Case Title: Carmen Mantilla and Pascual Mantilla v. NC Mall Associates, et als.

Citation: 

Docket Number: a-124-99

State: new-jersey

Court: New Jersey Supreme Court

Date: 2001-03-27T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). COLEMAN, J., writing for a unanimous Court. In this appeal, the Court decides whether Newport Mall, the indemnitee under a contract between it and Planned Building Services, Inc. (PBS), which provided janitorial services to the mall, may be indemnified for legal expenses incurred in defending itself against a claim based on its own negligence. On May 3, 1996, plaintiff, Carmen Mantilla, injured herself when she slipped and fell on water that had accumulated on the floor of the Newport Mall in Jersey City. She instituted suit against Newport Mall, the owners and managers of the mall, and PBS, which had been hired by the mall to perform cleaning services. PBS and Newport Mall had disputed whether the terms of their contract for janitorial services required PBS to clean up the water that had accumulated due to a leaking roof. At the conclusion of the trial, a jury found that Newport Mall, PBS, and plaintiff herself were all negligent. The jury apportioned 40% negligence to Newport Mall, 50% negligence to PBS, and 10% negligence to Mantilla. The $197,000 verdict was molded to reflect plaintiff's negligence and the availability of funds from collateral sources. Following entry of the judgment, Newport Mall moved pursuant to an indemnity agreement, to compel PBS to pay for its litigation expenses and to provide indemnification for its part of the judgment. The trial court ruled that the indemnification contract between PBS and Newport Mall required PBS to provide complete defense costs and indemnification, including that portion of the judgment that was based on Newport Mall's own negligence. PBS appealed on several grounds, among which was its contention that the indemnification clause did not require it to indemnify Newport Mall for its own negligence. Although the Appellate Division affirmed the judgment against PBS in an unpublished opinion, it agreed with its contention that, under the indemnification contract between it and the mall, PBS's indemnification liability was limited to losses caused by or arising from PBS's negligence and did not extend to losses arising from Newport Mall's own negligence. However, relying on principles of insurance law, the Appellate Division determined that PBS was required to indemnify Newport Mall for all of the costs of its defense. In reaching that determination, the panel specifically found that Newport Mall was an additional insured under PBS's general liability policy. Thus, the Appellate Division found that when the complaint was filed stating a complaint constituting a risk insured against, a duty to defend came into being regardless of the claim's merit. The Supreme Court granted PBS's petition for certification to determine whether Newport Mall was entitled to indemnification for legal fees incurred in defending itself against a claim of its own negligence. The Supreme Court denied Newport Mall's cross-petition for certification in which it sought to obtain contractual indemnification for its own negligence. HELD: Absent explicit contractual language to the contrary, an indemnitee who has defended against allegations of its own independent fault may not recover the costs of its defense from an indemnitor. 1. The Appellate Division's decision is in direct conflict with two other Appellate Division opinions, one of which is factually similar to the facts in this case and involved the very same parties and the interpretation of the same PBS-Newport Mall contract at issue here. (pp. 8-10) 2. Indemnification agreements warrant strict construction, and there is a presumption against indemnifying an indemnitee for its own negligence that can be rebutted only by plain language clearly expressing a contrary intent. The PBS-Newport Mall contract did not require PBS to indemnify Newport Mall for the cost of defending against claims of Newport Mall's own negligence. (pp. 10-11) 3. Although allegations in the pleadings may be a starting point to determine whether counsel fees and costs are recoverable by an indemnitee, the actual facts developed during trial should control. Once it is determined that an indemnitee has defended against charges of its independent fault, the indemnitor is not liable for indemnification for those costs. (pp. 11-14) 4. The common-law principle that an indemnitee who has defended against allegations of its independent fault may not recover its defense costs is a default rule' that parties to a contract may choose to override contractually by expressing such an intention in unequivocal terms. (pp. 14-15) 5. An indemnity provision is to be construed in accordance with the rules for construction of contracts generally. However, when the meaning of the clause is ambiguous, the clause should be strictly construed against the indemnitee. (pp. 15-16) 6. The right to legal costs follows the right to indemnification. Because the PBS-Newport Mall contract failed to express in unequivocal terms that PBS would indemnify Newport Mall for legal expenses incurred in defending itself against claims of its own negligence, PBS cannot be held responsible for those costs. (pp. 16-17) 7. The after-the-fact approach articulated in Central Motor, which permits an indemnitee to recover counsel fees if the indemnitee is adjudicated to be free from active wrongdoing regarding the plaintiff's injury, and