CTC TRANSPORTATION INSURANCE SERVICES, LLC v. QBE INSURANCE CORPORATION

*NOT FOR PUBLICATION*

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

:

CTC TRANSPORTATION :

INSURANCE SERVICES, LLC, et al., :

:

Plaintiffs, : Civil Action No. 20-6228 (FLW) (LHG)

:

v. :

: OPINION

QBE INSURANCE CORPORATION, :

et al., :

:

Defendants. :

:

WOLFSON, Chief Judge:

Plaintiffs CTC Transportation Insurance Services, LLC (“CTC California”), CTC

Transportation Insurance Services of Missouri, LLC (“CTC Missouri”), CTC Transportation

Insurance Services of Hawaii, LLC (“CTC Hawaii”) (together, the “CTC Plaintiffs”), and Thomas

Mulligan (“Mulligan”) (collectively “Defendants”), filed this insurance coverage action against

Defendants QBE Insurance Corporation (“QBE”), Capital Specialty Insurance Corporation

(“Capital”), Argo Group US, Inc. (“Argo”), Argonaut Insurance Company (“Argonaut”), Peleus

Insurance Company (“Peleus”)1, Axis Surplus Insurance Company (“Axis”), and Maxum

Indemnity Company (“Maxum”) (collectively, “Defendants”). Plaintiffs allege that Defendants,

with whom Plaintiffs have contracts for commercial insurance coverage, failed to defend Plaintiffs

in connection with a lawsuit filed against Plaintiffs in the Eighth Judicial District Court of the State

of Nevada, Clark County, entitled, Barbara D. Richardson In Her Capacity as the Statutory

1 The Court refers to Argo, Argonaut, and Peleus, together, as “the Argo Defendants.”

Receiver for Spirit Commercial Auto Risk Retention Group, Inc. v. Thomas Mulligan, et al. (the

“Spirit Receivership Action”). Pending before the Court are three separate motions for judgment

on the pleadings filed pursuant to Federal Rule of Civil Procedure 12(c) by QBE, the Argo

Defendants, and Capital. QBE’s motion has been joined by Axis and Maxum. Plaintiffs oppose

the motions and, additionally, have filed a cross-motion for partial summary judgment on QBE’s

duty to defend Plaintiffs in the Spirit Receivership Action, or, in the alternative, for leave to amend

the Complaint. For the reasons set forth herein, the Motions for Judgment on the Pleadings filed

by QBE, the Argo Defendants, and Capital are DENIED. The Motions for Joinder of QBE’s

Motion for Judgment on the Pleadings filed by Axis and Maxum are GRANTED. Plaintiffs’

Cross-Motion for Partial Summary Judgment is DENIED.2

I. BACKGROUND

The CTC Plaintiffs are limited liability companies that operated as program administrators

and general managing agents for insurance companies. (Pls.’ SUMF ¶ 18.) Mulligan is the Chief

Executive Officer of each of the CTC Plaintiffs. (Id. ¶ 19.) The CTC Plaintiffs previously served

as program administrators for Spirit Commercial Auto Risk Retention Group, Inc. (“Spirit”). (Id.

¶ 20.) Specifically, CTC California served as Program Administrator for Spirit from 2011 to 2016

and, in that capacity, underwrote and issued Spirit’s insurance policies pursuant to a Program

Administrator Agreement (the “PAA”). (Id. ¶ 23; see also Spirit Receivership Compl., ECF No.

13-6, ¶ 11.) In 2016, CTC California assigned the PAA to CTC Missouri and, on June 29, 2016,

the Nevada Division of Insurance approved an amendment agreement between CTC Missouri and

Spirit (the “CTC Agreement”). (Pls.’ SUMF ¶ 24.) Pursuant to the CTC Agreement, CTC

2 In their cross-motion Plaintiffs additionally seek leave to amend the Complaint if the Court

is inclined to grant any portion of QBE’s motion. Because the Court denies QBE’s motion for

judgment on the pleadings, I need not address Plaintiffs’ proposed amendments to the Complaint.

Missouri agreed to be responsible for (1) the marketing and underwriting of policies; (2) soliciting

business through “insurance brokers and licensed independent insurance agents”; and (3) all

related activities incidental to the issuance of policies, including collecting and paying to Spirit all

premiums due on business written pursuant to the agreement. (Id. ¶ 25.) CTC Hawaii never

executed a formal contract with Spirit, but is affiliated with CTC California and CTC Missouri.

(Spirit Receivership Compl., ECF No. 13-6, ¶ 13.)

In 2019, the CTC Plaintiffs each purchased a multi-layered insurance program with policy

periods of March 20, 2019 to March 20, 2020. (Compl. ¶ 2.) QBE issued the CTC Plaintiffs their

primary layers of coverage, with total limits, respectively, up to $5 million per professional liability

claim. (Compl. ¶¶ 26, 39, 52.) The insurance programs of each of the CTC Plaintiffs has four

excess layers that “follow form” to the Primary Policy. (Id. ¶¶ 27, 40, 53.) Each of the CTC

Plaintiffs obtained a first excess layer policy from Capital, which has a limit of liability of $5

million in excess of $5 million. (Id.) The second excess layer was obtained by each CTC Plaintiff

from Argo, Argonaut, and/or Peleus, and have limits of liability of $5 million in excess $10 million.

(Id. ¶¶ 28, 41, 54.) The third excess layer was obtained from Axis with limits of liability of $5

million excess of $15 million. (Id. ¶¶ 29, 42, 55.) The fourth excess layer was obtained from

Maxum with limits of liability of $5 million in excess of $15 million. (Id. ¶¶ 30, 43, 56.)

A. The Primary Policies

The CTC Plaintiffs each purchased separate “Insurance Agents and Brokers Errors and

Omissions Liability Insurance” policies from QBE for the policy period March 20, 2019 to March

20, 2020 (the “Primary Policies”). (Id. ¶¶ 25, 39, 52.) The terms of the Primary Policies are

identical. Relevant here, the Primary Policies’ insuring agreement for Errors and Omissions

Coverage states:

The Insurer shall pay on behalf of the Insured all sums in excess of

the Deductible stated in Item 5.a. and 5.b. of the Declarations which

the Insured shall become legally obligated to pay as Damages as a

result of a Claim first made against the Insured and reported to the

Insurer during the Policy Period, Automatic Extended Reporting

Period, or Optional Extended Reporting Period, if exercised, by

reason of a Wrongful Act in the performance of Professional

Services rendered or that should have been rendered by the Insured

or by any other person or organization for whose Wrongful Act the

Insured is legally responsible, provided the Wrongful Act occurs

during the Policy Period or on or after the Retroactive Date stated

in Item 6. Of the Declarations and before the end of the Policy

Period.

