H.L. v. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES and MONMOUTH COUNTY DIVISION OF SOCIAL SERVICES,

 SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2052-21
H.L.,
Petitioner-Appellant,
v.
DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES and MONMOUTH
COUNTY DIVISION OF
SOCIAL SERVICES,
Respondents-Respondents.
Submitted October 23, 2023 – Decided November 16, 2023
Before Judges Mawla and Marczyk.
On appeal from the New Jersey Department of Human
Services, Division of Medical Assistance and Health
Services.
Michael Heinemann, attorney for appellant.
Matthew J. Platkin, Attorney General, attorney for
respondent New Jersey Department of Human Services,
Division of Medical Assistance and Health Services
(Melissa H. Raksa, Assistant Attorney General, of
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
2 A-2052-21
counsel; Francis Xavier Baker, Deputy Attorney
General, on the brief).
Patrick James Boyle, attorney for respondent
Monmouth County Division of Social Services, on the
statement in lieu of brief.
PER CURIAM
H.L. appeals from the January 25, 2022 final agency decision of the
Division of Medical Assistance and Health Services ("Division") upholding the
transfer penalty on H.L.'s receipt of Medicaid benefits. In doing so, the
Assistant Commissioner adopted the decision of the Administrative Law Judge
("ALJ"). We affirm.
I.
H.L. was institutionalized at a long-term skilled nursing facility in June
2020. In September 2020, H.L. applied for managed long-term services and
supports ("MLTSS") Medicaid benefits to the Monmouth County Division of
Social Services ("MCDSS"). H.L. included a letter from her son P.L. dated July
15, 2020, stating H.L. lived with P.L. in Connecticut from January 1996, through
January 2020. She continued to live in his home when P.L. moved to Georgia
in January 2020, until June 2020, when she went to a nursing home.
On December 9, 2020, the MCDSS sent a letter to H.L.'s Designated
Authorized Representative for Medicaid purposes, requesting multiple
3 A-2052-21
verifications to determine Medicaid eligibility. On December 24, 2020, the
MCDSS received another letter from P.L. dated July 21, 2020,1 explaining H.L.'s
spending habits. He stated H.L. lived in his house and "paid rent, utilities,
transportation, . . . total[ing] $875[]," and that "she spent the rest as her personal
allowance which was often too little so [he] help[ed] her out."
By correspondence dated January 4, 2021, the MCDSS sent a request for
additional information, asking H.L. to verify sixty transactions2 made during the
five-year look-back period, from September 2015 to September 2020.
Specifically, the letter stated:
AS THERE COULD POSSIBLY BE A GIFTING
PENALTY INVOLVED DUE TO MONIES GIVEN
TO [H.L.]'S SON, A FULL LOOK BACK AT HER
RESOURCES WAS PERFORMED. PLEASE SEE
THE ATTACHED LARGE TRANSACTION LIST.
PLEASE VERIFY EACH TRANSACTION. FOR
WHICHEVER TRANSACTIONS ARE EXPLAINED
BY THE 7/21/20 UNSIGNED LETTER FROM [P.L.],
PLEASE PROVIDE A COPY OF ANY RENTAL
1 We assume this letter was misdated as July 21, 2020, and was actually prepared
on December 21, 2020, as it was in response to the December 9, 2020 letter from
the MCDSS. Moreover, it was stamped received on December 24, 2020.
2 The transactions, totaling $58,000, were cash withdrawals between $700 and
$1,800. Most of the funds were between $900 and $1,000 and were primarily
withdrawn once per month, but on some occasions multiple withdrawals were
made in a single month, and in other months, no cash withdrawals were made.
Three $1,000 transactions in 2020—May 7, June 3, and August 7—were direct
transfers to H.L.'s son's account.
4 A-2052-21
AGREEMENTS SIGNED BY [H.L.] AND HER SON,
[P.L.] ANY AGREEMENTS SHOULD HAVE BEEN
WRITTEN UP [AND] SIGNED AT THE TIME THEY
BEGAN LIVING TOGETHER. PLEASE ALSO
PROVIDE ANY CHECKS/BILLS/RECEIPTS TO
VERIFY HER LIVING EXPENSES, ETC. PLEASE
MAKE SURE ANY WRITTEN ATTESTATIONS
ARE SIGNED BY THE ATTESTOR.
On January 14, 2021, H.L. submitted a certification stating she lived with
her son since 1996. H.L. further stated how she would withdraw one large
amount from her bank account each month for all of her daily expenses and that
she gave $875 to P.L. "for rent, and other miscellaneous expenditures for [her]
daily living." Additionally, H.L. attested she "did not give any of [her] funds to
[her] family as a gift and used [her] minimal income for only [her] expenses
monthly." The MCDSS advised in their January 19, 2021 letter that a 162-day
penalty would be imposed related to transfers totaling $58,000 for less than fair
market value during the five-year look-back period.
On February 9, 2021, the MCDSS revised the penalty to 139 days based
on transfers totaling $49,875 to P.L. during the look-back period. The revision
was a result of both H.L. and P.L.'s certifications to the MCDSS that $875 of
the withdrawn funds each month related to rental payments from H.L. to P.L.
Because there was still no verification of a rental or expense agreement, the
MCDSS found the reduced $875 transactions fell under "love and affection."
5 A-2052-21
The MCDSS relied on N.J.A.C. 10:71-4.10(b)(6)(i) for the proposition that
transfers made for "love and affection" are not considered a transfer for fair
market value. The MCDSS reduced each original penalty transaction to the
attested rental amount of $875.3 The MCDSS determined the excess amount of
each $875 withdrawal was used for H.L.'s living expenses, and this excess
amount was not included in the revised penalty total. Thus, for each transaction,
any amount in excess of $875 was accepted by MCDSS as H.L.'s living expenses
and was not included in H.L.'s total penalty.
In the same February 9, 2021 letter, the MCDSS approved H.L.'s Medicaid
application effective August 1, 2020. However, because of the imposition of
the 139-day penalty, Medicaid would not cover H.L.'s room and board at her
nursing facility from August 1, 2020, to December 18, 2020. H.L. requested an
administrative hearing, and the matter was transmitted to the Office of
Administrative Law.
On October 19, 2021, a hearing was held before an ALJ. An MCDSS
worker testified on its behalf. She explained the MCDSS's application process,
how she reviewed H.L.'s application for benefits, the rationale behind reducing
