## Facts

- Wendy M. Flomerfelt, age 21, attended a party hosted by 20-year-old Matthew P. Cardiello at his parents’ home while they were away.
- Cardiello admitted providing beer to guests and knowing that drugs were being used; he saw Flomerfelt ingest cocaine.
- Flomerfelt had limited memory of the night; she acknowledged possible marijuana use before arriving and could not recall what else she consumed.
- Flomerfelt alleged Cardiello provided her alcohol and drugs (including Ultracet), served her alcohol while visibly intoxicated, and failed to promptly summon medical assistance after she was found unconscious the next day.
- Flomerfelt was found unconscious on the porch and suffered temporary and permanent injuries after overdosing on alcohol and drugs.
- Cardiello sought defense and indemnity under his parents’ homeowners policy issued by Pennsylvania General Insurance Company.
- The insurer denied coverage under an exclusion for injuries “[a]rising out of the use, … transfer or possession” of controlled dangerous substances.
- The causal mechanism of Flomerfelt’s injuries was disputed, including whether they were caused by drugs, alcohol, delayed medical care, or a combination.

## Issues

1. Whether the insurer had a duty to defend where the pleadings and record suggested potentially covered negligence theories alongside allegations implicating a controlled-substances exclusion.
2. Whether, on summary judgment, the insurer could deny any duty to indemnify by asserting the injuries necessarily “arose out of” controlled dangerous substances, despite disputed causation and alleged non-drug negligence.

## Decision

- The New Jersey Supreme Court held the insurer owed Cardiello a duty to defend because the allegations included potentially covered claims not necessarily dependent on controlled dangerous substances.
- The Court held the duty to indemnify could not be resolved on the existing record and remanded for fact-finding on causation and the exclusion’s application.
- The Court partially reversed the judgment for the insurer and remanded for further proceedings.

## Legal Principles

- Insurance exclusions are construed narrowly, and ambiguities are resolved in favor of coverage; the insurer bears the burden to show an exclusion clearly applies.
- The duty to defend is broader than the duty to indemnify and is triggered if the complaint states a claim that is potentially covered, even if excluded conduct is also alleged.
- “Arising out of” in an exclusion requires a substantial nexus between the excluded risk and the injury; the mere presence of excluded conduct in the background does not automatically bar a defense when independent covered theories are plausibly alleged.
- Indemnification depends on facts established in the underlying action; when causation is disputed and covered and excluded causes may both contribute, summary judgment negating indemnity may be premature.

## Conclusion

Because the pleadings and record left open the possibility that Flomerfelt’s injuries resulted from covered non-drug-related negligence (such as serving alcohol or failing to obtain timely medical aid), the insurer had to defend, while indemnity depended on factual findings about whether the injuries were proximately caused by excluded controlled-substances conduct.


Flomerfelt v. Cardiello, 202 N.J. 432, 997 A.2d 991 (N.J. 2010)