(Id., Ex. 1.)3 The term “Insured” is defined as the CTC Plaintiffs themselves, as well as their

current or former directors, officers, managers, employees, and independent contractors. (Id.)

“Professional Services” is defined as:

the following services rendered by the Insured for others or acting

as:

1. Insurance Wholesaler

2. Insurance Managing General Agent;

3. Insurance General Agent;

4. Insurance Underwriting Manager;

5. Insurance Program Administrator;

6. Insurance Agent;

7. Insurance Broker;

8. Insurance Surplus Lines Broker;

9. Insurance Consultant;

10. Insurance Claims Administrator;

11. Insurance Appraiser;

12. Insurance Premium Financier;

13. Notary Public;

14. Life and/or Health Agent or Broker;

15. Lecturer, speaker, instructor or teacher at any Insurance

convention or at any other meeting or course where

approved Department of Insurance continuing education

credits may be earned;

16. Expert witness concerning any Insurance related subject;

17. Employee Benefit Consultant; or

18. Loss Control or Risk Manager, concerning any Insurance

3 All bolded words are bolded in the Policy.

related subject.

(Id., Section XII.N.1–18.)

The Primary Policies additionally include a provision entitled “Defense, Settlements and

Claim Expenses.” (Id., Section I.B.) That provision states:

The Insurer shall have the right and duty to defend and investigate any

Claim to which coverage under this policy applies pursuant to the

following:

(a) Claim Expenses incurred in defending and investigating such

Claim shall be in addition to the Limits of Liability stated in Item 4.

of the Declarations. Such Claim Expenses shall not reduce the

Limits of Liability and shall not be applied against the Deductible.

(Id., Section I.B.1.a.)

The Primary Policies also include several exclusions from coverage. Relevant here are the

Business Enterprise Exclusion and the Insolvency Exclusion. The Business Enterprise Exclusion

provides that QBE will not provide coverage for any claim

based upon or arising out of Professional Services performed for

any organization if at the time the Professional Services were

rendered:

1. any Insured operated or managed such organization other

than the Named Insured;

2. any Insured was a principal, partner, officer, director,

trustee, member, manager or employee of such organization;

3. any Insured owned, directly or indirectly, ten percent (10%)

or more if such organization is publicly held or thirty percent (30%)

or more if such organization is a privately held organization;

4. such organization directly or indirectly through one or more

intermediaries, controls, or is controlled by, or is under common

control with the Named Insured.

(Id., Section III.D.) Professional Services is defined by the Primary Policies as

the following services rendered by the Insured for others or acting

as:

1. Insurance Wholesaler;

2. Insurance Managing General Agent;

3. Insurance General Agent;

4. Insurance Underwriting Manager;

5. Insurance Program Administrator;

6. Insurance Agent;

7. Insurance Broker;

8. Insurance Surplus Lines Broker

9. Insurance Consultant;

10. Insurance Claims Administrator;

11. Insurance Appraiser;

12. Insurance Premium Financier;

13. Notary Public:

14. Life and/or Health Agent Broker;

15. Lecturer, speaker, instructor or teacher at any Insurance

convention or at any other meeting or course where approved

Department of Insurance continuing education credits may be

earned;

16. Expert witness concerning any Insurance related subject[;]

17. Employee Benefit Consultant; or

18. Loss Control or Risk Manager, concerning any Insurance

related subject.

(Id., Section XII.N.) The Insolvency Exclusion provides that the Primary Policies will not provide

coverage for any claim

based upon or arising out of the insolvency, receivership,

bankruptcy, liquidation or financial inability to pay, of any

insurance Insurer, reinsurer, risk retention group or captive (or any

other self-insurance plan or trust by whatsoever name) in which the

Insured has placed or obtained coverage for a client or any account;

provided, however, this exclusion shall not apply if at the time the

Insured placed the insurance with the above described entity, such

entity:

1. held an A.M. Best rating of B+ or higher, or a

Demotech rating of A or higher; or

2. was guaranteed or operated by a governmental body

or bodies.

(Id., Section III.L (emphasis added).)

B. The Sprit Receivership Action

Spirit was an association captive insurance company that transacted commercial auto

liability insurance business and specialized in serving commercial truck owners. (Spirit

Receivership Compl. ¶¶ 6, 8, ECF No. 13-6.) Spirit was placed into receivership on February 27,

2019, by the Eighth Judicial District Court of Clark County, Nevada, based on its insolvency and

failure to cure its financial deficiencies. (Id. ¶ 9.) On November 6, 2019, Spirit was placed into

liquidation. (Id.) On February 6, 2020, Barbara D. Richardson, in her capacity as the statutory

receiver for Spirit filed the Sprit Receivership Action against various defendants, including the

CTC Plaintiffs, in Nevada.4 (Compl. ¶ 64.)

The Spirit Receivership “complaint arises out of a vast [allegedly] fraudulent enterprise

orchestrated by [Mulligan] and others, by which the Defendants operated a multitude of

interrelated companies in the insurance service industry for their own benefit and to the detriment

of their customers and insureds, including Spirit.” (Id. ¶ 1.) The Spirit Receivership Complaint

asserts the following causes of action against the CTC Plaintiffs and Mulligan: (1) breach of

contract, (2) breach of fiduciary duty, (3) breach of the implied covenant of good faith and fair

dealing, (4) violations of the Nevada Racketeer Influenced and Corruption Act, (5) unjust

enrichment, (6) fraud, and (7) civil conspiracy. (Id. ¶¶ 263–68, 286–92, 300–19, 327–79.)

