain at the time of
her deposition. Accordingly, Pachner argues, the Court should disregard not only
Cunningham’s testimony but other evidence relying on Cunningham’s testimony. The Court
disagrees. Cunningham’s testimony is relevant to this case and the Court will consider it.
A person need not be an organizational representative under Rule 30(b)(6) nor still employed
with a defendant to provide relevant testimony. Cf. Lacey v. Cessna Aircraft Co., 932 F.3d
170, 183 (3d Cir. 1991) (observing “many potentially relevant witnesses may no longer be
employed by” a defendant company). Testimony is relevant to the extent “(a) it has any
tendency to make a fact more or less probable than it would be without [her testimony]; and
(b) the fact is of consequence in determining [this] action.” Fed. R. Evid. 401.
Pachner does not argue any particular item of Cunningham’s testimony fails to meet this
definition. Instead, Pachner argues only the Court should wholesale disregard Cunningham’s
entire testimony because none of it can be relevant if Atain no longer employs Cunningham.
The Court cannot agree. As the director of underwriting for recreational programs at Atain
when NMG contracted with Atain under the Policy, Cunningham was personally involved
with Atain’s issuance of the Policy to NMG. (ECF No. 70-20, at 12:22-13:6, 32:19-23.)
Given her position and personal involvement, the Court cannot say her testimony is entirely
irrelevant. Accordingly, the Court considers both Cunningham’s testimony and other
evidence relying on her testimony.
be protected.” Satec, Inc. v. Hanover Ins. Grp., 162 A.3d 311, 317 (N.J. Super. Ct. App. Div.
2017) (quoting Werrmann v. Aratusa, Ltd., 630 A.2d 302, 304 (N.J. Super. Ct. App. Div. 1993)).
A broker’s failure to inform a client about critical facts related to the client’s pursuit of insurance
can constitute a breach of the broker’s duty. See Brill v. Guardian Life Ins. Co. of Am., 666 A.2d
146, 157 (N.J. 1995).

1. Subjective vs. Objective Understanding of Policy Terms
Pachner is not entitled to summary judgment concerning whether Pachner failed to
explain certain mountaineering-related terms. The report of NMG’s expert Frank Seigel explains
Pachner breached an insurance broker’s duty because Pachner “should have been familiar with
how Atain handled and considered ‘mountaineering’ and ‘guided mountaineering’ and whether or
not those terms, in Atain’s eyes, included the assembly and use of a Tyrolean Traverse.” (ECF
No. 80-4, at 13.) Pachner argues Atain’s subjective understanding of these contested terms is
irrelevant because of “the general rule that the terms in an insurance policy should be interpreted
in accordance with their plain and commonly-understood meaning,” not the subjective meaning

of the insurer. Cypress Point Condo. Ass’n v. Adria Towers, LLC, 143 A.3d 273, 286 (N.J. 2016).
This argument does not entitle Pachner to summary judgment. Pachner is correct that
courts must “first consider the plain meaning of the language at issue.” N.J. Transit Corp. v.
Underwriters at Lloyd’s, London, ___ A.3d ___, 2019 WL 6109144, at *4 (N.J. Super. Ct. App.
Div. Nov. 18, 2019). But the plain language analysis is only one part of the approach to the
interpretation of insurance contracts. Courts’ “goal in interpreting [insurance] policies is to
‘discover the intention of the parties[,]’ by considering ‘the contractual terms, the surrounding
circumstances, and the purpose of the contract.’” Id. at *5 (quoting Marchak v. Claridge
Commons, Inc., 633 A.2d 531 (1993). Atain’s subjective understanding of these terms is relevant
to “discover[ing] the intention of the parties.” Id.
2. Vulpis’s Reliance on Pachner’s Information
Pachner also argues none of the Pachner entities breached any duty to inform NMG about
relevant Policy terms because Vulpis testified he did not rely on Pachner for information about

