CONTE'S PASTA CO., INC. v. REPUBLIC FRANKLIN INSURANCE COMPANY, 1:18-cv-12410

Conte’s Pasta manufactured allegedly listeria-contaminated gluten-free pizza crusts; Nature’s One sued Conte’s in an underlying action alleging multiple theories including contamination, failed inspection, and conversion (failure to return Nature’s One’s packaging equipment).
Conte’s tendered defense to its insurer, Republic Franklin Insurance Co. (RFI); RFI denied coverage and this suit followed seeking declaratory relief and defense-cost obligations.
On May 29, 2020 the Court granted summary judgment for Conte’s on the conversion claim (finding a duty to defend) but held contamination and failed-inspection claims were not covered.
RFI moved for reconsideration as to conversion, arguing conversion was an intentional tort excluded by the policy because Conte’s allegedly kept equipment as leverage to force payment of invoices.
Conte’s argued the complaint did not allege intentional conversion and that continued possession resulted from Nature’s One’s failure to retrieve equipment.
The Court denied reconsideration, finding the underlying complaint did not clearly allege intentional conduct and ambiguities must be construed for the insured; the Court granted clarification on apportionment of defense costs and ordered the parties to negotiate allocation (60 days), with court determination if negotiation fails.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether conversion claim is excluded as an "expected or intended injury" because conversion is intentional	Conte’s: Conversion is not necessarily intentional; the complaint does not clearly allege intent; ambiguities resolve for insured	RFI: Conte’s intentionally retained equipment as leverage for unpaid invoices, so exclusion bars coverage and duty to defend	Denied reconsideration. Court: complaint lacks clear allegations of intent; conversion not necessarily intentional under controlling law; duty to defend conversion claim stands
Scope of RFI’s defense obligation and apportionment of defense costs	Conte’s: Underlying claims are factually interdependent; costs cannot be apportioned; insurer must cover defense costs	RFI: Only defense costs attributable to covered conversion cause should be reimbursed; non-covered claims should not be charged to insurer	Court granted clarification: RFI’s obligation is limited to costs attributable to covered conversion claim; parties must attempt a negotiated apportionment within 60 days, then submit three-page positions if unsuccessful; court will hold a hearing and may sanction bad-faith negotiators

Cruz-Mendez v. ISU/Ins. Servs. of San Francisco, 156 N.J. 556, 722 A.2d 515 (1999) (ambiguities in insurance contracts construed for insured)
SL Indus., Inc. v. Am. Motorists Ins. Co., 128 N.J. 188 (1992) (when covered and noncovered claims arise together, courts should fairly divide defense costs if parties cannot agree)
Grand Cove II Condo. Ass'n, Inc. v. Ginsberg, 676 A.2d 1123 (N.J. Super. App. Div. 1996) (duty-to-reimburse framework where insurer disputes coverage for some claims)
Howard Hess Dental Labs., Inc. v. Dentsply Int’l, Inc., 602 F.3d 237 (3d Cir. 2010) (motion for reconsideration limited to manifest errors, new evidence, or change in law)
Max’s Seafood Café v. Quinteros, 176 F.3d 669 (3d Cir. 1999) (standards for reconsideration and correcting manifest errors)
Harsco Corp. v. Zlotnicki, 779 F.2d 906 (3d Cir. 1985) (reiteration of narrow grounds for reconsideration)