On February 6, 2020, Plaintiffs tendered their claims to all Defendants for coverage for the

Spirit Receivership Action. (Compl. ¶ 72.) On March 17, 2020, QBE informed Plaintiffs that it

4 It appears that the Spirit Receivership Action has since been dismissed and referred to

arbitration. (See Pls.’ Opp., at 3.)

would not be providing coverage to Plaintiffs based on the Business Enterprise and Insolvency

Exclusions set forth in the relevant policies. (Id. ¶ 79.) Thereafter, on May 8, 2020, Maxum wrote

to Plaintiffs and informed them that it would be denying coverage for the Sprit Receivership Action

because (1) “Maxum, as an excess insurer to the primary QBE policies, has no obligation to

provide any coverage for a claim prior to the exhaustion of the underlying limits of insurance

provided by the underlying policies, (2) “Maxum’s coverage is no broader than that afforded by

QBE’s primary policies,” and (3) “[g]iven QBE’s denial of coverage under its primary policies,

there can be no coverage available for this matter under the Maxum excess policies.” (Id. ¶ 83.)

Capital, Argo, Argonaut, Peleus, and AXIS have not yet made coverage determinations with

respect to the Spirit Receivership Action. (Id. ¶ 87.)

C. Procedural History

Plaintiffs filed the instant Complaint on May 21, 2020. Plaintiffs assert that QBE and

Maxum, by denying coverage, have breached the relevant insurance policies by failing to

indemnify or defend Plaintiffs in the Spirit Receivership Action. (Id. ¶¶ 88–93.) Plaintiffs further

seek a declaratory judgment against all Defendants stating that “Defendants must defend the

Policyholders in the [Spirit Receivership Action].” (Id. ¶¶ 94–103.) On November 25, 2020, QBE

filed the instant motion for judgment on the pleadings. (ECF No. 38.) The Excess Insurers join

QBE’s motions as, they contend, the Excess Policies follow form to the Primary Policies and,

likewise, preclude coverage for the Spirit Receivership Action. (See ECF Nos. 39, 40, 41, 42.)

Plaintiffs oppose the motions and, further, have filed a cross-motion for partial summary judgment

on the question of whether QBE has a duty to defend Plaintiffs in the Spirit Receivership Action.

(ECF No. 47.) Alternatively, if the Court is inclined to grant any portion of QBE’s motion,

Plaintiffs seek leave to amend the Complaint. (Id.)

II. LEGAL STANDARDS

A. Rule 12(c) Standard

Rule 12(c) of the Federal Rules of Civil Procedure provides: “After the pleadings are

closed—but early enough not to delay trial—a party may move for judgment on the pleadings.”

Fed. R. Civ. P. 12(c). The applicable standard on a motion made pursuant to Rule 12(c) is similar

to that applied on a motion to dismiss pursuant to Rule 12(b)(6). See Spruill v. Gillis, 372 F.3d

218, 223 n. 2 (3d Cir.2004); Newton v. Greenwich Twp., No. 12-238, 2012 WL 3715947, at *2

(D.N.J. Aug. 27, 2012) (“The difference between a motion to dismiss pursuant to Rule 12(b)(6)

and Rule 12(c) is only a matter of timing and the Court applies the same standard to a Rule 12(c)

motion as it would to a Rule 12(b) (6) motion.”) (citing Turbe v. Gov’t of V.I., 938 F.2d 427, 428

(3d Cir. 1991)). Thus, when reviewing a motion made pursuant to Rule 12(c), a court “view[s]

the facts alleged in the pleadings and the inferences to be drawn from those facts in the light most

favorable to the plaintiff.” Mele v. Fed. Reserve Bank of N.Y., 359 F.3d 251, 253 (3d Cir. 2004)

(quoting Leamer v. Fauver, 288 F.3d 532, 535 (3d Cir. 2002)); see also Phillips v. Cty. of

Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (pursuant to Rule 12(b)(6), a court must “accept all

factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and

determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to

relief”) (citation omitted). Furthermore, a motion for judgment on the pleadings “should not be

granted ‘unless the moving party has established that there is no material issue of fact to resolve,

and that it is entitled to judgment in its favor as a matter of law.’” Mele, 359 F.3d at 253 (quoting

Leamer, 288 F.3d at 535)).

B. Summary Judgment 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.” Fed. R. Civ. P. 56(c). A factual dispute is genuine only if there is “a sufficient evidentiary

basis on which a reasonable [factfinder] 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. Cty.

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. Anderson, 477 U.S. 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).

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 will bear the

burden of persuasion at trial, that party must support its motion with credible evidence . . . that

would entitle it to a directed verdict if not controverted at trial.” Id. at 331. On the other hand, if

the burden of persuasion at trial would be on the nonmoving 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 nonmoving 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.” Id. Once the movant adequately supports its motion pursuant to Rule

56(c), the burden shifts to the nonmoving 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 nonmoving 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. DISCUSSION

A. Applicable Law

First, the parties dispute which state’s law applies to this matter. Specifically, QBE

contends that because the CTC California Policy was issued to an entity principally located in

California, the CTC Hawaii Policy was issued to an entity principally located in Hawaii, and the

CTC Missouri Policy was issued to an entity principally located in Missouri; California, Hawaii,

and Missouri law, respectively, should apply to Plaintiffs’ claims. Plaintiffs, however, maintain

that New Jersey law governs this dispute as there is no conflict between the law of New Jersey and

the laws of California, Missouri, and Hawaii. (Pls.’ Opp., at 12 n.4.)

A district court sitting in diversity jurisdiction applies the law of the forum state, including

its choice of law principles. Woessner v. Air Liquide Inc., 242 F.3d 469, 472 (3d Cir. 2001). Under

New Jersey law, the first step in the conflicts analysis is to determine “whether there is an actual

conflict between the laws of the states with interests in the litigation.” Continental Ins. Co. v.

Honeywell Int’l, Inc., 234 N.J. 23, 46 (2018). For an actual conflict to exist there must be a

“substantive difference” between the laws of the relevant states. Id. “If there is no actual conflict,

then the choice-of-law question is inconsequential, and the forum state applies its own law to

resolve the disputed issue.” Id. (quoting Rowe v. Hoffman-La Roche, Inc., 189 N.J. 615, 621

(2007)); see also Schwartz v. Hilton Hotels Corp., 639 F. Supp. 2d 467, 471 (D.N.J. 2009). Here,

the parties do not dispute that there is no conflict between the laws of New Jersey, California,

Hawaii, and Missouri, and, indeed, an independent review revealed that there is no conflict. (See

QBE Moving Br., at 19; Pls.’ Opp., at 12 n.4.) Nevertheless, QBE confusingly argues that the

laws of California, Hawaii, and Missouri, respectively, should apply to the claims brought by the

CTC Plaintiffs. I disagree. If there is no conflict amongst the potentially applicable laws, I need

not engage in a choice of law analysis but, rather, it is appropriate to simply apply the law of the

forum state. See Warriner v. Stanton, 475 F.3d 497, 501 (3d Cir. 2007); Lebegern v. Forman, 471

F.3d 424, 428 (3d Cir. 2006); Argush v. LPL Financial, LLC, Nos. 13-7821, 14-955, 14-956, 2016

WL 7424260, at *4 (D.N.J. Dec. 23, 2016). Accordingly, because there is no actual conflict of

law, I analyze Plaintiffs’ claims under New Jersey law.