these terms. Vulpis’s testimony does not entitle Pachner to summary judgment because Vulpis
could not have relied on Pachner for information Pachner did not provide, but should have. Cf.
Brill, 666 A.2d at 157.
3. Vulpis’s Greater Level of Expertise Compared to Pachner
Pachner further argues Vulpis, as an expert in the mountaineering field, had greater
familiarity than Pachner with terms like “mountaineering” and equipment like a “Tyrolean
Traverse.” Therefore, Pachner argues, NMG had no need for any explanation from an individual
like Pachner with a lesser level of expertise than Vulpis. The Court cannot grant summary
judgment on this ground. The fact an insured possesses greater knowledge and expertise in a

field than the insured’s broker does not relieve the broker from “exercis[ing] diligence in
obtaining coverage in the area his principal seeks to be protected.” Satec, 162 A.3d at 317.
4. Pachner’s and Vulpis’s Awareness of NMG’s Activities
Pachner next points out Vulpis informed Pachner NMG engaged in “mountaineering”
activities and requested insurance for those activities (ECF No. 70-17, at ATN000336), but
Vulpis never alerted Pachner that NMG engaged in the Activity. Pachner asks this Court for
summary judgment because, the argument goes, Pachner could not reasonably have been
expected to procure coverage for an Activity of which it had no knowledge. Pachner also argues
summary judgment is appropriate because Vulpis was aware the Policy did not cover the Activity
because the Activity was not a “mountaineering” activity. The same genuine issue of material
fact—namely, the conflicting evidence concerning whether the Activity qualified as a
“mountaineering” activity (ECF No. 72-1, at 253:19-24; ECF No. 70-20, at 18:8-13; ECF No.
70-8, at 20:20-21:4)—precludes the entry of summary judgment on both grounds.
G. Pachner’s Failure to Recommend Workers’ Compensation Insurance

Pachner asks the Court to grant summary judgment on NMG’s claim related to Pachner’s
failure to procure workers’ compensation insurance, as required by law. The Court cannot grant
summary on this basis because genuine issues of material fact exist concerning whether (1)
Pachner attempted to procure workers’ compensation insurance for NMG and (2) workers’
compensation insurance would have protected either NMG or Manchester.
An insurance broker’s obligations are “(1) to procure the insurance; (2) to secure a policy
that is neither void nor materially deficient; and (3) to provide the coverage he or she undertook
to supply.” President v. Jenkins, 853 A.2d 247, 569 (N.J. 2004). “[A]n insurance broker owes a
duty to his principal to exercise diligence in obtaining coverage in the area his principal seeks to

be protected.” Satec, Inc. v. Hanover Ins. Grp., 162 A.3d 311, 317 (N.J. Super. Ct. App. Div.
2017) (quoting Werrmann v. Aratusa, Ltd., 630 A.2d 302, 304 (N.J. Super. Ct. App. Div. 1993)).
When a client retains a broker to procure insurance, the broker must procure legally mandated
workers’ compensation insurance. See Schustrin v. Globe Indem. Co. of N.Y., 130 A.2d 897, 898
(N.J. Super. Ct. App. Div. 1957) (noting the jury’s finding that broker was obligated to procure
workers’ compensation insurance for client).
Pachner argues a broker owes no duty to recommend additional coverage for a client.
This argument does not affect the Court’s analysis. Pachner correctly points out New Jersey law
imposes “no duty [on an insurance broker] to advise an insured to consider higher amounts of
homeowner’s insurance.” Carter Lincoln-Mercury, Inc., Leasing Div. v. EMAR Grp., 638 A.2d
1288, 1292 (N.J. 1994) (citing Wang v. Allstate Ins. Co., 592 A.2d 527, 532-33 (N.J. 1991)).
Assuming without deciding this principle extends to workers’ compensation, the principle still
does not apply here. NMG does not claim Pachner failed to advise NMG to consider the option
of purchasing higher policy limits. Instead, the case concerns an alleged failure by a broker to

