                                                                                                                           Opinions of the United
1999 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-13-1999

Robeson Ind Corp v. Hartford Accident
Precedential or Non-Precedential:

Docket 98-5168




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Recommended Citation
"Robeson Ind Corp v. Hartford Accident" (1999). 1999 Decisions. Paper 121.
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Filed May 13, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-5168

ROBESON INDUSTRIES CORP.,
       Appellant,

v.

HARTFORD ACCIDENT & INDEMNITY COMPANY;
ZURICH INSURANCE COMPANY; CONTINENTAL
INSURANCE COMPANY

No. 98-5285

IN RE: ROBESON INDUSTRIES CORP.,
       Debtor,

ROBESON INDUSTRIES CORP.

v.

HARTFORD ACCIDENT & INDEMNITY COMPANY;
ZURICH INSURANCE COMPANY; CONTINENTAL
INSURANCE COMPANY

On Appeal from the United States District Court
for the District of New Jersey
District Judge: Honorable Garrett E. Brown
(Civ. Nos. 97-5185, 98-1500)

Argued February 17, 1999

BEFORE: GREENBERG, ROTH, and
LOURIE,* Circuit Judges
_________________________________________________________________

*Honorable Alan D. Lourie, Circuit Judge of the United States Court of
Appeals for the Federal Circuit, sitting by designation.
(Filed: May 13, 1999)

       Eugene R. Anderson (argued)
       Michael R. Magaril
       Steven J. Pudell
       Anderson Kill & Olick, P.C.
       One Gateway Center, Suite 901
       Newark, NJ 07102

        Attorneys for Appellants

       Lon A. Berk (argued)
       Sandra Tvarian
       Wiley Rein & Fielding
       1776 K Street, NW
       Washington, DC 20006

       Gerald A. Hughes
       Hughes & Hendrix
       850 Bear Tavern Road, Suite 304
       West Trenton, NJ 08628

        Attorneys for Appellee
        Zurich Insurance Company

       James W. Greene (argued)
       Thompson, O'Donnell, Markham,
       Norton & Hannon
       805 15th Street, NW, Suite 705
       Washington, DC 20005

       Paul J. Russoniello
       Flaster, Greenberg, Wallenstein,
       Roderick, Spirgel, Zuckerman,
       Skinner & Kirchner
       1810 Chapel Avenue West
       Third Floor
       Cherry Hill, NJ 08102

        Attorneys for Appellees
        Continental Casualty Company and
        American Casualty Company of
        Reading

                               2
OPINION OF THE COURT

LOURIE, Circuit Judge.

Robeson Industries Corp. appeals from the decision of
the United States District Court for the District of New
Jersey affirming the bankruptcy court's grant of summary
judgment that Robeson was not entitled to coverage under
its insurance policies and could not prevail in its tort
claims against the insurers. Robeson also appeals from the
decision of the district court denying jurisdiction to review
the bankruptcy court's imposition of sanctions under
Bankruptcy Rule 9011. See Robeson Indus. Corp. v. Zurich
Ins. Co., Civ. No. 97-5158(GEB) (D.N.J. Feb. 20, 1998)
(summary judgment); (D.N.J. June 2, 1998) (sanctions). We
affirm.

BACKGROUND

This appeal arises out of an adversary proceeding
commenced by debtor Robeson in the United States
Bankruptcy Court for the District of New Jersey. In that
proceeding, Robeson contended that Hartford Accident and
Indemnity Co., Zurich Insurance Co., and Continental
Insurance Co. (the "Insurers") had a duty to defend and
indemnify it against claims arising from the discharge of
certain contaminants at its manufacturing facility in
Castile, New York, including a claim brought by the New
York State Department of Environmental Conservation in
1990.1 Robeson had purchased various commercial general
liability insurance policies from the Insurers that provided
coverage from 1976 to 1983. The policies were negotiated in
New York and were issued to Robeson at its headquarters
in Mineola, New York. Although the policies were
apparently not identical as to the property covered, see
Robeson Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-
_________________________________________________________________

1. In addition, a private claim was later filed after the commencement of
the bankruptcy proceeding by an adjacent landowner. See Robeson
Indus. Corp. v. Zurich Ins. Co., Bankr. No. 93-33265(KCF), at 3 (Bankr.
D.N.J. Jan. 24, 1997) (memorandum opinion).