B. Whether QBE has a Duty to Defend Plaintiffs

At the outset, QBE does not dispute that the Spirit Receivership “is based upon and arises

out of Professional Services performed for Spirit.” (See Pl. SUMF ¶ 41; QBE’s Resp. to Pls.

SUMF ¶ 41.) Rather, QBE maintains that it has no obligation to defend Plaintiffs in the Spirit

Receivership Action because, it argues, coverage is barred by both the Business Enterprise and

Insolvency Exclusions. Plaintiffs, however, argue that neither exclusion applies and, accordingly,

have filed a cross-motion for summary judgment on the issue of whether QBE has a duty to defend

Plaintiffs in the Spirit Receivership Action.5

i. General Principles of Insurance Coverage under New Jersey Law

This dispute requires evaluation of the principles governing an insurance carrier’s duty to

defend its insured. An “insurer’s duty to defend is typically broader than its duty to indemnify.”

Grand Cove II Condo Ass’n, Inc. v. Ginsberg, 291 N.J. Super. 58, 71 (App. Div. 1996). For

example, “if there are multiple claims alleged, only one of which is potentially covered, the duty

to defend will continue until every covered claim is disposed.” Villa Enterprises Mgmt. Ltd. v.

Federal Ins. Co., 360 N.J. Super. 166, 186–87 (Law Div. 2002).

Under New Jersey law, “an insurance company has a duty to defend when an underlying

complaint against the insured ‘states a claim constituting a risk insured against.’” Navigators

Specialty Ins. Co. v. inVentiv Health Clinical, Inc., 826 F. App’x 199, 202 (3d Cir. 2020) (quoting

Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165 (1992)). In other words, an insurance carrier

“is contractually obligated to provide the insured with a defense against all actions covered by the

insurance policy.” Abouzaid v. Mansard Gardens Assocs., LLC, 207 N.J. 67, 79 (2011). In

determining whether a duty to defend exists, courts compare “the allegations set forth in the

complainant’s pleading and the language of the insurance policy.” Flomerfelt v. Cardiello, 202

5 Because the Excess Policies “follow form” to the Primary Policies, the Court’s analysis of

the Insolvency and Business Enterprise Exclusions applies equally to the motions filed by Capital,

Maxum, the Argo Defendants, and Axis. See Houbigant, Inc. v. Federal Ins. Co., 374 F.3d 192,

205 (3d Cir. 2004) (noting that under a follow form excess policy “the parties agree that the

coverage issues presented turn solely on the interpretation of the underlying polic[y]” (alteration

in original).

N.J. 432, 444 (2010). If the complaint raises allegations that fall within a risk covered by the

insurance contract, then “the duty to defend arises, irrespective of the claim’s actual merit.”

Voorhees, 128 N.J. at 173. Nonetheless, in determining whether a duty to defend has been

triggered, a court's analysis “is not necessarily limited to the facts asserted in the complaint,”

Abouzaid, 207 N.J. at 81, and may include “extrinsic facts, outside of the complaint, which are

later revealed in discovery.” S.T. Hudson Engineers, Inc. v. Pa. Nat. Mut. Cas. Co., 388 N.J.

Super. 592, 606 (App. Div. 2006).

The determination of “the proper coverage of an insurance contract is a question of law.”

Buczek v. Cont’l Cas. Ins. Co., 378 F.3d 284, 288 (3d Cir. 2004) (citing Atl. Mut. Ins. Co. v.

Palisades Safety & Ins. Ass’n, 364 N.J. Super. 599, 604 (App. Div. 2003)). “An insurance policy

is a contract that will be enforced as written when its terms are clear in order that the expectations

of the parties will be fulfilled.” Flomerfelt, 202 N.J. at 441. However, because insurance policies

are contracts of adhesion, they “are subject to special rules of interpretation,” Longobardi v. Chubb

Ins. Co. of N.J., 121 N.J. 530, 537 (1990), and “courts must assume a particularly vigilant role in

ensuring their conformity to public policy and principles of fairness.” Voorhees, 128 N.J. at 175;

see Zacarias v. Allstate Ins. Co., 168 N.J. 590, 594 (2001) (“We give special scrutiny to insurance

contracts because of the stark imbalance between insurance companies and insureds in their

respective understanding of the terms and conditions of insurance policies.”). In a dispute over

the interpretation of an insurance contract, the “burden is on the insured to bring the claim within

the basic terms of the policy.” Reliance Ins. Co. v. Armstrong World Indus., Inc., 292 N.J. Super.

365, 377 (App. Div. 1996). However, where, as here, “the insurance carrier claims the matter in

dispute falls within exclusionary provisions of the policy, it bears the burden of establishing that

claim.” Rosario ex rel. Rosario v. Haywood, 351 N.J. Super 521, 530 (App. Div. 2002).

In New Jersey, the court’s function in construing policies of insurance, as with any other

contract, “is to search broadly for the probable common intent of the parties in an effort to find a

reasonable meaning in keeping with the express general purposes of the policies.” Royal Ins. Co.

v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 416 (App. Div. 1994). In most cases, the best

indication of the parties’ reasonable expectations lies in the language of the insurance policy itself,

Reliance Ins. Co. v. Moessner, 121 F.3d 895, 903 (3d Cir. 1997), and thus, ordinarily, “the words

of an insurance policy are to be given their plain, ordinary meaning.” Zacarias, 168 N.J. at 595.

In that regard, “[w]here the express language of the policy is clear and unambiguous, ‘the court is

bound to enforce the policy as it is written.’” Rosario, 351 N.J. Super. at 530 (quoting Royal Ins.,

271 N.J. Super. at 416); Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238

(2008) (“If the language is clear, that is the end of the inquiry.”). This governing principle

precludes courts from writing “‘for the insured a better policy of insurance than the one

purchased.’” Gibson v. Callaghan, 158 N.J. 662, 670 (1999) (citation omitted).