3 Both H.L. and P.L. initially stated H.L. paid monthly rent in the amount of
$875. However, P.L. later certified he did not mean to state that H.L. paid "rent."
Rather, he claimed she merely contributed towards "household expenses."
6 A-2052-21
the penalty based on the attestations provided by H.L. and P.L., and the
reasoning supporting the 139-day transfer penalty based on H.L.'s failure to
produce a rental agreement or any form of receipts, bills, or invoices
substantiating her living expenses.
H.L. submitted a certification from P.L. dated October 18, 2021, which
stated that "nearly all" of H.L.'s income went towards her share of the household
expenses. P.L. certified he did not have any rental agreement with H.L. because
"we do not charge family members rent but family members, sharing a home,
all contribute towards their share of the household expenses." Neither H.L. nor
P.L. testified at the hearing.
On November 4, 2021, the ALJ issued an initial decision affirming the
139-day transfer penalty. The ALJ found H.L.: lived with her son for
approximately twenty-five years; had a fixed monthly income that never
exceeded $1,037.24; gave her son $875 monthly; and had no rental agreement
or expense agreement with P.L. during the five-year look-back period. The ALJ
noted the inconsistencies between H.L.'s January 14, 2021 certification, wherein
she stated she paid rent and other expenses, and P.L.'s representation in his July
21, 2020 letter that H.L. paid $875 for rent, compared with P.L.'s subsequent
October 18, 2021 certification, which stated H.L. paid no rent, but instead paid
7 A-2052-21
for her daily living expenses. Regarding a lack of documentation, the ALJ noted
H.L. provided no rental agreement, nor any receipts or bills to corroborate the
monthly expenses H.L. purportedly paid.
Ultimately, the ALJ found H.L. failed to meet her burden of showing P.L.
was entitled to compensation related to household expenses or rent during the
look-back period. The ALJ also concluded H.L. failed to rebut the presumption
that $49,875 was transferred from her account to establish Medicaid eligibility
and was therefore subject to a 139-day transfer penalty. H.L. filed exceptions
to the initial decision.
On January 25, 2022, in a final agency decision, the Division adopted the
ALJ's initial finding that H.L. failed to rebut the presumption that these transfers
were done for the purposes of qualifying for Medicaid under N.J.A.C. 10:71 -
4.10(j). The Division agreed H.L. failed to demonstrate through credible
documentary evidence the purpose of the specific transfers at issue.
Specifically, both H.L. and P.L. did not provide any rental agreement, receipts,
bills, invoices, or other documentation showing the specific household expenses
that H.L. allegedly helped pay or how it was determined what portion of the
household expenses she would pay.
8 A-2052-21
The Division also noted the contradictions in H.L.'s and P.L.'s statements.
The Division stated, "both [H.L.] and P.L.'s previous statements to [the] MCDSS
advised that these $875 payments to P.L. were for rent, which P.L. now states is
not the case." Additionally, the Division noted the transfers directly to P.L.'s
account, particularly those occurring in June and August 2020, appeared to have
been made after H.L. moved out of P.L.'s house and into a nursing home. H.L.
would not have been living with P.L. during the time these transactions
occurred, and H.L. did not provide an explanation for the transfers.
Ultimately, the Division adopted the findings of the ALJ. It held that H.L.
had failed to meet her burden to show the transfers at issue were solely for a
purpose other than to qualify for Medicaid.
II.
On appeal, H.L. argues the final agency decision adopting the ALJ's
imposition of a transfer penalty was arbitrary, capricious, and unreasonable. She
contends the term "rent" was ambiguous as utilized in both P.L.'s July 21, 2020
letter and H.L.'s January 14, 2021 certification. H.L. claims both of those letters
are unclear on which portion of the $875 was used for rent, and what was meant
by the term "rent." She argues her son's October 18, 2021 certification made
clear there was no formal rental agreement and that H.L. simply contributed
9 A-2052-21
toward her share of household expenses. H.L. further asserts the Division
improperly disregarded P.L.'s October 18, 2021 certification.
Our role in reviewing the decision of an administrative agency is limited.
In re Stallworth, 208 N.J. 182, 194 (2011) (citing Henry v. Rahway State Prison,
81 N.J. 571, 579 (1980)). We accord a strong presumption of reasonableness to
an agency's exercise of its statutorily delegated responsibility and defer to its
fact-finding. City of Newark v. Nat. Res. Council in Dep't of Env't Prot., 82
N.J. 530, 539 (1980); Utley v. Bd. of Rev., Dep't of Lab., 194 N.J. 534, 551
(2008). We will not upset the determination of an administrative agency absent
a showing that it was arbitrary, capricious, or unreasonable; that it lacked fair
support in the evidence; or that it violated legislative policies. Lavezzi v. State,
219 N.J. 163, 171 (2014); Campbell v. Dep't of Civ. Serv., 39 N.J. 556, 562
(1963). "A reviewing court 'may not substitute its own judgment for the
agency's, even though the court might have reached a different result.'" In re
Stallworth, 208 N.J. at 194 (quoting In re Carter, 191 N.J. 474, 483 (2007)).
In determining whether agency action is arbitrary, capricious, or
unreasonable, a reviewing court must examine:
(1) whether the agency's action violates express or
implied legislative policies, that is, did the agency
follow the law; (2) whether the record contains
substantial evidence to support the findings on which
10 A-2052-21
the agency based its action; and (3) whether in applying
the legislative policies to the facts, the agency clearly
erred in reaching a conclusion that could not reasonably
have been made on a showing of the relevant factors.
[Ibid. (quoting In re Carter, 191 N.J. at 482-83).]
"The party challenging the agency action has the burden to show that the
administrative determination is arbitrary, capricious, or unreasonable." In re
Renewal Application of TEAM Acad. Charter Sch., 247 N.J. 46, 73-74 (2021)