obtain workers’ compensation insurance for a client who was legally mandated to obtain such
insurance. (ECF No. 80-4, at 13-14.) Were the Court to adopt Pachner’s argument, then NMG
would possess a legal obligation to obtain workers’ compensation insurance, see N.J. Stat. Ann.
§ 34:15-71 (requiring employers to obtain workers’ compensation insurance), but NMG’s
insurance broker Pachner would have no legal obligation to procure the insurance for NMG.
This is not the law in New Jersey. See Schustrin, 130 A.2d at 898.
The delineation of a broker’s duties does not end the Court’s inquiry, because a plaintiff
must show more than the failure to procure workers’ compensation insurance before liability will
attach. “To succeed in an action against an insurance broker, the plaintiff must prove that in

addition to being negligent, the broker’s negligence was a proximate cause of the loss.” Harbor
Commuter Serv., Inc. v. Frenkel & Co., 951 A.2d 198, 207 (N.J. Super. Ct. App. Div. 2008). Put
another way, the plaintiff must “establish[] that its loss would not have occurred but for
defendants’ negligence, or that defendants’ negligence constituted a substantial contributing
factor to the loss.” Id.
Two genuine issues of material fact preclude summary judgment. First, the record
contains conflicting evidence concerning whether Pachner in fact attempted to obtain workers’
compensation insurance for NMG. (ECF No. 73-3 ¶¶ 4-5; ECF No. 73-10, at 6; ECF No. 86-14
¶ 18.) Taking the evidence in the light most favorable to non-movants NMG and Manchester
while making all reasonable inferences in their favor, a reasonable jury could find Pachner did
not attempt to obtain workers’ compensation insurance for NMG.
The second genuine issue of material fact concerns whether (1) Pachner’s failure to
procure workers’ compensation insurance for NMG either contributed to NMG’s and
Manchester’s loss or (2) their loss would not have occurred had NMG purchased workers’

compensation insurance. As discussed earlier, genuine issues of material fact remain concerning
whether Manchester qualified as an employee or an independent contractor. See part III.B.,
supra. Given this uncertainty, the record does not conclusively demonstrate whether or not
workers’ compensation insurance would have covered Manchester’s Injury. Viewing this
uncertainty in the light most favorable to non-movants NMG and Manchester while making all
reasonable inferences in their favor, a reasonable jury could find Pachner’s failure to procure
workers’ compensation insurance for NMG either contributed to NMG’s and Manchester’s loss,
or their loss would not have occurred but for Pachner’s failure. In light of the two genuine issues
of material fact, the Court cannot grant summary judgment against NMG’s and Manchester’s

claims related to Pachner’s failure to procure workers’ compensation insurance for NMG.
H. Pachner’s Failure to Provide a Copy of the Policy
Pachner requests summary judgment on any claim it negligently failed to provide NMG
with a copy of the Policy. The Court cannot grant summary judgment in light of the conflicting
evidence.
An insurance broker has a duty to provide its client with any policy it receives from the
insurer within 10 days of receipt by the broker. See N.J. Admin Code § 11:17A-4.6. According
to Pachner, when “Pachner & Associates received a copy of the Policy, we made it available to
NMG through our web portal.” (ECF No. 73-3 ¶ 13.) Vulpis testified that he never received the
Policy until after Manchester’s Injury. (ECF No. 72, at 112:16-25.) In light of the conflicting
evidence, a genuine issue of material fact precludes summary judgment.
Pachner argues even if Pachner did not provide Vulpis with a copy of the Policy,
Pachner’s failure did not proximately cause any of NMG’s damages because Vulpis received a
copy of the Quote. (ECF No. 72-1, at 233:21-236:8.) A genuine issue of material fact also

precludes summary judgment on this basis. “To succeed in an action against an insurance
broker, the plaintiff must prove that in addition to being negligent, the broker’s negligence was a
proximate cause of the loss.” Harbor Commuter Serv., Inc. v. Frenkel & Co., 951 A.2d 198, 207
(N.J. Super. Ct. App. Div. 2008). Put another way, the plaintiff must “establish[] that its loss
would not have occurred but for defendants’ negligence, or that defendants’ negligence
constituted a substantial contributing factor to the loss.” Id.
A genuine issue of material fact exists concerning whether Pachner’s failure to provide
the Policy to NMG substantially contributed to NMG’s loss by depriving Vulpis of important
Policy details that would have prompted Vulpis to make inquiries about, and adjustments to,

