Case Law Summaries

Adamar of New Jersey, Inc. v. Roselle

• Opinion Date: March 8, 2001
• Real Property Law
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LIABILITY; INDEMNIFICATION—A contract can limit an indemnification obligation to the indemnitor’s own negligence while the insurance obligation can, at the same time, require the indemnitor’s carrier to provide a defense for the indemnitee if named as an additional insured.

A patron was injured on an escalator. The property owner had an agreement with a contractor for the maintenance and service of the escalator. It sought a declaration that the maintenance company and its insurance company were required to indemnify the property owner for any liability that might occur as well as for the defense costs stemming from the related litigation. It also sought contribution under the Tortfeasors Contribution Act. The maintenance agreement provided that the service company would not be liable for any indirect, special, or consequential damages unless they were associated with claims for liability or loss arising from the maintenance company’s negligent acts or omissions. It also expressly stated that nothing in the agreement meant that the service company would assume any liability on account of accidents to persons or property, except those due directly to its acts or omissions. The maintenance agreement also contained a requirement that the service company have the property owner named an additional insured with respect to the performance of services by the maintenance company under the agreement. A Certificate of Operations was attached to a Certificate of Insurance stating that the property owner was an additional insured with respect to the performance of services by the maintenance company under the particular agreement. Lastly, the agreement stated that at its own expense, the service company was required to “defend all suits or claims alleging such bodily injury or property damages and shall pay all expenses in connection therewith.” The lower court held that the language in the maintenance agreement was quite clear that the indemnification of the property owner was only to cover the failure of the service company to properly maintain the escalator. It did not cover the manufacture, design, or installation of the escalator. Further, it clearly did not cover negligence on the part of the property owner. Similarly, the Certificate of Insurance clearly limited the property owner’s coverage to the services performed by the maintenance company under the agreement. As such, the insurance company was held only to have an obligation to defend the property owner if the failure was a maintenance failure. According to the Appellate Division, the lower court viewed the obligation to indemnify and the obligation to defend as indivisible concepts. The lower court also concluded that whether the maintenance company or its insurer had an obligation to indemnify and defend depended on how a jury assessed liability. The Appellate Division agreed that the indemnity provision of the contract clearly did not cover acts or omissions of the property owner. Further, the insurance policy limited coverage to the negligence of the maintenance company because that was the limit of the indemnification the maintenance company had given to the property owner. Consequently, the Appellate Division believed that the lower court was correct in offering the property owner the opportunity to prove the appropriate allocation of responsibility to the underlying accident by trying the underlying case. On the other hand, the Appellate Division approached the question of defense differently than did the lower court. In fact, it found a different result for the maintenance company than it did for the insurance company. The maintenance agreement, by its terms, required the service company to defend all suits or claims “alleging” by the injury or property damages. According to the Court, it was clear that the obligation was intended to be construed without reference to whatever coverage was being provided by the insurance company. Further, by defending for “alleged” bodily injury, the maintenance company agreed to defend the property owner and pay “all” costs with respect to that defense and any litigation in which it was alleged that the maintenance company was negligent. There was no qualification on this obligation as there was within the agreement to indemnify. The injured patron’s complaint included an allegation that there was negligent maintenance. Thus, according to the Court, the service company’s agreement to defend was broader than its agreement to indemnify. Because “there would be a clear conflict created by having [the service company’s] attorney representing [the property owner] with respect to claims that [the property owner] would be responsible, [the service company’s] obligation to pay all costs related to such litigation must be translated into an obligation to reimburse.” As to the insurance company, the property owner was an additional insured. Whenever a complaint against an insured falls within the perimeters of coverage, the insured must provide a defense. Therefore, the insured’s duty to defend is broader than its duty to indemnify. The insurance company’s obligation to indemnify the property owner was called into play by reason of the allegation of negligent maintenance against the service company, and, thus, vicariously against the property owner. The property owner was being sued for risk covered by the policy. Thus, the insurance company was also held to be responsible to provide good defense or to reimburse good defense, on the same basis as was the maintenance company.

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