Recent New Jersey case addresses various issues of importance to the insurance industry

New Jersey Insurance law attorney Jared Stolz explains the Four Seasons at North Caldwell Condominium Ass'n case, a decision from the Superior Court of New Jersey, arising from allegedly defective construction.
Jared Stolz, attorney in New Jersey
Jared Stolz, attorney in New Jersey
FLEMINGTON, N.J. - June 1, 2019 - PRLog -- A recent New Jersey case addressed various issues of importance to the insurance industry. The Four Seasons at North Caldwell case has important implications for construction defect litigation. Attorney Jared Stolz was involved in the litigation as counsel for a subcontractor of K. Hovnanian, and provides a summary. The complete comment will be available on the Blog of Insurance law attorney Jared Stolz at

The plaintiff was a condominium association for a newly constructed condominium complex called "Four Seasons at North Caldwell." (hereinafter "Association").  Association sued four named defendants along with fictitiously-named defendants for various claims arising out of allegation of defective construction of common elements of the condominium.  The four named defendants were K. Hovnanian at North Caldwell, III, LLC ("KHNC"), Hovnanian Enterprises, Inc. ("Enterprises"), K. Hovnanian Companies, LLC ("KHC"), and K. Hovnanian Enterprises, Inc. ("KHE").  KHNC was the general contractor for the condominium and is a wholly owned subsidiary of Enterprises.  Both KHC and KHE are wholly owned subsidiaries of Enterprises, KHC providing day to day operational services and KHE providing financing operations.

The Enterprises, KHC, and KHE sought the have the entire complaint dismissed against them and KHNC sought dismissal of eight of the sixteen counts.  The counts were for varying causes of action such as breach of contract, fraud, breach of trust, civil conspiracy and other claims arising out of the allegedly defective construction.

Enterprises, KHC, and KHE moved to dismiss the entire case against them, arguing that the counts against them fail to set forth more than mere conclusory allegations and thus fails to state a claim.  The complaint refers to the named defendants as "Hovnanian Defendants" and alleges that they took certain actions with specifying what actions each individual entity took within the group.  The Court noted that in examining the complaint for sufficiency of claim, all facts alleged must be taken as true and "[t]he examination of the complaint 'should be one that is at once painstaking and undertaken with a generous and hospitable approach.' The Court must 'search the complaint in depth and with liberality' to identify the causes of action asserted."

The Court concluded that "based on even a liberal and hospitable review, the non-veil piercing Counts of the Complaint do not sufficiently plead claims against the Defendants Enterprises, KHC, and KHE."  The core deficiency was that all named defendants are lumped into a term as "Hovnanian Defendants" and there is no specific reference to any of the individual defendants in ascribing the allegedly wrongful actions.  Thus, the complaint could not survive even under this liberal standard and the Court dismissed all counts except the veil piercing count without prejudice with leave to re-plead if so desired.

The Court also dismissed the veil piercing count without prejudice, but for a different reason.  The Court noted that in order to properly allege a count for piercing the corporate veil, plaintiff must allege that "the subsidiary was dominated by the parent" and that "adherence to the fiction of separate corporate existence would perpetrate a fraud or injustice, or otherwise circumvent the law."  Here, the Court concluded, that the complaint fails to sufficiently allege either prongs.  There were some allegations regarding commonality of employees and officers, but without more, such overlapping was insufficient to allege domination by the parent corporation.  Likewise, there was mere conclusory statements about undercapitalization, but not enough to survive a motion to dismiss.  Thus, the complaint failed to sufficiently allege a claim to pierce the corporate veil and the count was dismissed with leave to re-plead.

The case is Four Seasons at North Caldwell Condominium Association, Inc. v. K. Hovnanian at North Caldwell III, LLC, et al., Superior Court of New Jersey, Essex County Civil Part, May 28, 2019.

*** Jared Elliott Stolz is an attorney in New Jersey, focusing on insurance law and litigation.

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