Additionally, in the context of an insurance policy, “[e]xclusionary clauses are

presumptively valid and are enforced if they are ‘specific, plain, clear, prominent, and not contrary

to public policy.’” Flomerfelt, 202 N.J. at 441 (quoting Princeton Ins. Co. v. Chunmuang, 151

N.J. 80, 95 (1997)). Because the burden is on the insurer to bring the case within an exclusion,

Chunmuang, 151 N.J. at 95, “exclusions are ordinarily strictly construed against the insurer, and

if there is more than one possible interpretation of the language, courts apply the meaning that

supports coverage rather than the one that limits it.” Flomerfelt, 202 N.J. at 442 (internal citation

omitted). Nonetheless, “[i]f the words used in an exclusionary clause are clear and unambiguous,

‘a court should not engage in a strained construction to support the imposition of liability.’” Id.

(quoting Longobardi, 121 N.J. at 537). In that regard, courts cannot “disregard the ‘clear import

and intent’ of a policy exclusion,” Am. Motorists Ins. Co. v. L–C–A Sales Co., 155 N.J. 29, 41

(1998) (citation omitted), and “[f]ar–fetched interpretations of a policy exclusion are insufficient

to create an ambiguity requiring coverage.” Essex Ins. Co. v. New Jersey Pan–African Chamber

of Commerce & Indus., Inc., No. A–1237–14T3, 2017 WL 4051726, at *3 (N.J. Super. Ct. App.

Div. Sept. 14, 2017). “Rather, courts must evaluate whether, utilizing a ‘fair interpretation’ of the

language, it is ambiguous.” Flomerfelt, 202 N.J. at 442 (quoting Stafford v. T.H.E. Ins. Co., 309

N.J. Super. 97, 105 (App. Div. 1998)).

ii. The Insolvency Exclusion

QBE contends that coverage is precluded by the Insolvency Exclusion. The CTC Primary

Policies provide exclude coverage for any claim

based upon or arising out of the insolvency, receivership,

bankruptcy, liquidation or financial inability to pay, of any

insurance Insurer, reinsurer, risk retention group or captive (or any

other self-insurance plan or trust by whatsoever name) in which the

Insured has placed or obtained coverage for a client or an account;

provided, however, this exclusion shall not apply if at the time the

Insured placed the insurance with above described entity, such

entity:

1. held an A.M Best rating of B+ or higher, or a Demotech

rating of A or higher; or

2. was guaranteed or operated by a governmental body or

bodies.

(Compl., Ex. 1, Section III.L.) QBE argues that this exclusion applies to Plaintiffs’ claim for

coverage “because the Spirit Receivership Action is expressly based upon and arises out of Spirit’s

receivership, insolvency and liquidation of a risk retention group.” (QBE Moving Br., at 37.)

Plaintiffs, however, maintain that the Insolvency Exclusion is ambiguous and, moreover, does not

preclude coverage for the Spirit Receivership Action.

Insolvency exclusions, such as the one at issue here, are widely enforced both in New

Jersey and throughout the United States. See, e.g., Criterion Claim Solutions, Inc. v. Scottsdale

Indemnity Co., No. 20-6225, 2021 WL 794787 (D.N.J. Mar. 1, 2021) (enforcing insolvency

exclusion under New Jersey law);6 ACE Capital Ltd. v. Morgan Waldon Ins. Mgmt., LLC, 832 F.

Supp. 2d 554, 568–72 (E.D. Pa. 2011); Zurich Specialties London Ltd. v. Bickerstaff, Whatley,

Ryan & Burkhalter, Inc., 650 F. Supp. 2d 1064, 1070–71 (C.D. Cal. 2009); American Auto. Ins.

Co. v. Valentine, 131 F. App’x 406, 411 (4th Cir. 2005) (“In sum, we conclude that the

exclusionary clause relating to insolvency unambiguously bars coverage of the broker’s claims

stemming from the underlying suits. . . .”). Application of an insolvency exclusion turns on the

interpretation of the exclusion’s prefatory language: “based upon or arising out of.” See Criterion

Claims Solutions, 2021 WL 794787, at *5–6. The New Jersey Supreme Court has instructed that

“arising out of” should be given a broad definition and “has been read expansively to define the

link between the conduct and the covered activity as ‘originating from,’ ‘growing out of’ or having

a ‘substantial nexus.’” Flomerfelt, 202 N.J. at 452 (quoting Am. Motorists Ins. Co. v. L-C-A Sales

Co., 155 N.J. 29, 34 (1998)). In other words, “[t]here need be shown only a substantial nexus

between the activity and the injury.” Criterion Claim Solutions, 2021 WL 794787, at *5 (quoting

U.S. Specialty Ins. Co. v. Sussex Airport, Inc., No. 14-5494, 2016 WL 2624912, at *3 (D.N.J. May

6, 2016)).

Here, there is no doubt that the allegations alleged in the Spirit Receivership Action arise

6 Criterion Claim Solutions also involved insureds seeking a declaration that their insurer

must defend them in the Spirit Receivership Action. The plaintiffs there were Criterion Claim

Solutions, Inc., a claims management company that acted as a third-party administrator for Spirit

and Mulligan. 2021 WL 794787, at *1–2. While the insolvency exclusion in that case differs

from the one at issue here, the district court held that the Spirit Receivership Action “is excluded

from coverage under the Scottsdale Policy because it arises out of or in some way involves Spirit’s

insolvency.” Id. at *7.

from Spirit’s insolvency. Accord Criterion Claim Solutions, 2021 WL 794787 at *7. Indeed, that

complaint alleges Mulligan and the CTC Plaintiffs, inter alia, “operated a multitude of interrelated

companies in the insurance service industry for their own benefit and to the detriment of their

customers and insureds, including Spirit.” (Spirit Receivership Compl. ¶ 1.) This scheme involved

“a web of interrelated companies that wrote insurance policies, provided so-called financing for

insureds wishing to purchase insurance, processed insurance premiums, and/or adjusted and paid

insurance claims, and collected Spirit’s assets.” (Id. ¶ 2.) The Spirit Receivership complaint

claims that “[a]s a result of this scheme, Spirit . . . became financially insolvent and was placed

into permanent receivership and subsequently into liquidation, leaving hundreds of unpaid claims

and a host of creditors.” (Id. ¶ 4.) Nor does there appear to be any dispute that Spirit is an auto

liability insurer operating as a risk retention group. (See Pls.’ SUMF ¶¶ 1, 6 (noting that Spirit “is

a risk retention group” and that “Spirit transacted commercial auto liability insurance business”).)