                               3
33265(KCF), at 4 (Bankr. D.N.J. Jan. 24, 1997)
(memorandum opinion), they all pertained generally to
Robeson's New York property, including the Castile facility.
None of the policies contained a choice-of-law provision.

The policies contained two provisions relevant to the
present controversy. The first provision obligated Robeson
to give prompt notice to the Insurers of any occurrence or
third-party claim covered by the policies (the "late notice"
provision).2 The parties do not dispute that the states of
New York and New Jersey differ in their interpretation of
the "late notice" provision. Under New York law, an
insured's breach of the timely notice provision relieves the
insurer of its duty to defend or indemnify, even absent a
showing of prejudice to the insured. See Unigard Sec. Ins.
Co. v. North River Ins. Co., 594 N.E.2d 571, 573 (N.Y. 1992).
In contrast, under New Jersey law, an insurer mustfirst
establish prejudice before untimely notice relieves the
insurer of its duties under the policy. See Cooper v.
Government Employees Ins. Co., 237 A.2d 870, 874 (N.J.
1968).

The second policy provision generally excludes coverage
for environmental contamination, except for contamination
that was "sudden and accidental" (the "pollution exclusion"
exception). Although Robeson argued to the bankruptcy
court that no conflict of law existed between New York and
New Jersey on the interpretation of the "pollution
exclusion" exception, the court disagreed, noting that New
_________________________________________________________________

2. What we refer to as the "late notice" provision is actually two
separate
provisions in the policies that cover different circumstances, both of
which were implicated in this case. The first provision states: "If a
claim
is made or suit is brought against insured, the insured shall immediately
forward to the company every demand, notice, summons or other
process received by him or his representative." See Robeson Indus. Corp.
v. Zurich Ins. Co., Bankr. No. 93-33265(KCF), at 3 (Bankr. D.N.J. Aug.
27, 1997) (memorandum opinion) (emphasis added). The second
provision states: "In the event of an occurrence, written notice
containing
particulars sufficient to identify the insured and also reasonably
obtainable information with respect to the time, place and circumstances
thereof, and the names and addresses of available witnesses, shall be
given by or for the insured to the company, or any of its authorized
agents as soon as practicable." Id. (emphasis added).

                               4
Jersey interprets the "sudden and accidental" language to
cover gradual discharges, see Morton Int'l, Inc. v. General
Accident Ins. Co., 629 A.2d 831, 870-75 (N.J. 1993),
whereas New York interprets this language as covering only
abrupt discharges, see Powers Chemco, Inc. v. Federal Ins.
Co., 548 N.E.2d 1301, 1302 (N.Y. 1989). See also Pfizer,
Inc. v. Employers Ins. of Wausau, 712 A.2d 634, 640-41,
643-44 (N.J. 1998) (summarizing the differences between
New York's and New Jersey's interpretations of the"late
notice" provision and the "pollution exclusion" exception).

The interpretations to be given to the "late notice"
provision and the "pollution exclusion" exception are
outcome-determinative in this case. Robeson did not timely
notify the Insurers of their potential liability under the
policies until December 1992, two-and-a-half years after
the State of New York filed its claim against Robeson and
several years after the contamination began. Moreover,
Robeson's contamination was gradual, ostensibly occurring
over several years. Robeson thus contended in the
Bankruptcy court that New Jersey law applied to the
interpretation of the policies. Robeson's main argument in
support of its contention was that it had moved its
headquarters to South Plainfield, New Jersey in April 1991.3
Robeson further argued, in an attempt to show its close ties
to New Jersey, that it had been using warehousing facilities
in New Jersey for approximately the last twenty years, paid
New Jersey taxes thereon, and had continually maintained
management personnel and sales representatives in New
Jersey.

