ZDZISLAW CHOINSKI MAGDALENA CHOINSKI v. DENDRITE INTERNATIONAL INTERNATIONAL MANAGEMENT CONSTRUCTION CO COATES ELECTRIC INC (2013)

In this appeal, we are asked to review the validity of certain indemnification provisions and contractual obligations entered into by defendant International Management Construction Co. (IMC),¹ and third-party defendant Dallas Contracting Co., Inc. (Dallas).  After a jury verdict which found that IMC was not negligent in plaintiff Zdzislaw Choinski's (Choinski) negligence action, the court ordered Dallas to reimburse:  (1) the $20,000 IMC paid in settlement to Choinski on account of his personal injury complaint, and (2) a $25,500 portion of the total counsel fees and costs IMC incurred in defending the proceedings.   A third count of IMC's third-party complaint against Dallas seeking to enforce Dallas' contractual commitment to provide general liability insurance against claims similar to those asserted by Choinski was not decided by the trial judge.   Dallas appealed and we remanded to the trial court to determine the breach of contract claim on the merits.   Dallas and IMC moved for summary judgment, as well as reconsideration of certain orders previously entered by the trial court.   IMC's application was granted and we affirm.

I.

The following is a brief description of the relevant facts and procedural history.   IMC, the general contractor, entered into an agreement with Dallas, the subcontractor and Choinski's employer, for Dallas to perform demolition work at defendant Dendrite International's building site.   Two separate provisions in the contract between the parties, Sections 12.1 and 12.2.1, are in dispute — both obligate Dallas to indemnify IMC from work-related claims.   In addition, Section 13.1 of the agreement requires Dallas to name IMC as an additional insured on all policies except for workers' compensation, including liability coverage.

By the time the personal injury suit went to trial, the only remaining parties were Choinski, IMC, and Dallas.   Choinski then settled with IMC and testified at trial.²  At the close of trial, the jury was given a verdict sheet and answered the first question which asked:  “Was it proved by a preponderance of the evidence that [IMC] was negligent on April 9, 2005?”   The jury responded in the negative.   For reasons not found in the limited record before us, the questions on the verdict sheet were framed so that if the jury determined IMC was not negligent it did not need to reach the issues of whether Choinski or Dallas were negligent.

Once the jury returned the verdict, the judge rendered his written opinion determining there was no merit to Dallas' claim that the indemnification clauses were ambiguous, and that IMC was therefore entitled to recover the $20,000 settlement it paid to Choinski.   The judge also stated that, “[u]nder the circumstances herein, the court is satisfied that an award of $25,000 in legal fees and $500 in costs is reasonable.”   IMC had sought reimbursement of $31,447.50 in attorney's fees and $580.95 in costs.   The trial judge's award totaled $45,500.   The judge did not address the breach of contract issue for Dallas' failure to obtain liability insurance.   Dallas appealed and we remanded the matter to the trial judge to dispose of the outstanding contractual issue and to amplify his reasons for why the $20,000 settlement was reasonable or why a reduced award of counsel fees was appropriate.  Choinski v. Dendrite Int'l, No. A–5418–08 (App.Div. January 3, 2011).

On remand, in an comprehensive and cogent written opinion, Judge Phillip Lewis Paley granted summary judgment to IMC for its breach of contract claims, including legal fees, for which the court undertook a reasonableness determination.   The judge found that the settlement with Choinski was reasonable.   The judge disagreed with Dallas' contention that since all payments were made by IMC's insurer, IMC suffered no damages.   The judge's August 31, 2011 order required Dallas to reimburse IMC “or its insurance carrier $31,391.40 in attorneys' fees and defense costs in this matter to date as well as the $20,000 paid in settlement of the underlying claim brought by the plaintiff[.]”  It is from that order that Dallas appeals.

Dallas argues that IMC has suffered no damages.   Dallas also contends that IMC's insurer has no right to recover monies expended under its insurance policy obligations to IMC and further that the insurer is not an intended third-party beneficiary of the agreement between IMC and Dallas.   We disagree.

II.

In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46–2(c) that governed the motion court.   See Gray v. Caldwell Wood Prods., Inc., 425 N.J.Super. 496, 499 (App.Div.2012);  see also Chance v. McCann, 405 N.J.Super. 547, 563 (App.Div.2009) (“An appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46.”) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445–46 (2007)).   We must “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.”  Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).   In such review, “ ‘[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.’ ”  Estate of Hanges v. Metropolitan Property & Cas. Ins. Co., 202 N.J. 369, 382 (2010) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

Summary judgment “is designed to provide a prompt, businesslike and inexpensive method of [resolving cases].”  Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 74 (1954).   Summary judgment is appropriate if “there is no genuine issue as to any material fact” in the record.   R. 4:46–2(c).