NMG’s insurance. The Policy contains substantially more details about coverage than the Quote.
For instance, while the Quote merely mentions the insurance “Excludes Injury to Employees,
Leased Workers, Volunteers, and Independent Contractors,” the Policy actually defines several of
these terms. (ECF No. 73-37, at 2; ECF No. 70-5, at ATN000373-76.) Unlike the Quote, the
Policy spells out the exact terms of the exclusion for injury to employees or independent
contractors. (ECF No. 70-5, at ATN000383.) Making all reasonable inferences in favor of non-
movant NMG, a reasonable jury could find Vulpis would use the more detailed information in
the Policy to inquire about his insurance and adjust it so as to explicitly cover incidents like the
one in which Manchester suffered an Injury. Accordingly, the Court cannot grant summary
judgment.
I. Pachner’s Duty to Manchester
Pachner asks this Court to grant summary judgment against Manchester because New
Jersey law precludes Manchester from bringing an action against Pachner until Manchester

obtains a judgment against NMG and the judgment is returned unsatisfied.18 The Court disagrees
because Manchester is a foreseeable injured third-party to whom Pachner, a broker, owes a duty.
See Carter Lincoln-Mercury, Inc., Leasing Div. v. EMAR Grp., 638 A.2d 1288, 1297-98 (N.J.
1994).
“[A]n insurance broker may owe a duty of care not only to the insured who pays the
premium and with whom the broker contracts but to other parties found within the zone of harm
emanating from the broker’s actions as well.” Id. at 1297. When a broker negligently fails to
procure insurance that would cover the injuries of a third-party, the broker owes a duty to the
third-party, making the third-party an appropriate plaintiff in a negligence action against the

broker. See Impex Ag. Commodities Div. Impex Overseas Corp. v. Parness Trucking Corp., 576
F. Supp. 587, 591 (D.N.J. 1983) (applying New Jersey law). Pachner, as a broker, owes a duty to
procure appropriate insurance not just to NMG, but also to Manchester—a foreseeable, injured
third-party whose Injury NMG expected the Policy to cover. Because Pachner owes Manchester
a duty, Manchester is therefore an appropriate plaintiff in a negligence action. Accordingly,
summary judgment against Manchester on this basis is inappropriate.
18 Pachner characterizes this argument by saying Manchester lacks “standing” to sue Pachner.
(ECF No. 73-2, at 25-26; ECF No. 92, at 4-5.) The Court declines to adopt this phrasing, to
avoid confusion with the doctrine of justiciability under Article III of the Constitution. See,
e.g., Gill v. Whitford, 138 S. Ct. 1916, 1929 (2018). Pachner’s underlying argument concerns
whether Manchester is an appropriate plaintiff—which, in a negligence action like this, is
best analyzed in terms of whether Pachner owes a duty to Manchester.
Pachner argues New Jersey is not a direct action state, meaning an injured third party
may not bring an action directly against a tortfeasor’s insurance company in lieu of the tortfeasor.
See Manukas v. Am. Ins. Co., 237 A.2d 898, 524 (N.J. Super. Ct. App. Div. 1968). But Pachner is
not an insurance company against whom Manchester brings an action in lieu of the tortfeasor.
Rather, Pachner is the tortfeasor. Manchester brings a negligence action against Pachner for

Pachner’s negligent failure to obtain appropriate insurance for NMG that would cover
Manchester’s Injury. Manchester does not bring an action against Pachner in the capacity of an
insurer. Therefore, Pachner’s “direct action” argument is inapposite.
Pachner further argues New Jersey law imposes a bar against direct actions such as this
one until the plaintiff obtains a judgment against the tortfeasor and is unable to execute on the
judgment. See N.J. Stat. Ann. § 17:28-2. This argument does not entitle Pachner to summary
judgment against Manchester for two reasons. First, as previously explained, Manchester has not
brought a direct action against an insurer, because Pachner is the tortfeasor, not the tortfeasor’s
insurer. Second, the statute’s language merely imposes a requirement on insurance contracts; it