The bankruptcy court, applying New Jersey choice-of-law
rules, found Robeson's argument in favor of the application
of New Jersey law unpersuasive, and held on summary
judgment that New York law applied to the interpretation of
the policy exclusions. See Robeson Indus. Corp. v. Zurich
Ins. Co., Bankr. No. 93-33265(KCF), at 17 (Bankr. D.N.J.
Jan. 24, 1997). The court later granted summary judgment
of non-coverage to the Insurers. See id. at 2-8 (Bankr.
_________________________________________________________________

3. At some time prior to its filing of the instant suit, Robeson moved its
headquarters again from New Jersey to California. See Robeson's Brief,
at 8 n.9.

                               5
D.N.J. Aug. 27, 1997). The court also clarified that its
choice-of-law ruling also applied to Robeson's tort claims
against the Insurers--claims stemming largely from the
Insurers' alleged bad faith with respect to the denial of
coverage. Finding such claims to be unsustainable under
New York law, the court granted summary judgment to the
Insurers on the tort claims as well. See id. at 8-12. The
district court summarily affirmed the bankruptcy court's
summary judgment rulings on appeal. See Robeson Indus.
Corp. v. Zurich Ins. Co., Civ. No. 97-5158(GEB) (D.N.J. Feb.
20, 1998).

In its summary judgment opinion, the bankruptcy court
invited the Insurers to move for sanctions under
Bankruptcy Rule 90114 because of Robeson's dogged
insistence that New Jersey law or policy should apply even
in the face of the court's earlier choice-of-law ruling and
New York law directly on point. The Insurers accepted this
invitation, and, not surprisingly, the bankruptcy court
granted the resulting motion,5 awarding the Insurers their
_________________________________________________________________

4. Bankruptcy Rule 9011 is similar to Rule 11 of the Federal Rules of
Civil Procedure. It states in relevant part:

       (b) Representations to the court--By presenting to the court
       (whether by signing, filing, submitting, or later advocating) a
       petition, pleading, written motion, or other paper, an attorney or
       unrepresented party is certifying that to the best of the person's
       knowledge, information, and belief, formed after an inquiry
       reasonable under the circumstances--(1) it is not being presented
       for any improper purpose, such as to harass or to cause
       unnecessary delay or needless increase in the cost of litigation;
(2)
       the claims, defenses, and other legal contentions therein are
       warranted by existing law or by a nonfrivolous argument for the
       extension, modification, or reversal of existing law or the
       establishment of new law[.]

Subsection (c) provides for the imposition of sanctions for the breach of
a party's Rule 9011 obligations.
5. The bankruptcy court stated: "This court determined on January 27,
1997 that under New Jersey choice of law rules . . . New York law
applied. From January 27, 1997 to August 27, 1997, the plaintiff in an
overly zealous manner created expense to the defendants on related
issues without presenting [a] consistent theory or a good faith argument
for reversing existing [law]. [Robeson's] briefs were duplicative,
circulative, voluminous, self-righteous and full of[citations to] self-
serving publication[s] which it authored." See Robeson Indus. Corp. v.
Zurich Ins. Co., Bankr. No. 93-33256(KCF), at 2 (Bankr. D.N.J. Feb. 11,
1998) (memorandum opinion).
6
litigation expenses for the time period between the court's
choice-of-law ruling and its grant of summary judgment.

Robeson appealed the imposition of sanctions to the
district court, but the court dismissed the appeal on the
ground that it had not been filed within the ten-day time
limit prescribed by Bankruptcy Rule 8002(a). The district
court noted that the bankruptcy court signed its sanctions
order on February 11, 1998, that the order was entered on
the clerk's docket on February 23, 1998, and that the ten-
day period began to run on this latter date. Because
Robeson's notice of appeal was filed on March 6, the
district court continued, it was one day late and therefore
the court lacked jurisdiction. See Robeson Indus. Corp. v.
Zurich Ins. Co., Civ. No. 97-5158(GEB) (D.N.J. Jun. 1, 1998)
(hearing transcript). Ruling in the alternative, the district
court affirmed the decision of the bankruptcy court to
impose sanctions on the merits. See id.

