Case Law Summaries

Mantilla v. NC Mall Associates

• Opinion Date: March 27, 2001
• Real Property Law
• E-Mail

LEASES; INDEMNIFICATION—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.

A patron was injured when she slipped and fell on water that had accumulated on the floor at a shopping mall. The water was present as the result of a leaking roof. She instituted a suit against the mall owner and against the maintenance service company who maintained the premises. The mall owner and the maintenance service company disputed with each other as to who was responsible for cleaning up water that accumulated as the result of a roof leak. At trial, the jury apportioned negligence between the parties; forty percent to the mall owner, fifty percent to the maintenance service company, and ten percent to the injured plaintiff. Following entry of judgment, the mall owner moved pursuant to an indemnity agreement to compel the maintenance service company to pay for its litigation expenses and to provide indemnification for its share of the judgment. The lower court granted the mall owner’s motion and ruled that the maintenance service company was required to pay for the mall owner’s litigation expenses as well as provide indemnification for its share of the judgment. The maintenance service company appealed on the basis that, inter alia, the indemnification agreement only required the maintenance service company to indemnify the mall owner for the maintenance service company’s negligence and not the mall owner’s negligence. The Appellate Division recognized that although the indemnification agreement did not expressly require the maintenance service company to indemnify the mall owner for the mall owner’s negligence, the Appellate Division relied on principles of insurance law and found that “[the mall] was an additional insured under [the maintenance service company’s] general liability policy.” Thus, it held that “when the complaint was filed which stated a claim constituting a risk insured against, a duty to defend came into being irrespective of the claim’s merit.” On these bases, the Appellate Division affirmed the lower court judgment. The Supreme Court granted the maintenance service company’s petition to determine whether the mall owner was entitled to indemnification for legal expenses incurred in defending itself against a claim of its own negligence. Interestingly, it relied on a case involving strikingly similar facts: a plaintiff slipped and fell at the same mall owner’s mall and sued the same mall owner and same maintenance service company. The same issue of indemnification for legal expenses also arose in that case. There, the Appellate Division held that the maintenance service company was not obligated to indemnify the mall owner for losses attributable to the mall owner’s own negligence or for the cost of defending against that negligence. The Appellate Division reasoned that the language in the indemnification agreement was ambiguous and explained that “although indemnification agreements are interpreted in accordance with the rules governing contracts generally, ambiguous clauses should be construed strictly against the indemnitee.” The Appellate Division went on to say “a contract will not be construed to indemnify the indemnitee against losses resulting from its own negligence unless such intention is expressed in unequivocal terms.” It went on, “this general rule is fortified by N.J.S. 2A:40A-1 which specifies that an indemnification agreement in a maintenance or construction contract purporting to hold harmless the indemnitee for losses or damages resulting from its sole negligence is a violation of public policy.” On these bases, the Appellate Division held that the indemnification agreement between the mall owner and the maintenance service company did not require the maintenance service company to indemnify the mall owner for the cost of defending claims of the mall owner’s own negligence. The Supreme Court relied on the holding of that earlier case and another Appellate Division case which held that an indemnitee can recover counsel fees “so long as the indemnitee is adjudicated free from active wrongdoing regarding the injury to the plaintiff and has tendered the defense to the indemnitor at the start of the litigation.” On these bases, the Supreme Court reversed the Appellate Division decision and held that “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.”

Copyright ©2003. Meislik & Meislik. All rights reserved.