(citing Lavezzi, 219 N.J. at 171).
"Medicaid is a federally-created, state-implemented program that
provides 'medical assistance to the poor at the expense of the public.'" In re Est.
of Brown, 448 N.J. Super. 252, 256 (App. Div. 2017) (quoting Est. of DeMartino
v. Div. of Med. Assistance & Health Servs., 373 N.J. Super. 210, 217 (App. Div.
2004)); see also 42 U.S.C. § 1396-1. To receive federal funding, the State must
comply with all federal statutes and regulations. Harris v. McRae, 448 U.S. 297,
301 (1980); see also 42 U.S.C. § 1396a(a)-(b). The State must adopt
"'reasonable standards . . . for determining eligibility for . . . medical assistance
. . . [that are] consistent with the objectives' of the Medicaid program[,]"
Mistrick v. Div. of Med. Assistance & Health Servs., 154 N.J. 158, 166 (1998)
(first alteration in original) (quoting L.M. v. Div. of Med. Assistance & Health
Servs., 140 N.J. 480, 484 (1995)), and "provide for taking into account only such
11 A-2052-21
income and resources as are . . . available to the applicant." N.M. v. Div. of
Med. Assistance & Health Servs., 405 N.J. Super. 353, 359, (App. Div. 2009);
see also 42 U.S.C. § 1396a(a)(17)(A)-(B).
New Jersey participates in the federal Medicaid program pursuant to the
New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1
to -19.5. Eligibility for Medicaid in New Jersey is governed by regulations
adopted in accordance with the authority granted by N.J.S.A. 30:4D-7 to the
Commissioner of the Department of Human Services (DHS). The Division is
the agency within the DHS that administers the Medicaid program. N.J.S.A.
30:4D-5, -7; N.J.A.C. 10:49-1.1. Accordingly, the Division is responsible for
protecting the interests of the New Jersey Medicaid program and its
beneficiaries. N.J.A.C. 10:49-11.1(b).
H.L. applied for institutional-level Medicaid benefits while she was
residing in a skilled nursing home. The Division provides such benefits pursuant
to the Medicaid Only program, N.J.A.C. 10:71-1.1 to -9.5. Among other
eligibility requirements, an individual seeking such benefits must have financial
eligibility as determined by the regulations and procedures. See N.J.A.C. 10:71-
1.2(a). The local county welfare agencies evaluate eligibility, which in this case
is the MCDSS. N.J.S.A. 30:4D-7a; N.J.A.C. 10:71-1.5, -2.2(c). Through those
12 A-2052-21
county agencies, the Division serves as a "gatekeeper to prevent individuals
from using Medicaid to avoid payment of their fair share for long-term care."
W.T. v. Div. of Med. Assistance & Health Servs., 391 N.J. Super. 25, 37 (App.
Div. 2007).
The transfer of an asset for less than fair market value during the look-
back period raises a rebuttable presumption that the asset was transferred for the
purpose of establishing Medicaid eligibility. H.K. v. Dep't of Hum. Servs., 184
N.J. 367, 380 (2005) (citing N.J.A.C. 10:71-4.10(j)); see also 42 U.S.C. §
1396p(c)(1). To rebut that presumption, the applicant must present "convincing
evidence that the assets were transferred exclusively (that is, solely) for some
other purpose." N.J.A.C. 10:71-4.10(j). The presumption "shall be considered
successfully rebutted only if the applicant demonstrates that the asset was
transferred exclusively for some other purpose." N.J.A.C. 10:71-4.10(l)(1). "If
the applicant had some other purpose for transferring the asset, but establishing
Medicaid eligibility appears to have been a factor in his or her decision to
transfer, the presumption shall not be considered successfully rebutted."
N.J.A.C. 10:71-4.10(l)(2). The regulations are clear that the applicant bears the
burden of proof to rebut the presumption by presenting credible docum entary
evidence of the fair market value of the transferred assets. N.J.A.C. 10:71 -
13 A-2052-21
4.10(j). The regulation allows the applicant to rebut the presumption that an
unauthorized Medicaid transfer occurred by submitting "any pertinent evidence
(for example, legal documents, realtor agreements, and relevant
correspondence) with regard to the transfer." N.J.A.C. 10:71-4.10(j)(2).
If it is determined the applicant transferred an asset for less than fair
market value during the look-back period to become eligible for Medicaid
institutional-level services, the applicant will be subject to a period of Medicaid
ineligibility to be imposed once he or she is otherwise eligible for Medicaid
benefits. N.J.S.A. 30:4D-3(i)(15)(b); N.J.A.C. 10:71-4.10(c)(4).
Guided by these principles, we affirm substantially for the reasons set
forth in the Division's final agency decision, which is supported by sufficient
credible evidence in the record as a whole. R. 2:11-3(e)(1)(D). We add the
following comments.
The Division did not "disregard" P.L.'s supplemental certification.
Rather, the Division correctly noted that while hearsay statements are admissible
in contested hearings before the ALJ, "legally competent evidence must exist to
support each ultimate finding of fact to an extent sufficient to provide assurances
of reliability and to avoid the . . . appearance of arbitrariness." See N.J.A.C.
1:1-15.5(b). The Division observed H.L. failed to provide any documentation
14 A-2052-21
from the five-year look-back period to support her assertions that the funds paid
to P.L. were used for household expenses. The Division further noted the
contradictions in the various statements submitted to the ALJ, coupled with the
fact that no witnesses testified on behalf of H.L. to explain the discrepancies.
Finally, the Division noted that after H.L. was placed in a nursing home there
were "at least three separate transfers in the amount[] of $1,000 [from her
account]" which could not have been contributions for her household expenses
at P.L.'s residence as she was no longer living there. In short, H.L. failed to
provide evidence to rebut the presumption the transfers were made to qualify for
Medicaid eligibility.
We discern no basis to disturb the Division's findings and conclude the
decision was not arbitrary, capricious, or unreasonable. To the extent we have
not specifically addressed any of H.L.'s remaining arguments, we conclude they
lack sufficient merit to warrant discussion in a written opinion. R. 2:11-
3(e)(1)(E).
Affirmed.