Robeson appealed the summary judgment rulings and
the sanctions order to this court. We have jurisdiction
pursuant to 28 U.S.C. S 1291 (1994).

DISCUSSION

A. Standards of Review

Summary judgment is appropriate when there are no
genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. See Fed. R. Civ. P.
56(c). This court reviews a district court's grant of summary
judgment de novo, reapplying the summary judgment
standard. See General Ceramics, Inc. v. Firemen's Fund Ins.
Cos., 66 F.3d 647, 651 (3rd Cir. 1995). Choice-of-law is a
question of law which this court reviews de novo . See id.
Whether an appeal from the bankruptcy court to the
district court is timely is also a question of law which this
court reviews de novo. See Shareholders v. Sound Radio,
Inc., 109 F.3d 873, 879 (3rd. Cir. 1997). Because we sit in
diversity in the present case, we are bound to follow the
substantive law of the forum, see Clark v. Modern Group,
Ltd., 9 F.3d 321, 326 (3rd Cir. 1994), including the forum's
choice-of-law rules, see Klaxon v. Stentor Elec. Mfg. Co., 313
U.S. 487, 496 (1941).

                               7
B. Choice-of-Law

The Supreme Court of New Jersey has in several cases
set forth New Jersey's choice-of-law rules for the
interpretation of casualty insurance contracts. See, e.g.,
Pfizer, Inc. v. Employers Ins. of Wausau, 712 A.2d 634 (N.J.
1998); HM Holdings, Inc. v. Aetna Cas. & Sur. Co., 712 A.2d
645 (N.J. 1998) (decided concurrently with Pfizer); Unisys
Corp. v. Insurance Co. of N. Am., 712 A.2d 649 (N.J. 1998)
(decided concurrently with Pfizer); The Gilbert Spruance Co.
v. Pennsylvania Mfrs.' Ass'n Ins. Co., 629 A.2d 885 (N.J.
1993). See also General Ceramics, supra. These cases make
clear that New Jersey follows S 193 of the Restatement
(Second) of Conflict of Laws.6 Pfizer, "applying the
principles" laid down in the Court's earlier opinion in
Spruance, sets forth the operative portions of that
provision:

       Spruance set forth a specific choice-of-law framework
       for interpreting casualty-insurance contracts. Under
       this framework, a court looks first to Restatement
       section 193, which provides that the place that"the
       parties understood . . . to be the principal location of
       the insured risk governs unless some other state has a
       more significant relationship under the principles
       stated in S 6 to the transaction and the parties."

Pfizer, 712 A.2d at 638 (citation deleted). Thus, under S 193
of the Restatement, New Jersey generally interprets
casualty-insurance policies in accordance with the law of
the state in which the insured risk is principally located,
unless some other state has a more significant relationship
to the transaction and the parties as illuminated by the
_________________________________________________________________

6. The validity of a contract of fire, surety or casualty insurance and
       the rights created thereby are determined by the local law of the
       state which the parties understood was to be the principal location
       of the insured risk during the term of the policy, unless with
respect
       to the particular issue, some other state has a more significant
       relationship under the principles stated in S 6 to the transaction
and
       the parties, in which event the local law of the other state will
be
       applied.

Restatement (Second) of Conflicts of Law S 193 (1969).

                               8
consideration of factors listed in S 6.7 The Court has
referred to the approach under S 193 as "site-specific." See
Pfizer, 712 A.2d at 637.

