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Diaz v. M&M Louie Holdings, LLC

A-0639-09T2 (N.J. Super. App. Div. 2010) (Unpublished)

LEASES; INDEMNIFICATION — Where an indemnification clause in a lease does not specifically state that a party would indemnify and hold the other party harmless for that other party’s own negligence, a court will not extend the indemnification provision to do so.

An employee of a commercial tenant was walking across the landlord’s paved parking lot when he failed to notice an abandoned well cover that had become dislodged. He stepped into it and suffered a serious knee injury. He filed suit against the landlord and its two principals. They, in turn, sued the tenant, claiming the tenant agreed in the governing lease to hold them harmless and indemnify them for any and all claims such as that in the instant matter. They also claimed the tenant failed to add them as additional insured on its insurance policy.

The governing lease contained language that the tenant would indemnify and hold the landlord harmless for any cause or reason whatsoever arising out of, or by reason of, the occupancy by the tenant and the conduct of the tenant’s business. The insurance policy procured by the tenant that covered the date of this accident listed the named landlord as the additional insured and complied with the required level of insurance coverage. The landlord stated during discovery that the governing lease must have been renewed to cover the tenant at the time of the accident, and the parties knew each other as one paid rent to the other for more than ten years. The tenant confirmed payment to a predecessor entity that had changed after the lease was executed. The lower court entered an order reforming the lease to reflect the correct identity of the landlord and requiring the tenant to defend and indemnify the owner of the subject premises.

On appeal, the tenant argued that the indemnification clause of the lease agreement did not specifically reference the negligence or fault of the indemnitee so that the landlord was not entitled to defense and indemnification from the tenant. The Appellate Division agreed, finding that the lower court erred in holding that the tenant was required to indemnify the landlord. The Court said that a bright line rule exists requiring explicit and unequivocal language under a lease agreement that indemnification and defense shall include the indemnitee’s own negligence. The Court said the language of the indemnification clause in the lease at issue did not specifically express that the tenant would indemnify and hold the landlord harmless for its own negligence.

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