UNITED SPECIALTY INSURANCE COMPANY, v. CENTURY WASTE SERVICES,

 SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1428-22
UNITED SPECIALTY
INSURANCE COMPANY,
Plaintiff-Respondent,
v.
CENTURY WASTE SERVICES,
LLC,
Defendant-Appellant,
and
ASHLEY WAITE, ANGELA
AMERUOSO, JESUS HURTADO
PEREZ, JESUS EDWARD
HUTADO, and MIGUEL ANGEL
LECHUGA GUTIERREZ,
Defendants.
________________________________
Argued October 18, 2023 – Decided November 20, 2023
Before Judges Currier and Susswein.
On appeal from the Superior Court of New Jersey, Law
Division, Union County, Docket No. L-1632-19.
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
2 A-1428-22
Geoffrey T. Bray argued the cause for appellant (Bray
& Bray, LLC, attorneys; Geoffrey T. Bray, on the
brief).
Thomas M. Wester argued the cause for respondent
(Goldberg Segalla, LLP, attorneys; Christian A.
Cavallo and Thomas M. Wester, of counsel and on the
brief).

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION 

PER CURIAM
This matter involves an insurance coverage dispute arising from an
automobile accident involving an employee of defendant Century Waste
Services LLC (Century). The employee was operating a vehicle owned by a
manager's mother —a vehicle not covered under the insurance policy issued to
Century by United Specialty Insurance Company (USI). Century appeals from
December 2, 2022 Law Division orders granting summary judgment in favor of
USI, and denying defendant's motion for summary judgment, ruling that USI is
not required to indemnify Century. Century contends USI is estopped from
denying coverage because USI's reservation of rights letter did not inform
Century that it could accept or reject USI's assigned counsel. Century further
contends it suffered prejudice by USI's control of the defense of the underlying
lawsuit. After carefully reviewing the record in view of the governing legal
principles and arguments of the parties, we affirm.
3 A-1428-22
We discern the following pertinent facts and procedural history from the
record. On March 3, 2017, a manager employed by Century asked another
employee to drive from Elizabeth, New Jersey to the Bronx, New York to pick
up a check from a Century customer. The manager gave the employee
permission to drive a vehicle owned by the manager's mother. The employee
was involved in a car accident on the way to pick up the check.
The passengers in the other vehicle filed a complaint against Century, the
Century employee who drove the borrowed vehicle, and the owner of the
borrowed vehicle, seeking to recover damages for injuries they sustained in the
car accident.
In July 2017, USI's claim administrator sent a letter to Century advising
it had retained counsel to defend Century in the underlying action. The letter
advised Century that if Century chose to retain its own attorney, it would be at
its own expense.
GEICO, the borrowed vehicle's insurer, assigned counsel to defend both
the vehicle's owner and the Century employee driving the vehicle at the time of
the accident.
On March 20, 2019, USI wrote to Century offering to continue to defend
Century in the underlying lawsuit, subject to a reservation of rights. The letter
4 A-1428-22
stated, "[i]f we do not hear from you to the contrary, we will assume that you
consent to the retention of Meaghan Lipton, Esq. for this matter." Century never
objected to USI's continued representation in the underlying action.
In May 2019, USI filed a complaint seeking a declaratory judgment that
USI did not owe Century a defense or indemnity in the underlying lawsuit. In
the summer of 2020, USI filed a motion for summary judgment in the
declaratory judgment action. Century cross-moved for summary judgment
seeking to require USI to provide a defense and indemnify Century in the
underlying lawsuit. On October 7, 2020, the trial court entered orders denying
both parties' summary judgment motions.
On November 4, 2022, USI filed another motion for summary judgment
seeking a declaratory judgment that it did not owe Century a defense or
indemnity in the underlying lawsuit. On November 22, 2022, Century cross-
moved for summary judgment and opposed USI's motion.
On December 2, 2022, the trial court entered orders granting USI's
summary judgment motion and denying Century's cross-motion. The trial court
reasoned, "[t]here was never any coverage for Century [] on the underlying
action under the [USI] policy in the first place" and that "Century [] cannot be
allowed to create that coverage through estoppel. . . ." The court determined the
5 A-1428-22
March 20, 2019 letter from USI reserving its rights was not insufficient simply
because it did not include "certain magic words." The court further determined
Century had suffered no prejudice.
On appeal, Century contends that USI should be estopped from denying
coverage because the March 20, 2019 reservation of rights letter did not contain
the required language to inform Century it could accept or reject the offer of a
defense, and because Century incurred prejudice as a result of USI’s control of
the legal defense.
Our review of a trial court's decision regarding a motion for summary
judgment is de novo. Samolyk v. Berthe, 251 N.J. 73, 78 (2022). "A trial court's
interpretation of the law and the legal consequences that flow from established
facts are not entitled to any special deference." Rowe v. Bell & Gossett Co.,
239 N.J. 531, 552 (2019) (quoting Manalapan Realty, L.P. v. Twp. Comm. of
Twp. of Manalapan, 140 N.J. 366, 378 (1995)).
We employ the same standard as the trial court and "consider whether the
competent evidential materials presented, when viewed in the light most
favorable to the non-moving party, are sufficient to permit a rational factfinder
to resolve the alleged disputed issue in favor of the non-moving party."
Samolyk, 251 N.J. at 78 (quoting Brill v. Guardian Life Ins. Co. of Am., 142
6 A-1428-22
N.J. 520, 540 (1995)). A motion for summary judgment shall be granted "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 challenged and that the moving party is entitled to a judgment or
order as a matter of law." R. 4:46-2(c).
Turning to substantive legal principles, "[e]stoppel is a doctrine applied
at law and in equity for the purpose of precluding a party 'from asserting rights
which might perhaps have otherwise existed. . . as against another person, who
has in good faith relied upon such conduct, and has been led thereby to change
his position for the worse.'" Northfield Ins. Co. v. Mt. Hawley Ins. Co., 454 N.J.
Super. 135, 145 (App. Div. 2018) (quoting Highway Trailer Co. v. Donna Motor
Lines, Inc., 46 N.J. 442, 449 (1966)). In Griggs v. Bertram, the New Jersey
Supreme Court explained:
[t]he strongest and most frequent situation giving rise
to such an estoppel is one wherein a carrier undertakes
to defend a lawsuit based upon a claim against its
insured. If it does so with knowledge of facts that are
relevant to a policy defense or to a basis for