However, not every application of S 193 necessitates
review of the S 6 factors. Indeed, rote application of the S 6
factors would swallow the "site-specific" rule that S 193
prescribes. The Supreme Court of New Jersey has
recognized as much:

       When the policy covers risks located primarily in a
       single state, the choice-of-law issue can be
       straightforward. For example, there is no choice-of-law
       issue where the policyholder is located in one state, the
       environmental liability arises out of the same state,
       and the policies are issued by a state-based insurer for
       that one site. An easy example is that of a [commercial
       general liability] policy covering a solid waste treatment
       plant creating a risk in a single state. At the other end
       of the spectrum are cases where a single insured seeks
       coverage under [commercial general liability] policies
       for certain environmental and toxic tort liabilities,
       including . . . [multiple] sites located in . . . different
       states. When such an insured operation or activity is
       predictably multistate, the significance of the principal
       location of the insured risk diminishes; in such a case,
       section 193 directs that the governing law is that of the
_________________________________________________________________

7. [T]he factors relevant to the choice of the applicable rule of law
       include (a) the needs of the interstate and international system,
(b)
       the relevant policies of the forum, (c) the relevant policies of
other
       affected states and the relevant interests of those states in the
       determination of the particular issue, (d) the protection of
justified
       expectations, (e) the basic policies underlying the particular
field of
       law, (f) certainty, predictability, and uniformity of result, and
(g) ease
       in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws S 6 (1969).

The Supreme Court of New Jersey, following Ceramics, collapsed these
factors into four "categories" for purposes of application: (1) the
competing interests of the relevant states, (2) the national interests of
commerce among several states, (3) the interests of the parties in
realizing justified expectations and achieving predictable results, and
(4)
the interests of judicial administration. See Pfizer, 712 A.2d at 639-40.
9
       state with the dominant significant relationship
       according to the principles set forth in Restatement
       section 6 as applied to the particular issue involved.

Pfizer, 712 A.2d at 638 (citations and quotations omitted).
Therefore, a court need only consider the application of the
S 6 factors when the "insured operation or activity is
predictably multistate," that is, when the policy covers sites
in many states, or when the insured risk is transient. See
id. at 639 (noting that the insured risk was"to some degree
transient," and therefore "to choose the applicable law that
governs the disputed issues, Spruance requires that we
turn to the S 6 analysis."). The comments to S 193 confirm
this interpretation:

       The location of the insured risk will be given greater
       weight than any other single contact in determining the
       state of the applicable law provided that the risk can be
       located, at least principally, in a single state. Situations
       where this cannot be done, and where the location of
       the risk has less significance, include (1) where the
       insured object will be more or less constantly on the
       move from state to state during the terms of the policy
       and (2) where the policy covers a group of risks that
       are scattered throughout two or more states.

Restatement (Second) of Conflict of Laws S 193 cmt. b
(1969).

Robeson's principal argument is that HM Holdings , a case
decided concurrently with Pfizer, mandates that New Jersey
law applies in this case, at least with respect to the
interpretation of the "late notice" provision. Robeson asserts
that that case is "remarkably similar" to the facts presented
here. We disagree. Like Pfizer, Unisys, Spruance, and
General Ceramics, HM Holdings involved a "predictably
multistate" insured operation, which consequently
necessitated a S 6 inquiry on its particular facts.
Specifically, HM Holdings involved coverage under a
commercial general liability policy of nine waste sites
located within seven different states. See HM Holdings, 712
A.2d at 211-12. The Court concluded under S 6 that the law
of the waste sites would apply to the interpretation of the
"pollution exclusion" exception, and that either the law of

                               10
New Jersey or the law of the waste sites applied to the "late
notice" provision, with New Jersey law taking precedence if
the law of the waste sites was similar to New York's, the
state in which the parties were headquartered. See id. at
648-49.