What is disputed, however, is whether Plaintiffs “placed or obtained coverage for a client

or account” with Spirit. (See QBE Moving Br., at 37; Pls.’ Opp., at 23–27.) QBE, relying on

allegations set forth in the Spirit Receivership complaint, contends that the CTC Plaintiffs placed

or obtained coverage for accounts because they “participated in the unauthorized writing of

insurance coverage for Mexican insureds that was placed with Spirit.” (See QBE Reply, at 31;

QBE Moving Br., at 37.) Further, QBE highlights that Spirit’s reinsurance agreement states that

that CTC California was Spirit’s insurance producer, (see ECF No. 47-13, at 4–5 (setting forth that

reinsurance policy applies to “covering insureds involved in interstate trucking produced and/or

underwritten by CTC Transportation Insurance Service, Inc.”)), and that the Program

Administrator Agreement states that the CTC Plaintiffs were responsible for “the marketing and

underwriting of policies, endorsements, notices of cancellation, notices of nonrenewal, coding,

premium collection and all related activities incidental to the issuance of policies in the authorized

classes of business and the marketing of the program.” (ECF No. 47-18, sec. 5(A).) Moreover,

QBE notes that the Program Administrator Agreement refers to those for whom the CTC Plaintiffs

quoted coverage with Spirit as “clients.” (Id., Addendum A, (“All compensation is calculated from

the base premium quoted to a prospective client.”).) Plaintiffs, however, contend that the

Insolvency Exclusion does not apply because the CTC Plaintiffs were not acting as insurance

brokers and, rather, worked only for Spirit. (Pls.’ Opp., at 25–26.) In that regard, Plaintiffs

contend that only insurance brokers “place or obtain coverage for a client or account.” (Pls.’

Reply, at 10–11.) In other words, Plaintiffs maintain that the Insolvency Exclusion has no

application to the CTC Plaintiffs because they “place or obtain coverage” for Spirit, not for “a

client or an account.” (Pls.’ Opp., at 26.).

Having reviewed the Primary Policies as a whole, I find that it is unclear whether the

Insolvency Exclusion applies to bar coverage for the Spirit Receivership Action. In that regard,

there are questions of fact that preclude the application of the Insolvency Exclusion to Plaintiffs at

this juncture. The Insolvency Exclusion applies where the CTC Plaintiffs “placed or obtained

coverage for a client or an account.” (Compl., Ex. 1, Section III.L.) Specifically, I find that there

are multiple reasonable meanings for the phrase “client or an account” in this context. First, as

Plaintiffs argue, “client or an account” could be interpreted to mean the client or account of an

insurance broker who is communicating with the CTC Plaintiffs to obtain coverage for the broker’s

client. In that regard, it is the insurance broker that is obtaining coverage for a client, not the CTC

Plaintiffs. QBE, on the other hand, argues that “client or account” refers to any insured for whom

the CTC Plaintiffs underwrote coverage. Compounding the confusion, the policies do not define

these terms. Because there are no definitions for these terms, I find both QBE and Plaintiffs’

readings of the Insolvency Exclusion to be an “objectively reasonable reading of the disputed

passage.” Pittson Co. Ultramar Am. Ltd. v. Allianz Ins. Co., 124 F.3d 508, 520 (3d Cir. 1997).

Indeed, the ambiguity in the Primary Policies is similar to the ambiguities found in the

policy at issue in Alexander & Alexander Services, Inc. v. These Certain Underwriters at Lloyd’s,

London, England, 136 F.3d 82 (2d Cir. 1998).7 Alexander & Alexander involved an insurance

brokerage conglomerate, A&A, that had purchased an errors and omissions policy from the

defendant. Id. at 84. A&A had placed insurance with a Pennsylvania insurer which, because of

financial incapacity, was placed under rehabilitation. Id. at 84–85. Additionally, a subsidiary of

A&A had acted as the general managing agent for the Pennsylvania insurer. Id. at 85. The

defendant insurer denied coverage for the rehabilitation action pursuant to an insolvency exclusion

that stated that the policy would not cover “any claim arising from the financial inability to pay of

any insurer or reinsurer with which [A&A] has placed or obtained coverage for a client or an

account.” Id. at 84. Applying New York law and considering the specific factual scenario before

it, the Second Circuit found the exclusion to be “fraught with ambiguities.” As the court explained:

We are uncertain of the meaning of “coverage placed or obtained;”

uncertain of the meaning of “client or account,” and uncertain

whether there must be a relationship or nexus between a claim

asserted in the [underlying] case and not paid because of insolvency

and coverage placed or obtained or underwritten by A&A.

Id. at 89. Specifically, the Alexander court questioned whether “client or account” referred solely

to A&A’s brokerage clients, i.e., insureds for whom A&A obtained coverage, or whether it referred

to A&A’s brokerage clients and all insureds for whom A&A’s subsidiary underwrote coverage.

Id. at 87. The same ambiguities are presented here—the Primary Policies are unclear with respect

7 While Alexander & Alexander involved interpretation of an insurance policy under New

York law, I find the court’s reasoning persuasive and, therefore, rely on it here.

to whose client or account the Insolvency Exclusion applies—whether the client or account refers

to the insured for whom CTC underwrote policies, or, more narrowly, whether the terms refer to a

client, i.e., the person who purchased the commercial automobile insurance policy, of an insurance

broker. These questions demonstrate the genuine ambiguity of the exclusion.

However, I find that the record is not sufficiently developed to resolve that ambiguity at

this time. While under the doctrine of contra proferentum, ambiguities in an insurance policy are

to be resolved in favor of the insured, “[a]n exception to that rule exists for sophisticated

commercial entities that do not suffer from the same inadequacies as the ordinary unschooled

policyholder and that have participated in the drafting of the insurance contract.” Benjamin Moore

& Co. v. Aetna Cas. & Sur. Co., 179 N.J. 87, 102 (2004); see also Pittson, 124 F.3d at 521 (3d Cir.