noncoverage of the claim, without a valid reservation
of rights to deny coverage at a later time, it is estopped
from later denying coverage.
[88 N.J. 347, 356 (1982) (emphasis added).]
7 A-1428-22
"[T]he predominant view is that a loss which is not within the coverage of
a policy cannot be brought within such coverage by invoking the principles of
waiver or estoppel." Greenberg & Covitz v. Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa., 312 N.J. Super. 251, 264 (App. Div. 1998). However,
"reasonable, detrimental reliance by an insured . . . on words or conduct of an
insurer may estop the insurer from denying coverage for a claim which is not
within the policy's definition of coverage or is excluded by a specific provision."
Id. at 264-65.
In the matter before us, Century does not dispute the borrowed vehicle
does not qualify as a "covered auto" under the USI policy. Its
coverage/indemnification argument rests on the principle of estoppel, which i n
turn hinges on whether Century was properly informed of its right to choose
either to consent to legal representation by the lawyer provided by USI, or to
retain its own attorney at its own expense. The law is well settled that "[w]ithout
the insured's consent or circumstances that suggest the insured acquiesced in the
insurer's control of the defense, an insurer will be estopped from later
disclaiming coverage." Northfield, 454 N.J. Super. at 143 (citing Griggs, 88
N.J. at 356).
8 A-1428-22
"Reservation of rights letters have long been regarded as proper defense
mechanisms for insurance companies." Passaic Valley Sewerage Comm'rs v.
St. Paul Fire and Marine Ins. Co., 206 N.J. 596, 616 (2011) (citing Burd v.
Sussex Mut. Ins. Co., 56 N.J. 383, 393-95 (1970)). Under such an agreement,
the insurance company cannot be held ultimately responsible for payments
otherwise required by the insurance policy. "It seems to be universally agreed
that the defense of an action against the insured is incompatible with a denial of
liability unless the carrier has reserved the issue of its liability by appropriate
means." Merchants Indem. Corp. v. Eggleston, 37 N.J. 114, 126 (1962).
The filing of a declaratory judgment does not qualify as a reservation of
rights. For example, in Merchants, the insurance company controlled the
preparation for and the defense of the underlying damage suit. Id. at 131-32.
The insurance company had participated in discovery proceedings. Id. at 125.
The first suggestion of disclaimer of rights appeared in a complaint by the
insurance company for a declaratory judgment. Ibid. At no time had the insurer
offered to defend with reservation of rights. Id. at 128. The insurer "relie[d]
wholly upon the fact that it instituted an action for a declaratory judgment."
Ibid. Thus, the Court held, "we cannot agree that a carrier may claim the right
9 A-1428-22
to defend and escape the consequences by filing a suit for a declaration of its
duty." Ibid.
The Court in Merchants further explained that an "agreement may . . . be
inferred from the insured's failure to reject the carrier's offer to defend with a
reservation of rights." Id. at 126. "[B]ut to spell out acquiescence by silence,
the letter must fairly inform the insured that the offer may be accepted or
rejected." Id. at 127-28.
In the matter before us, we are dealing with a variation of acquiesce by
silence. In determining whether the March 20, 2019 letter was adequate in
informing Century of its options, we find helpful guidance in Northfield. We
explained, "[t]he insurer of course may plainly ask for consent or advise the
insured it has a right to reject the defense, but the insured's rights may be
observed in other ways." Northfield, 454 N.J. Super. at 143. We noted the
clearest approach occurs when the insurer clearly expresses that if the insured
consents, it would provide a defense subject to the reservation of rights. Id. at
143. Importantly, however, we acknowledged that "[t]he insured's consent to
the insurer's control of the defense in such circumstances may, however, be
derived through other means." Ibid. We noted there are no "magic words"
needed to constitute a valid reservation of rights. Id. at 138.
10 A-1428-22
In Northfield, the insurer's letter stated it was, "disclaiming any obligation
to indemnify" but was "willing to provide…a courtesy defense." Id. at 143. We
held that phrasing generated doubt whether the insured's "failure to decline that
ostensible favor justifies a finding of acquiescence that [the insured] acquiesced
in Northfield's control of the defense of the underlying action." Id. at 144. That
uncertainty, we concluded, precluded summary judgment. Ibid.
Applying these foundational principles to the matter before us, we are
satisfied the "if we do not hear from you" language in the March 20, 2019
reservation of rights letter adequately communicated that Century had the option
to reject the use of the attorney retained by USI. We infer that Century elected
not to exercise its option to retain its own counsel when it chose not to advis e
USI that it did not want its interests represented by the attorney retained by USI.
See U.S. Cas. Co. v. Home Ins. Co., 79 N.J. Super. 493, 498 (App. Div. 1963)
(holding that a reservation of rights which stated, "[u]nless we receive written
notice to the contrary, within five days of the date of this letter, we shall assume
that you agree to our handling of this matter with a full reservation of rights to
all parties, we shall proceed accordingly" was sufficient). We thus conclude
that Century consented to allow the attorney retained by USI to control the
defense of the underlying lawsuit.
11 A-1428-22
In these circumstances, Century fails to provide a basis upon which to
apply the estoppel doctrine. We add that the question of detrimental reliance
and prejudice becomes moot once it is determined the reservation of rights letter
was adequate to explain the insured's options. But even if were we to assume
for the sake of argument that prejudice is a relevant consideration, here, Century
has not shown that it suffered any prejudice. See Northfield, 454 N.J. Super. at
145 (rejecting a "blanket statement" that prejudice to the insured will be
assumed). It is not disputed that USI's reservation of rights letter was sent
twenty months after it had retained an attorney to defend Century in the
underlying lawsuit. But, as counsel candidly acknowledged at oral argument
before us, Century is not able to show how the case would have been handled
differently had it chosen to retain a different attorney at its own expense.1
Accordingly, Century has not shown it suffered prejudice.
To the extent we have not addressed them, any remaining arguments
raised by defendant lack sufficient merit to warrant discussion. R. 2:11-
3(e)(1)(E).
1 We add that GEICO appears to have been controlling the litigation as the
insurer for the owner of the borrowed vehicle and the person driving it at the
time of the accident.
12 A-1428-22
Affirmed.