In contrast, Robeson's insured activities were not
"predictably multistate," and they thus fit within the
general site-specific rule of S 193. The policies involved
covered only Robeson's New York property, and only New
York was implicated by Robeson's contamination. Compare
Spruance, 629 A.2d at 885 (involving the hauling of waste
from Pennsylvania to New Jersey). These facts alone are
dispositive under S 193 because the parties at the time of
contracting clearly understood New York (more specifically,
Robeson's plant in Castile) to be the principal location of
the insured risk. In fact, the facts of this case, viz., "a
commercial general liability policy covering a . . . plant
creating a risk in a single state," were described by the
Supreme Court of New Jersey as an "easy example" that
presents "no choice-of-law issue" and no need for a complex
balancing of factors under S 6. See Pfizer, 712 A.2d at 638;
cf. Spruance, 629 A.2d at 891 ("When the waste producing
facility and the waste site are located in the same state,
their common location makes the application of section 193
straightforward.").8

Robeson's argument concerning the movement of its
headquarters to New Jersey does not alter the result to
which S 193 directs us. First, the site-specific rule
prescribed by that section is unaffected by the location of
the contracting parties' headquarters; the focus is the
_________________________________________________________________

8. The bankruptcy court was also aware that "[t]he instant case
represents the hypothetical `straightforward' case suggested by the court
in [Spruance] because the insured risk was not transient and was not
scattered through several states." See Robeson Indus. Corp. v. Zurich Ins.
Co., Bankr. No. 93-33265(KCF), at 10 (Bankr. D.N.J. Jan. 24, 1997)
(memorandum opinion). Despite the bankruptcy court's recognition of
this fact, and its proper conclusion based thereon that New York law
should apply to the interpretation of the policies, the court went on to
balance the various states' interests under S 6. While we consider this
extra step unnecessary under S 193, we believe that it helped to
underscore the bankruptcy court's conclusion.

                               11
parties' understanding of the location of the insured risk.9
Second, S 193 prescribes that it is the parties'
understanding of the principal location of the insured risk
"during the term of the policy" that matters. Thus, the
movement of Robeson's headquarters to New Jersey seven
years after the expiration of the last of the policies at issue
cannot have affected the parties' understanding at the time
of contracting that New York was the principal location of
the insured risk. Robeson's other contacts with New Jersey
likewise do not affect the analysis under S 193.

We conclude that the district court correctly affirmed the
bankruptcy court's application of New Jersey choice-of-law
rules and correctly affirmed the application of New York law
to the interpretation of the policies. Because Robeson does
not dispute that it is not entitled to coverage under the
laws of New York, the district court's affirmance of the
bankruptcy court's grant of summary judgment to the
Insurers is also affirmed.

C. The Tort Claims

Robeson argues that the bankruptcy court improperly
applied New York law to its tort claims. Robeson asserts
that its tort claims are independent of its claim for coverage
under the policy, and that New Jersey choice-of-law rules
mandate that New Jersey law should apply to those claims.
Robeson supports this assertion by noting that its various
tort claims,10 which it summarizes generally as the
_________________________________________________________________

9. We do not mean to suggest that the location of a party's headquarters
is irrelevant in a "multistate activity" case--i.e., when a weighing of
the
S 6 factors is warranted under S 193, see, e.g., Pfizer, 712 A.2d at 641
(assessing the relevance of New York law in a multistate site case
because New York was the principal place of business of the insured and
was the location in which the contracts were negotiated), but this is not
such a case.

10. The relevant tort claims are styled in Robeson's complaint as "breach
of covenant of good faith and fair dealing,""failure to warn," and "breach
of fiduciary duty." See Robeson's Complaint at 15, 17, 22. Review of
these claims reveals, as Robeson admits, that the claims are premised
upon the Insurers' alleged bad faith in the handling of Robeson's claims.
Thus, we will refer to Robeson's various tort claims as a single claim for
bad faith.

