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Kieffer v. Best Buy

205 N.J. 213, 14 A.3d 737 (2011)

CONTRACTS; INDEMNIFICATION — Unless an indemnification provision specifically covers claims, there will be no indemnification for defense costs related to unsuccessful law suits.

An electronics store engaged a contractor to clean and provide maintenance for its stores. The contractor then subcontracted the daily cleaning of a certain store. A customer fell on an alleged slippery surface in that store. At trial, the customer’s expert, an engineer, testified that the floor finish material was not properly applied in the area of the fall and that this caused the accident. The customer amended her complaint against the store to include the contractor and the subcontractor. The store filed a third-party complaint against the contractor, claiming that the contractor was performing maintenance at the time of the accident and was contractually bound to defend and indemnify the store. In turn, the contractor filed a fourth-party complaint against its subcontractor, claiming that the subcontractor was performing floor maintenance at the store when the accident occurred and was contractually obligated to defend and indemnify it.

The contractor’s agreement with the store permitted it to delegate its duties to others, but it was to remain solely responsible for the conduct of all such subcontractors. The subcontractor’s agreement with the contractor required that the subcontractor defend, indemnify, and hold the contractor harmless the cleaning company from any act of negligence, omission or conduct arising out of the operation of the subcontractor’s business and its performance or non-performance of services. The cleaning company trained the subcontractor’s employees and inspected the subcontractor’s work.

The lower court granted summary judgment against the customer, noting that she did not know why she fell and that her only observation was that the floor was shiny. It placed little value on the engineer’s testimony, declaring it a net opinion. Based on the indemnification agreements, the store moved to recover its costs of defense from the contractor, and the contractor moved to hold the subcontractor liable for both its legal costs and those it owed to the store. The lower court granted both motions, finding that there was no evidence of a harmful substance on the floor. In denying the subcontractor’s motion for reconsideration, the lower court stated that each indemnification agreement was functionally identical, even though only the contract between the store and its contractor anticipated protection against claims. The Appellate Division affirmed the lower court’s order, mistakenly finding, like the lower court, that the contract between the contractor and subcontractor contained protection against claims.

On appeal, the Court found that the contract between the contractor and its subcontractor did not obligate the subcontractor to indemnify either the contractor or the store for the legal costs of defending a lawsuit that was dismissed for lack of evidence. Unlike the contract between the store and its contractor, the contract between the contractor and its subcontractor did not require defense or indemnification on account of claims. Rather, the contract only imposed responsibility for paying defense costs in connection with any act of negligence, omission or conduct. The Court found that if the cleaning company wanted broad indemnification coverage that encompassed claims, it could have drafted an indemnification similar to the indemnification agreement between it and the store. Because the record was devoid of any finding of negligence, the Court remanded the matter to the lower court for entry of a judgment dismissing the contractor’s fourth-party complaint against the subcontractor.

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