STATE OF NEW JERSEY, Plaintiff-Appellant, v. RONELL J. ALMORALES

 

STATE OF NEW JERSEY, Plaintiff-Appellant,

v.
RONELL J. ALMORALES,

Defendant-Respondent. _________________________

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
DOCKET NO. A-2632-22

Argued August 29, 2023 – Decided October 2, 2023

Before Judges Gilson and Gooden Brown.

On appeal from an interlocutory order of the Superior Court of New Jersey, Law Division, Camden County, Indictment No. 22-09-2521.

Kevin J. Hein, Assistant Prosecutor, argued the cause for appellant (Grace C. MacAulay, Camden County Prosecutor, attorney; Rachel M. Lamb, Assistant Prosecutor, of counsel and on the brief).

Douglas R. Helman, Assistant Deputy Public Defender, argued the cause for respondent (Joseph E. Krakora, Public Defender, attorney; Douglas R. Helman, of counsel and on the brief).

PER CURIAM
By leave granted, the State appeals from a March 29, 2023, Law Division

order granting defendant's motion to suppress evidence seized without a warrant. We affirm.

The facts are undisputed. On November 19, 2021, at about 8:50 a.m., Camden County Police Department Detective William Grasso "was conducting an undercover surveillance operation" on the 1300 block of Browning Street in Camden. The surveillance was initiated in response to Grasso's receipt of "specific information from a confidential source" who had "previously provided information to law enforcement" leading to "narcotics and weapons arrests." According to the source, "a heavy set [B]lack male wearing a large black jacket with fur on the hood was standing on the 1300 block of Browning Street and . . . had a handgun concealed on his person." Grasso also knew that "the 1300 block of Browning Street [was] an open air drug set where illegal narcotics [were] sold" and "violent crimes including shootings and homicides" occurred.

While "conducting . . . surveillance . . . of the area," Detective Fabbroni of the Narcotics Gang Unit (NGU) observed "a heavy set [B]lack male wearing a large black jacket with fur on the hood standing on the sidewalk on the 1300 block of Browning Street" with "several other unidentified males." The

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individual, later identified as defendant, was "the only male observed wearing a black jacket with fur on the hood," and the other males were the only individuals observed on the 1300 block. Based on the tip, the time of day, the area's reputation, and defendant's heavy clothing, Grasso believed defendant was carrying a firearm. Consequently, Grasso notified NGU detectives of his observations and advised that defendant would be stopped.

Grasso proceeded to the 1300 block of Browning Street and exited his vehicle along with Fabbroni and Diaz, another NGU detective.1 The detectives detained defendant, and conducted "a [Terry]2 frisk . . . for weapons." "While checking the right front pocket of [defendant's] jacket," Diaz "felt an object consistent with . . . a handgun," and retrieved "a 9mm Black Taurus G2C" firearm containing a magazine with "nine ball point rounds of ammunition [and] . . . one ball point round in the chamber." During a search incident to arrest, the detectives found on defendant's person "sixty-three clear plastic vials" containing a "white powder suspected to be cocaine," as well as $254 in U.S. currency.

 

1. 1  The record does not reveal either detective's first name.

2. 2  Terry v. Ohio, 392 U.S. 1 (1968).

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Defendant was subsequently charged in a five-count indictment with third-degree possession of a controlled dangerous substance (CDS), N.J.S.A. 2C:35-10(a)(1) (count one); third-degree possession of CDS with intent to distribute, N.J.S.A. 2C:35-5(a)(1) and N.J.S.A. 2C:35-5(b)(5) (count two); second-degree unlawful possession of a weapon, N.J.S.A. 2C:39-5(b)(1) (count three); second-degree possession of a weapon during a CDS offense, N.J.S.A. 2C:39-4.1(a) (count four); and second-degree certain persons not to have weapons, N.J.S.A. 2C:39-7(b)(1) (count five).

On February 6, 2023, defendant moved to suppress the items seized, arguing that the informant's tip "was insufficient to establish the requisite veracity and basis of knowledge to support his detention and frisk." An evidentiary hearing was scheduled for March 15, 2023, at which time the State intended to present Grasso's testimony. Over defendant's objection, the State requested an adjournment the day before the hearing upon learning that Grasso had been injured in the line of duty and was unable to testify. The judge denied the State's adjournment request.

When the parties appeared on March 15, 2023, upon being advised that "defendant ha[d] no dispute with the facts as alleged in the State's brief," the judge proceeded to hear oral argument and adjudicate the motion as a non-

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testimonial motion to suppress. Confirming that "by agreement" with defense counsel, "there [was] no factual dispute," the State lodged no objection to the judge proceeding in that fashion.