                               12
Insurers' "bad-faith claims handling and investigation of
Robeson's claims in connection with the Castile facility,"
Robeson's Opening Brief at 18, all took place after Robeson
had moved its headquarters to New Jersey and therefore
that the state of New York has no relevant interest in the
controversy. Robeson argues further that New Jersey law
allows for the imposition of tort liability against an insurer
for bad faith even when the insured was not entitled to
coverage under the policy, and cites several cases from
various state supreme courts in support of this contention.
The Insurers respond that the same state's law--New York's
--should apply to both Robeson's coverage and bad faith
claims because the bad faith claims merely arise out of
alleged unsatisfactory performance by the Insurers under
the policy. Accordingly, the Insurers contend that New York
law applies to the propriety of the bad faith claims, and
that such claims are unsustainable thereunder.

We do not necessarily agree with the bankruptcy court's
conclusion that the same state's law necessarily applies to
the coverage and bad faith claims. The appellate courts of
New Jersey have explained that

       conflict of laws principles do not require that all legal
       issues presented by a single case be decided under the
       law of a single state. Instead the choice of law decisions
       can and should be made on an issue-by-issue basis,
       and thus the law of different states can apply to
       different issues in the same case.

O'Connor v. Busch Gardens, 605 A.2d 773, 774 (N.J. Super.
Ct. App. Div. 1992) (citing Johnson Matthey, Inc. v.
Pennsylvania Mfrs.' Ass'n Ins. Co., 593 A.2d 367, 375 (N.J.
Super. Ct. App. Div. 1991)). Therefore, a separate analysis
to determine which state's law applies to Robeson's bad
faith claim would normally be appropriate.

However, application of New Jersey's conflict-of-law rules
is unnecessary here because neither New Jersey nor New
York would sustain Robeson's tort claims. In New York
University v. Continental Insurance Co., 662 N.E.2d 763
(N.Y. 1995), the Court of Appeals of New York dismissed a
claim analogous to Robeson's, namely, that the insurer had
negligently and recklessly failed to adequately investigate

                               13
the insured's claim and denied payment. See New York
Univ., 662 N.E.2d at 769-70. The Court of Appeals began
its analysis by noting that insurance policies, like other
contracts, contain an implied duty of good faith and fair
dealing. See id. at 769. In order to sustain an action for tort
liability against an insurer, as opposed to an action for
breach of contract, the insured's complaint must assert a
basis for tort liability that goes beyond the breach of the
insurer's contractual duties. See id. at 770 (noting that the
insured's complaint must state a "tort independent of the
contract"). The Court of Appeals concluded that

       Plaintiff's claim amounts to nothing more than a claim
       based on the alleged breach of the implied covenant of
       good faith and fair dealing, and the use of familiar tort
       language does not change the cause of action to a tort
       claim in the absence of an underlying tort duty
       sufficient to support a claim for punitive damages.

       The cause of action is duplicative of the . . . cause of
       action for breach of contract and should have been
       dismissed.

Id. (citations omitted). Because Robeson's tort claims in
essence allege no more than that the Insurers engaged in
bad faith in their performance of their duties under the
policy, New York law mandates their dismissal.

Robeson's bad faith claim does not fare any better under
New Jersey law. In Pickett v. Lloyd's, 621 A.2d 445 (N.J.
1993), the New Jersey Supreme Court concluded that
"there is a sufficient basis in law to find that an insurance
company owes a duty of good faith to its insured in
processing a first-party11 claim," a conclusion which rested
largely on the understanding that contracts generally
contain an implied duty of good faith and fair dealing. See
Pickett, 621 A.2d at 540. After extensive analysis of the
authorities, the Court concluded that the cause of action
for bad faith is "best understood as one that sounds in
_________________________________________________________________

11. Both New York University and Pickett involve first-party claims.
However, we see no reason why the rationales of these cases should not
likewise apply in the third-party context, i.e., when the policy covers
damage to a third party's property.