1997) (“[A] sophisticated insured . . . cannot seek refuge in the doctrine of strict construction by

pretending it is the corporate equivalent of the unschooled, average consumer.” (omission in

original) (quoting Owens-Illinois, Inc. v. United Ins. Co., 198 N.J. 437, 650 (1994)). Here, it is

clear that the CTC Plaintiffs, as program administrators for a risk retention group, are sophisticated

with regard to insurance. Moreover, it appears that the Primary Policies were procured through an

insurance broker. (See ECF No. 13-3, at 24.) At this stage, no discovery has been exchanged, and

the Court cannot weigh any evidence on the construction of these terms. See Benjamin Moore,

179 N.J. at 102; see also Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 38 (1988)

(declining to construe policy in favor of insured where the policy covered “commercial risks

procured through a broker, and thus involved parties on both sides of the bargaining table who

were sophisticated with regard to insurance”). Accordingly, I find it premature to rule on the

question of whether the Insolvency Exclusion bars coverage for the Spirit Receivership Action.

Thus, both QBE’s motion for judgment on the pleadings and Plaintiffs’ motion for partial summary

judgment based on the Insolvency Exclusion are denied. The parties may move for summary

judgment on the issue at the appropriate time following discovery.

iii. The Business Enterprise Exclusion

QBE additionally contends that the Business Enterprise Exclusion, as set forth in each of

the Primary Policies, bars coverage for the Spirit Receivership Action. That exclusion provides

that QBE will not provide coverage for any claim

based upon or arising out of Professional Services performed for

any organization if at the time the Professional Services were

rendered:

1. any Insured operated or managed such organization

other than the Named Insured;

2. any Insured was a principal, partner, officer,

director, trustee, member, manager or employee of such

organization;

3. any Insured owned, directly or indirectly, ten

percent (10%) or more if such organization is publicly held

or thirty percent (30%) or more if such organization is a

privately held organization;

4. such organization directly or indirectly through one

or more intermediaries, controls, or is controlled by, or is

under common control with the Named Insured.

(Compl., Ex. 1, Section III.D.)

Specifically, QBE argues that this exclusion bars coverage because “the customer to which

the CTC [Plaintiffs] provided insurance services – Spirit – became a business partner with the CTC

[Plaintiffs] and Mulligan in many financial transactions.” (Moving Br., at 22.) In that regard,

QBE submits that each part of the Business Enterprise Exclusion applies independently to bar

coverage because “(1) the CTC [Plaintiffs] and individual insureds operated and managed Spirit,

(2) the individual insureds were principals, officers, directors, members or managers of Spirit, (3)

the insureds allegedly owned Spirit, and (4) Spirit was directly or indirectly controlled by, and was

under common control with, the CTC [Plaintiffs].” (QBE Moving Br., at 2.) Plaintiffs do not

dispute that the Spirit Receivership is based on or arises out of professional services, as defined

under the Primary Policies, rendered to Spirit by Plaintiffs. Nor do Plaintiffs challenge the

Business Enterprise Exclusion as ambiguous or otherwise unenforceable. Rather, Plaintiffs argue

that the exclusion applies only if the conditions set forth in parts 1 to 4 of the exclusion were “met”

at the time the professional services were performed. Plaintiffs contend that resolution of that

question is fact sensitive and that “[i]t is not clear from the face of the complaint in the [Spirit

Receivership Action] whether the conditions . . . were ‘met’ at the time Plaintiffs performed

professional services for Spirit.”8 (Pls.’ Opp., at 17–18.)

I first turn to the question of who is an “Insured” under the Primary Policies. There is no

dispute that the CTC Plaintiffs and Mulligan are considered “Insureds.” However, QBE contends

that if other individuals named as defendants in the Spirit Receivership Complaint are “Insureds”

under the Primary Policies, it does not have a duty to defend the CTC Plaintiffs.9 Specifically, the

parties dispute whether Matthew Simon, who served as a President of Spirit, a director of Spirit,

and the Chief Operating Officer of CTC California; Daniel George, who was a director and officer

of Spirit and an Executive Vice President of CTC California; Scott McCrae, who was an Executive

Vice President of the CTC Plaintiffs and became the President of CTC California in January 2019;

8 Plaintiffs additionally challenge application of the Business Enterprise Exclusion because,

they argue, QBE relies on hearsay allegations from the underlying complaint in the Spirit

Receivership Action. (Pls.’ Opp. Br., at 47.) Whether an insurer has a duty to defend, however,

is “determined by comparing the allegations in the complaint with the language of the policy.”

inVentiv Health Clinical, 826 F. App’x at 202. That is, the underlying complaint, as well as other

relevant extrinsic evidence, controls whether there is a duty to defend an insured. Id.

9 Whether these individuals are “Insureds” does not affect QBE’s duty to defend Mulligan.

and Brenda Guffey, who was a President of Spirit and an employee of the CTC Plaintiffs, are

“Insureds” under the Primary Policies. (See Spirit Receiver Compl. ¶¶ 36–43.) The Spirit

Receivership Action asserts claims against these individuals, in their individual capacity, in

addition to alleging that “George, Guffey, Simon, McCrae and other management defendants of

CTC and Spirit continued to conceal the true financial condition of Spirit, its misrepresentations

to policyholders, and the wrongful financial transactions of Spirit and CTC so that they could

continue Spirit and CTC in business.” (Id. ¶ 63.) Because the Primary Policies include in the

definition of “Insured” a current or past officer, director, manager or employee of the CTC

Plaintiffs, QBE maintains that Simon, George, McCrae, and Guffey are insured persons under the

Primary Policies. Plaintiffs, on the other hand, argue that Simon, George, McCrae, and Guffey

only qualify as “Insureds” under the Primary Policies where they were acting “on behalf of the

Named Insured” and “within the scope of their duties as such.” (Pls.’ Opp., at 19.)

The Primary Policies define “Insured,” as relevant here, as “any past or current principal,

partner, officer, director, trustee, shareholder or employee of the Named Insured or its Predecessor

Organization solely while acting on behalf of the Named Insured or its Predecessor Organization

and with the scope of their duties as such.” (Compl., Ex. 1, Section XII.G.) Based on a review of

the Spirit Receivership Complaint, I find that there are questions of fact as to when Simon, George,

McCrae, and Guffey held their respective positions at Spirit and CTC and whether they held those

positions at the same time. In other words, it is unclear whether the conduct of Simon, George,

McCrae, and Guffey, to the extent it forms a basis for the claim against the CTC Plaintiffs, occurred

while Simon, George, McCrae, and Guffey were acting on behalf of the CTC Plaintiffs and within

the scope of their duties for the CTC Plaintiffs. Indeed, in alleging the various roles held by

George, Simon and Guffey, the Spirit Receivership Complaint includes no dates and, simply, states

that that they held their respective positions “at relevant times.” In that regard, to the extent the

claims against the CTC Plaintiffs in the Spirit Receivership are based on the actions of Simon,

George, McCrae, and Guffey, I cannot find that the Business Enterprise Exclusion unambiguously

bars coverage at this time. In other words, I cannot, based on the facts before me, determine

whether George, Simon, Guffey, and McCrae (1) operated and managed Spirit, (2) were principals,

officers, directors, members or managers of Spirit, or (3) owned Spirit, while they acted on behalf

of the CTC Plaintiffs.