On March 29, 2023, the judge issued an order and accompanying written opinion granting the suppression motion. In the opinion, citing State v. Smart, 473 N.J. Super. 87 (App. Div. 2022), aff'd, 253 N.J. 156 (2023), the judge concluded the detectives "lacked reasonable suspicion to stop and frisk defendant because they did not sufficiently corroborate any criminal activity based on the confidential informant's tip." Critically, the judge noted "[d]efendant's body-type, clothing, and location were the only facts the police were able to corroborate." The judge pointed out that the detectives "did not observe any activity, like defendant adjusting his waist band; or any observable indicia, like a bulge in defendant's pocket; to raise a suspicion that defendant was concealing a handgun."

As such, the judge found that "[a]ll the police had to go on . . . was the bare report of an unnamed informant who neither explained how [he or she] knew about the gun nor supplied any basis for believing [he or she] had inside information about defendant." According to the judge, "[w]hen viewed in its totality, the information provided by the informant lacked the requisite detail to

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establish a basis of knowledge to support the reliability of the tip and justify an investigative detention." Because the detectives had "insufficient evidence to support a finding of reasonable suspicion to warrant an investigatory detention," the judge concluded that "all the evidence seized from defendant's person [was] fruit of the poisonous tree and must be excluded."

In this ensuing appeal, the State raises the following points for our consideration:3

POINT I

THE TRIAL COURT ERRED IN GRANTING DEFENDANT'S MOTION TO SUPPRESS EVIDENCE BECAUSE THE TOTALITY OF THE CIRCUMSTANCES, INCLUDING A TIP FROM A RELIABLE CONFIDENTIAL INFORMANT, ESTABLISHED REASONABLE SUSPICION FOR A TERRY STOP AND FRISK.

POINT II

THE TRIAL COURT DENIED THE STATE'S RIGHT TO PRESENT MATERIAL FACTS BY FAILING TO POSTPONE THE SUPPRESSION HEARING AFTER THE POLICE OFFICER WITNESS WAS UNABLE TO TESTIFY.

 

3
renumbered the points accordingly.

appeal and A-2632-22

We have omitted the first point addressing granting leave to 6

"When reviewing a trial court's decision to grant or deny a suppression motion, appellate courts '[ordinarily] defer to the factual findings of the trial court so long as those findings are supported by sufficient evidence in the record.'" State v. Smart, 253 N.J. 156, 164 (2023) (alteration in original) (quoting State v. Dunbar, 229 N.J. 521, 538 (2017)). "But when the facts are undisputed, as they are here, and the judge interprets the law on a non- testimonial motion to suppress, our review is de novo." Ibid.

As a threshold matter, we reject the State's contention that the judge erred in adjudicating the motion "without live testimony," thereby denying "the State the ability to present all material facts." "[Rule] 3:5-7(c) provides that a hearing on a motion to suppress need be held only if material facts are disputed." State v. Kadonsky, 288 N.J. Super. 41, 45-46 (App. Div. 1996). "It is only when the defendant's counter statement [of facts] places material facts in dispute that an evidentiary hearing is required." State v. Green, 346 N.J. Super. 87, 90 (App. Div. 2001). Here, both parties agreed that the facts were undisputed. Moreover, the State did not object in the trial court to proceeding without a testimonial hearing and we reject its belated request for a remand to conduct a hearing.

Turning to the merits, "'[a] warrantless search is presumed invalid unless it falls within one of the recognized exceptions to the warrant requirement.'"

 

 

 

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State v. Gamble, 218 N.J. 412, 425 (2014) (quoting State v. Cooke, 163 N.J. 657, 664 (2000)). "[T]he State bears the burden of proving by a preponderance of the evidence that [the] warrantless search or seizure '[fell] within one of the . . . exceptions . . . .'" State v. Goldsmith, 251 N.J. 384, 399 (2022) (second and third alteration in original) (quoting State v. Shaw, 213 N.J. 398, 409 (2012)).

Here, the exception at issue "is an investigative stop, also known as a Terry stop, which is a procedure that involves a relatively brief detention by police during which a person's movement is restricted." Ibid. An investigative stop or detention "is permissible 'if it is based on specific and articulable facts which, taken together with rational inferences from those facts, give rise to a reasonable suspicion of criminal activity.'" Shaw, 213 N.J. at 410 (quoting State v. Pineiro, 181 N.J. 13, 20 (2004)). "The standard for this form of brief stop or detention is less than the probable cause showing necessary to justify an arrest." Ibid. "However, an officer's hunch or subjective good faith—even if correct in the end—cannot justify an investigatory stop or detention." Id. at 411.

Pursuant to Terry and its progeny, in addition to an investigative stop, a police officer may conduct a protective search or pat-down without a warrant when the officer believes the individual detained is armed and dangerous. 392

 

 

 

 

 

 

 

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U.S. at 27. This "exception allows a law enforcement officer 'to take necessary measures to determine whether the person is in fact carrying a weapon and to neutralize the threat of physical harm.'" State v. Roach, 172 N.J. 19, 27 (2002) (quoting Terry, 392 U.S. at 23). "Specifically, the officer may conduct 'a carefully limited search of the outer clothing'" to determine whether weapons are present. Ibid. (quoting Terry, 392 U.S. at 30). Like an investigatory stop, "in order to conduct a protective search, an officer must have a 'specific and particularized basis for an objectively reasonable suspicion that defendant was armed and dangerous.'" Ibid. (italicization omitted) (quoting State v. Thomas, 110 N.J. 673, 683 (1988)).

"Determining whether reasonable and articulable suspicion exists for an investigatory stop is a highly fact-intensive inquiry that demands evaluation of 'the totality of circumstances surrounding the police-citizen encounter, balancing the State's interest in effective law enforcement against the individual's right to be protected from unwarranted and/or overbearing police intrusions.'" Goldsmith, 251 N.J. at 399 (quoting State v. Privott, 203 N.J. 16, 25-26 (2010)). The inquiry "takes into consideration numerous factors, including officer experience and knowledge." Id. at 400.