                               14
contract," id. at 452, and that contract damages were the
appropriate remedy for breach, see id. at 454. The Court
continued that whether bad faith exists depends on
whether the insured's claim was "fairly debatable." Id. at
453. In other words, the insured must "show the absence
of a reasonable basis for denying benefits of the policy and
the defendant's knowledge or reckless disregard of the lack
of a reasonable basis for denying the claim." Id. In defining
the scope of what claims are "fairly debatable," the Court
noted the following:

       Perhaps the [fairly debatable] rule is easiest to
       understand in the context of the denial of benefits on
       the basis of non-coverage . . . . Under the "fairly
       debatable" standard, a claimant who could not have
       established as a matter of law a right to summary
       judgment on the substantive claim would not be
       entitled to assert a claim for an insurer's bad faith
       refusal to pay the claim.

Id. at 453-54 (citations omitted).

Here, Robeson did not establish a right to summary
judgment that there was coverage. In fact, summary
judgment was decided in favor of the Insurers , a ruling
which we have affirmed as correct. Accordingly, the
Insurers did not act in "bad faith" as a matter of New
Jersey law.

Because the application of the laws of New York or New
Jersey to Robeson's tort claims would lead to the same
conclusion--i.e., dismissal--there is no need for us to
embark upon a choice-of-law analysis with respect thereto.
Instead, we agree with the bankruptcy court and the
district court that these claims were not sustainable in
either jurisdiction, and we affirm the grant of summary
judgment in favor of the Insurers.

D. Sanctions

Robeson's final argument is that its appeal of the
bankruptcy court's sanctions order to the district court was
not untimely under Bankruptcy Rule 8002(a). In support of
its argument, Robeson contends that the ten-day time
period of Rule 8002(a) did not begin to run until the district

                                15
court had finally disposed of Robeson's earlier appeal on
the merits of coverage and tort liability on February 24,
1998.12 As Robeson's appeal of the sanctions order was filed
on March 6, 1998, within 10 days of February 24th,
Robeson contends that its appeal was timely filed.

We disagree. Rule 8002(a) states that "[t]he notice of
appeal shall be filed with the clerk within 10 days of the
date of the entry of the judgment, order, or decree appealed
from." This court has noted that "[t]his deadline is strictly
construed. The failure to file a timely notice of appeal
creates a jurisdictional defect barring appellate review."
Shareholders v. Sound Radio, Inc., 109 F.3d 873, 879 (3rd
Cir. 1997) (citations omitted). The rule clearly defines the
act that starts the running of the appeal period--viz., entry
of the order in the bankruptcy court. The rule makes no
exception for the circumstance that a party has taken an
appeal to the district court on the merits of the case or on
a separate issue presented in the same controversy.
Furthermore, we perceive no reason that such an exception
is warranted, and in any event it would not be consistent
with the "strict construction" that we are required to afford
to the rule. Accordingly, we agree with the district court
that Robeson's appeal of the sanctions order was not timely
and that the district court therefore lacked jurisdiction to
review that order. Given our affirmance on jurisdictional
grounds, we express no opinion on the district court's
conclusion that the sanctions order was otherwise
affirmable on its merits.
_________________________________________________________________

12. Appellee Zurich appears to have misunderstood Robeson's argument,
for it discusses the relevance of the fact that the district court had
stayed its sanctions order pending resolution of Robeson's earlier appeal
on the merits of coverage and tort liability. However, Robeson clearly
articulates its argument in its opening brief: "The relevant issue before
this Court is whether an appeal of sanction may proceed in the absence
of a final adjudication of an action, not whether a court's entry of a
stay
of its own sanctions order tolls the time to file a notice of appeal from
the Order." Robeson's Opening Brief, at 43 (emphasis in original). Given
the clarity of Robeson's argument, there is no reason for us to consider
the relevance of the district court's stay.

                               16
CONCLUSION

The district court did not err in (1) affirming the
bankruptcy court's conclusion that New York law applied to
the interpretation of the insurance policies at issue and
that Robeson was not entitled to coverage thereunder, (2)
affirming the bankruptcy court's conclusion that Robeson's
tort claims were unsustainable, or (3) dismissing Robeson's
appeal on the issue of sanctions for lack of jurisdiction.
Accordingly, the judgment of the district court is

AFFIRMED.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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