As there is apparently no dispute that Mulligan is an “Insured” under the Primary Policies,

I turn to whether the Business Enterprise Exclusion bars coverages based on Mulligan’s conduct.

Application of each of the conditions of the Business Enterprise Exclusion with respect to

Mulligan’s conduct is also fraught with factual questions. First, QBE argues that the first condition

of the Business Enterprise Exclusion bars coverage for claims arising from Mulligan’s conduct

because the Spirit Receivership Action alleges that Mulligan operated or managed Spirit and was

“at relevant times . . . a manager, officer, or director of Spirit; . . . CTC California; . . . CTC Hawaii;

. . . and CTC Missouri.” (Spirit Receivership Compl. ¶ 10.) Plaintiffs, however, contest whether

Mulligan operated or managed Spirit and, instead, maintain that under Spirit’s bylaws, only

Spirit’s named officers and directors “operated and managed” Spirit. (Pls.’ Opp., at 20.) On the

second condition, QBE points to the allegation that “Mulligan . . . at relevant times was a manager,

officer or director of Spirit.” (Spirit Receivership Compl. ¶ 10.) Plaintiffs, however, through

affidavit of Mulligan and by relying on various filings made by Spirit, contend that Mulligan was

never a “principal, partner, officer, director, trustee, manager or employee of’ of Spirit or any other

organization at the time the professional services giving rise to the [Spirit Receivership Action]

were performed.” (See Pls.’ Opp., at 20–21.) Next, QBE submits that the third condition is met

because the Spirit Receiver alleges that Mulligan owns Spirit. (QBE Reply, at 25 (citing Spirit

Receivership Compl. ¶ 129).) Plaintiffs, however, point to extrinsic evidence that demonstrates

that Spirit is wholly owned by the members of its association. (Pls.’ Opp., at 21.) And, finally,

QBE argues that the fourth condition is met based on the Receiver’s allegations that Mulligan

“dominated and controlled the affairs of CTC and Spirit and other Related Entities.” (QBE Reply,

at 26.) Again, Plaintiffs dispute the factual basis for those allegations and contend that, at the time

Plaintiffs provided Professional Services to Spirit, neither Mulligan nor the CTC Plaintiffs

controlled Spirit or were under common control with Spirit. (Pls.’ Opp., at 21.)

I cannot resolve these factual disputes on QBE’s motion for judgment on the pleadings

under Rule 12(c). A motion for judgment on the pleadings should only be granted where “the

movant clearly establishes that no material issue of fact remains to be resolved and that [it] is

entitled to judgment as a matter of law.” Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir.

2008). In other words, “[j]udgment on the pleadings is appropriate only when ‘all material

allegations of fact are admitted or not controverted in the pleadings and only questions of law

remain to be decided by the district court.’” Huertas v. United States, No. 04-3361, 2005 WL

719143, at *7 (D.N.J. July 5, 2005) (quoting 5C Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure § 1367). Defendant has not made that showing here because, as set forth

above, there remain disputes of material fact that must be resolved for the Court to determine

whether the Business Enterprise Exclusion applies to bar coverage for the Spirit Receivership

Action. See, e.g., Citizens Ins. Co. of Am. v. Selective Way Ins. Co., 98 F. Supp. 3d 782, 788–89

(E.D. Pa. 2015) (denying motion for judgment on the pleadings where plaintiff could not “show

that there is not at least a question of fact regarding whether [insured] is entitled to coverage”).

For the same reasons, I deny Plaintiffs’ motion for partial summary judgment on the duty to defend.

CAMICO Mut. Ins. Co. v. Baratz & Assocs., No. 14-3160, 2015 WL 248264, at *4 (D.N.J. Jan.

20, 2015) (denying summary judgment where genuine disputes of material fact existed as to

whether insurance policy exclusion applied to bar coverage); Landmark Am. Ins. Co. v. Rider

Univ., No. 08-1250, 2010 WL 4063199, at *6 (D.N.J. Oct. 15, 2010) (denying summary judgment

where there was a question of fact as to whether “each of the Individual Defendants actually

participated in the hazing, i.e., the excluded event, or if they merely participated in the events that

flowed therefrom”).

In sum, because I find that questions of fact exist regarding the scope and application of

both the Insolvency and Business Enterprise Exclusions, both QBE’s motion for judgment on the

pleadings and Plaintiffs’ partial motion for summary judgment on the duty to defend are denied.

See, e.g., CAMICO Mut. Ins. Co., 2015 WL 248264, at *4 (denying motion for summary judgment

on duty to defend where there were questions of fact as to whether exclusion applied to bar

coverage); Landmark Am. Ins. Co., 2010 WL 4063199, at *6 (denying motions for summary

judgment on duty to defend where there were questions of fact that precluded application of the

at-issue policy exclusion); see also Foster v. Westchester Fire Ins. Co., No. 09-1459, 2011 WL

4382971, at *14 (W.D. Pa. Sept. 20, 2011) (“Based upon the foregoing discussion, the existence

of questions of fact regarding the extent of plaintiff's subjective knowledge prior to applying for,

and receiving, insurance from Westchester and Plus Companies precludes summary judgment with

respect to defendants’ duty to defend.”).

IV. CONCLUSION

For the reasons set forth herein, the Motions for Judgment on the Pleadings filed by QBE,

Argo, and Capital are DENIED. The Motions for Joinder of QBE’s Motion for Judgment on the

Pleadings filed by Axis and Maxum are GRANTED. Plaintiffs’ Cross-Motion for Partial

Summary Judgment is DENIED. An appropriate Order accompanies this Opinion.

DATED: June 28, 2021 /s/ Freda L. Wolfson

Freda L. Wolfson

U.S. Chief District Judge