 

 

 

 

 

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A-2632-22

"With regard to presence in an area where criminal activity is prevalent, although the reputation of an area may be relevant to the analysis," our Supreme Court "has held that '[j]ust because a location to which police officers are dispatched is a high-crime area does not mean that the residents in that area have lesser constitutional protection from random stops.'" Ibid. (quoting State v. Chisum, 236 N.J. 530, 549 (2019)); see also Illinois v. Wardlow, 528 U.S. 119, 124 (2000) ("An individual's presence in an area of expected criminal activity, standing alone, is not enough to support a reasonable, particularized suspicion that the person is committing a crime."); Pineiro, 181 N.J. at 31 (Albin, J., concurring) ("The words 'high crime area' should not be invoked talismanically by police officers to justify a Terry stop that would not pass constitutional muster in any other location."). Although "officers need not ignore the relevant characteristics of a neighborhood, . . . more is required to find reasonable suspicion." Goldsmith, 251 N.J. at 400-401 (citing Wardlow, 528 U.S. at 124).

 

 

 

 

 

 

 

When an informant's tip factors into the analysis,

[a]n informant's "veracity" and "basis of knowledge" are two highly relevant factors under the totality of the circumstances. A deficiency in one of those factors "may be compensated for, in determining the overall reliability of a tip, by a strong showing as to the other, or by some other indicia of reliability." An informant's veracity may be established in a variety of ways. For example, the informant's past reliability will contribute

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to the informant's veracity. With regard to the informant's basis of knowledge, if the informant does not identify the basis of knowledge, a reliable basis of knowledge may nonetheless be inferred from the level of detail and amount of hard-to-know information disclosed in the tip. Finally, independent corroboration of hard-to-know details in the informant's tip may also greatly bolster the tip's reliability.

[State v. Zutic, 155 N.J. 103, 110-11 (1998) (citation omitted) (first quoting State v. Smith, 155 N.J. 83, 93 (1998); then quoting Illinois v. Gates, 462 U.S. 213, 233 (1983); then citing State v. Novembrino, 105 N.J. 95, 123 (1987); and then citing Smith, 155 N.J. at 95).]

Even where the veracity factor is satisfied "by demonstrating that the informant has proven reliable in the past, such as providing dependable information in previous police investigations," the State must still demonstrate that the "informant obtained his [or her] information in a reliable manner." State v. Keyes, 184 N.J. 541, 555 (2005). For example, information may be "deemed to have come from a trustworthy source if the informant provides 'sufficient detail in the tip or recount[s] information that could not otherwise be attributed to circulating rumors or easily gleaned by a casual observer.'" Id. at 556 (quoting Smith, 155 N.J. at 95).

Applying these principles, we are satisfied that the judge correctly concluded the detectives lacked a reasonable articulable suspicion that defendant was engaged in criminal activity to justify the stop and, in turn, the

 

 

 

 

 

 

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frisk. Grasso believed defendant was armed based on the tip, the time of day, the prevalence of crime in the area, and defendant's heavy clothing. The time of day and prevalence of crime in the area are "non-specific, non-individualized" reasons for conducting an investigatory stop of defendant. Goldsmith, 251 N.J. at 405. Because neither reason is specific to defendant engaging in behavior indicative of criminal activity, it "could be used to justify the stop of virtually anyone" at that time of day "based simply on their presence on that street." Id. at 406. We acknowledge that Grasso's awareness of the prevalence of crime in the area is a relevant factor, but it was insufficient under the circumstances to form a reasonable and articulable suspicion of criminality—even considering the other factors.

Turning to the tip and defendant's clothing, as the judge pointed out, the fact that the tip accurately described defendant's clothing and location "is of no moment because a tipster's knowledge of such innocent identifying details alone 'does not show that the tipster has knowledge of concealed criminal activity.'" State v. Rosario, 229 N.J. 263, 276 (2017) (quoting Florida v. J.L., 529 U.S. 266, 272 (2000)). Although the tip satisfied the veracity factor because the informant had proven reliable in the past, the information provided in the tip "was not information the informant could claim to know only if he or she had a

 

 

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reliable source of information" to satisfy the basis of knowledge factor. Smith, 155 N.J. at 97. "Without knowing the facts that led the informant to believe defendant was engaged in illegal activity, we cannot make an independent determination of whether that conclusion was reasonable." Id. at 98.

Further, there were no police observations of defendant engaging in behavior indicative of criminal activity or awareness of defendant engaging in criminal activity in the past to corroborate the tip and cure its deficiencies. Although the detectives corroborated defendant's body-type, clothing, and location, those facts, combined with the others, were still insufficient to establish an objectively reasonable suspicion that defendant was armed and dangerous. See Thomas, 110 N.J. at 683 (concluding officer was justified in making an investigatory stop based on a tip that "included a detailed description of the appearance, name, and location of a person allegedly in possession of illegal drugs," which facts were corroborated by the officer observing the defendant at the location and matching the description as well as the officer's recognition of the defendant "from a prior arrest for drug possession").

In sum, we are convinced the State failed to "'meet the constitutional threshold of individualized reasonable suspicion' that this particular defendant was engaged in criminal activity." Goldsmith, 251 N.J. at 405 (quoting State v.

 

 

 

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Nyema, 249 N.J. 509, 532 (2022)). "An investigative detention that is premised on less than reasonable and articulable suspicion is an 'unlawful seizure,' and evidence discovered during the course of an unconstitutional detention is subject to the exclusionary rule." State v. Elders, 192 N.J. 224, 247 (2007) (quoting State v. Rodriguez, 172 N.J. 117, 132-33 (2002)). Therefore, we discern no error in the judge's decision granting defendant's motion to suppress.