The judgment or order sought shall be rendered forthwith 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.

[Ibid.]

We affirm substantially for the reasons set forth in Judge Paley's comprehensive written opinion, adding only the following comments.

An indemnity agreement is interpreted in accordance with general rules of contract construction.  Ramos v. Browning Ferris Indus., Inc., 103 N.J. 177, 191 (1986).   In determining the meaning of an indemnity provision, the clause “is to be strictly construed and not extended to things other than those therein expressed.”  Longi v. Raymond–Commerce Corp., 34 N.J.Super. 593, 603 (App.Div.1955) (citing George M. Brewster & Son, Inc. v. Catalytic Constr.   Co., 17 N.J. 20 (1954)).   An ambiguity exists where “the terms of the contract are susceptible to at least two reasonable alternative interpretations.”  Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008) (citing Nester v. O'Donnell, 301 N.J.Super. 198, 210 (App.Div.1997)).   We find no such ambiguity here.   The terms are entirely clear.

The failure of a party to an agreement to procure insurance pursuant to its contractual obligations may sustain a claim for breach of contract by the non-breaching party.   See Antenucci v. Mr. Nick's Mens Sportswear, 212 N.J.Super. 124, 130–31 (App.Div.1986);  Robinson v. Janay, 105 N.J.Super. 585, 591 (App.Div.), certif. denied, 54 N.J. 508 (1969).   The quantum of damages recoverable by IMC for breach of an agreement by Dallas to procure insurance is the “loss sustained by reason of the breach, the amount that would have been due under the policy provided it had been obtained.”  Robinson, supra, 105 N.J.Super. at 591 (citation and internal quotation marks omitted).

Dallas argues that IMC's insurer is not entitled to recover the amounts it paid in settlement of the underlying claim and for reasonable legal fees it expended.   We disagree.

Standard Accident Ins. Co. v. Pellecchia, 15 N.J. 162 (1954), established that normally a carrier paying an insurance loss is entitled to subrogation against the tortfeasor.   In that case, Pellecchia, employed by Columbus Trust Company, embezzled money.   Standard, as surety to Columbus for Pellecchia's conduct, paid Columbus $200,000.   Columbus had claims against Federal Trust Co. by virtue of Federal's guarantee of endorsements on false or forged checks, which were settled.   Thereafter, Standard brought suit against Federal on the rights which Columbus had against Federal under the guarantee of endorsements.   The trial court granted summary judgment to Federal.   Our Supreme Court reversed and remanded for trial.   In a comprehensive opinion, Chief Justice Vanderbilt set out basic law on subrogation:

Subrogation is a device of equity to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it.   It is a right of ancient origin, having been imported from the civil law to serve the interests of essential justice between the parties.   It is most often brought into play when an insurer who has indemnified an insured for damage or loss is subrogated to any rights that the insured may have against a third party, who is also liable for the damage or loss.   In such a case it is only equitable and just that the insurer should be reimbursed for his payment to the insured, because otherwise either the insured would be unjustly enriched by virtue of a recovery from both the insurer and the third party, or in the absence of such double recovery by the insured the third party would go free despite the fact that he has the legal obligation in connection with the loss or damage.

[Id. at 171 (citations omitted) (emphasis added).]

Furthermore, Dallas was contractually obligated to pay the legal fees of IMC pursuant to Sections 12.1 and 12.2.1.   Additionally, had Dallas procured the contractually obligated liability insurance naming IMC as an additional insured as required by the contract in dispute, and Dallas' insurer had failed to pay IMC, then IMC could have proceeded against that insurer for those fees.

While the standard rule in this state is to require each litigant to pay his own counsel fees, there are exceptions, one of them being a suit seeking coverage under a liability insurance policy.   R. 4:42–9(a)(6).   An insured covered by a policy is entitled to the full protection provided by the coverage, and that benefit should not be diluted by the need to pay counsel fees in order to secure rights under the policy.  Sears Mortgage Corp. v. Rose, 134 N.J. 326, 356 (1993);  Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 572 (1970).   An insured is not required to show bad faith or arbitrary action by an insurer in order to recover fees.  Corcoran v. Hartford Fire Ins. Co., 132 N.J.Super.   234 (App.Div.1975).

Affirmed.

FOOTNOTES

FN1. IMC indicated in its initial pleadings that its correct company name is International Management Consultants, Inc., doing business as IMC Construction..  FN1. IMC indicated in its initial pleadings that its correct company name is International Management Consultants, Inc., doing business as IMC Construction.

FN2. We do not know the context in which Choinski's testimony was proffered as we have not been supplied with a copy of the transcript..  FN2. We do not know the context in which Choinski's testimony was proffered as we have not been supplied with a copy of the transcript.

PER CURIAM