# CTC TRANSPORTATION INSURANCE SERVICES, LLC v. QBE INSURANCE CORPORATION

> District Court, D. New Jersey · June 28, 2021

URL: https://www.frixlaw.com/law-library/cases/10270905

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** June 28, 2021
- **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/10270905

## Opinion text

*NOT FOR PUBLICATION*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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10270905. Public record. Not legal advice.