does not limit the circumstances under which a plaintiff may bring a tort action. See id. (“No
policy of insurance . . . shall be issued or delivered in this state by any insurer authorized to do
business in this state, unless [the policy allows the plaintiff to recover directly against the insurer
if the tortfeasor is insolvent.]”). Because Manchester is not bringing an action for breach of an
insurance contract, the statute has no application here.
Finally, Pachner argues Manchester cannot bring an action against Pachner until it has
obtained a judgment against NMG. See Estate of Atanasoski v. Arcuri Agency, Inc., No. A-2291-
17T4, 2019 WL 1986539, at *3-6 (N.J. Super. Ct. App. Div. May 6, 2019). Because an action by
Manchester against NMG concerning Manchester’s Injury is pending in state court, the
appropriate course for this Court would not be to grant summary judgment against Manchester
(which would permanently extinguish Manchester’s right to recover against Pachner), but to
await the outcome of the state court case before issuing any final judgment against Pachner in
favor of Manchester.
J. Action Against Pachner Risk Management

Pachner argues, and the Court agrees, summary judgment is appropriate against Pachner
Risk Management (“PRM”) because PRM had no relationship with Manchester, Enberg, Vulpis,
or NMG, nor was PRM involved in procuring insurance for NMG. No party contests this
argument, and the evidence supports it. Donald Pachner testified PRM has always been an
inactive company and further testified PRM has never had anything to do with NMG. (ECF No.
73-11, at 126:14-127:5.) When asked whether “there was anything you came across that
suggested [PRM] owed or breached any duty to [NMG],” NMG’s expert Frank Seigel testified
he did not recall any reference to PRM in the file he reviewed. (ECF No. 73-15, at 180:8-23.)
Because the undisputed evidence shows PRM had no connection to NMG, Vulpis, or the other

parties in this case, the Court will grant summary judgment in favor of PRM.
K. Donald Pachner as Agent of His Disclosed Principal, Pachner & Associates
Pachner argues the Court should grant summary judgment in favor of Donald Pachner
because he cannot be liable for the torts of his disclosed principal Pachner & Associates if
Donald Pachner was merely serving as the agent of Pachner & Associates. See City of Millville
v. Rock, 683 F. Supp. 2d 319, 326-28 (D.N.J. 2010). In light of New Jersey’s “participation
theory” of principal-agent tort liability, the court disagrees.
Under New Jersey law, the “long-standing rule [is] that ‘[a]n agent who does an act
otherwise a tort is not relieved from liability by the fact that he acted at the command of a
principal or on account of the principal.’” Ballinger v. Del. River Port Auth., 800 A.2d 97, 110
(N.J. 2002) (quoting Restatement (Second) of Agency § 343 (1958)). New Jersey law refers to
this as the “participation theory” of principal-agent tort liability.
[T]he essence of the participation theory is that a corporate officer can be held
personally liable for a tort committed by the corporation when he or she is
sufficiently involved in the commission of the tort. A predicate to liability is a
finding that the corporation owed a duty of care to the victim, the duty was
delegated to the officer and the officer breached the duty of care by his own
conduct.
Saltiel v. GSI Consults., Inc., 788 A.2d 268, 272 (N.J. 2002); see also Reliance Ins. Co. v. The
Lott Grp., 776-77 (N.J. Super. Ct. App. Div. 2004).
As the sole member of Pachner & Associates who served as the primary individual
responsible for dealing with NMG during NMG’s effort to insure its activities, Donald Pachner
meets these requirements. (ECF No. 73-3 ¶ 1; ECF No. 86-14 ¶ 16.) Accordingly, the Court
may not grant summary judgment on this ground.
IV. CONCLUSION
For the reasons set forth above, Atain’s motion is DENIED and Pachner’s motion is
GRANTED IN PART in favor of PRM on all claims and in favor of all Pachner parties on any
claims relating to Pachner’s negligent failure to maintain appropriate licensure and DENIED IN
PART in all other respects. An appropriate order will follow.
/s/ Brian R. Martinotti
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE
Dated: January 30, 2020

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10267387. Public record. Not legal advice.