has tendered the defense to the indemnitor at the start of the litigation, is adopted. (p. 17) 8. The Appellate Division's conclusion that PBS's duty to defend Newport Mall came into being once a complaint was filed that stated a claim constituting a risk insured against, irrespective of the claim's merit, was erroneous and its reliance on insurance law was misplaced and constituted reversible error. (pp. 17-19) 9. It is the language of the PBS-Newport contract that controls the relationship and obligations of the parties - not PBS's insurance policy. If Newport Mall has a claim as a named insured under PBS's policy, then Newport Mall should assert that claim against the appropriate insurance company in a separate proceeding. (pp. 19-20) Judgment of the Appellate Division is REVERSED. JUSTICES STEIN, LONG, LaVECCHIA, and ZAZZALI join in JUSTICE COLEMAN's opinion. CHIEF JUSTICE PORITZ and JUSTICE VERNIERO did not participate. SUPREME COURT OF NEW JERSEY A- 124 September Term 1999 CARMEN MANTILLA and PASCUAL MANTILLA, Plaintiffs, v. NC MALL ASSOCIATES, incorrectly designated as SIMON and ASSOCIATES, INC. and M.S. MANAGEMENT ASSOCIATES (INDIANA), INC., Defendants-Respondents, and PLANNED BUILDING SERVICES INC., Defendant-Appellant, and ABC MAINTENANCE COMPANY (fictitiously named); CDE CONSTRUCTION COMPANY (fictitiously named); EFG ROOFING COMPANY (fictitiously named); HIJ ARCHITECTURAL FIRM (fictitiously named); XYZ ENGINEERING FIRM (fictitiously named), Defendants. Argued January 3, 2001 -- Decided March 27, 2001 On certification to the Superior Court, Appellate Division. Theresa E. Mullen and Allan Maitlin argued the cause for appellant (Sachs, Maitlin, Fleming, Greene, Wilson & Marotte, attorneys). Stanley P. Fishman argued the cause for respondents (Fishman & Callahan, attorneys; Lisa Della Pelle, on the briefs). The opinion of the Court was delivered by COLEMAN, J. This appeal requires us to decide whether Newport Centre Mall Associates and M.S. Management Associates (Newport Mall), the indemnitee under a contract between it and Planned Building Services, Inc. (PBS), may be indemnified for legal expenses incurred in defending itself against a claim based on its own negligence. The Appellate Division found that Newport Mall was entitled to indemnification for its legal expenses. We disagree and reverse. We hold that absent explicit contractual language to the contrary, an indemnitee who has been found to be at least partially at fault may not recover the costs of its defense from an indemnitor. An insurance clause in the same printed portion states: 12. Risk of Loss; Indemnity; Insurance. All work performed by Contractor hereunder shall be done and performed solely at Contractor's own risk, and it is understood and agreed by the parties that Contractor is an independent contractor and not an agent or employee of Owner. Contractor shall indemnify and save Owner harmless from any and all loss, cost, expense, damages, claims and liability for bodily injury, death or property damage occurring in and about the Shopping Center as a result of the work performed and materials and equipment installed or furnished by Contractor hereunder. Contractor shall carry and keep in force the following insurance: (a) A comprehensive general . . . liability policy, including contractual liability coverage with respect to this agreement, bodily injury liability, property damage and completed operations coverage, all in broad form . . . . In furtherance of that provision, PBS obtained a comprehensive general liability policy from Travelers Insurance Company containing an additional insured endorsement which, in pertinent part, states: WHO IS AN INSURED (SECTION II) IS AMENDED TO INCLUDE AS AN INSURED ANY PERSON OR ORGANIZATION FOR WHOM YOU HAVE AGREED IN WRITING PRIOR TO INJURY TO PROVIDE INSURANCE BUT ONLY WITH RESPECT TO OPERATIONS PERFORMED BY YOU OR ON YOUR BEHALF, OR PREMISES OWNED OR USED BY YOU. The third indemnification clause is located in the typed portion of the PBS-Newport Mall contract. In pertinent part, it states: ARTICLE 6. INDEMNITY. PBS shall indemnify and hold Owner, Melvin Simon and Associates, Inc., and M.S. Management Associates Inc., ( indemnitees ) harmless from and against any and all claims, liabilities, damages, losses and judgments, including cost and expenses incident thereto, which may be suffered by or accrue against, be charged to or recoverable from indemnities [sic], by reason of injury to or death of any person or by reason of injury to or destruction of property, caused by or arising from the negligence of PBS, its officers, agents or employees, in connection with any matter dealt with in this agreement. [Geralnik, supra, slip op. at 15-16.] It is the language of the PBS-Newport contract that controls the relationship and obligations of the parties, not PBS's insurance policy. As noted previously, the contract does not express an unequivocal intention by the parties to have PBS indemnify Newport Mall for the costs of defending against claims of Newport Mall's own negligence. Furthermore, Travelers Insurance Company is not a party to this appeal. If Newport Mall has a claim as a named insured under PBS's policy, then Newport Mall should assert that claim against Travelers Insurance Company in a separate proceeding. NO. A-124 CARMEN MANTILLA and PASCUAL MANTILLA, Plaintiffs, v. NC MALL ASSOCIATES, incorrectly designated as SIMON and ASSOCIATES, INC. and M.S. MANAGEMENT ASSOCIATES (INDIANA), INC., Defendants-Respondents. DECIDED March 27, 2001 Justice Stein