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Zbieg v. K. Hovnanian Enterprises, Inc.

A-3084-01T3 and A-3311-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

INDEMNIFICATION; INSURANCE—A contractual requirement to name another as an additional insured is to be read in concert with the agreement’s indemnification provision.

The general contractor for a townhouse and condominium complex hired a paving contractor. The contract required the paving contractor to indemnify, defend and save the general contractor harmless from and against any and all injuries “caused by or resulting from or arising out of any act, neglect or negligence, omission or agreement on the part of the [paving contractor], its agents, officers, employees, subcontractors or servants in connection with this Agreement or with the prosecution of the work hereunder, whether covered by the insurance specified herein or not.” The indemnification provision in the contract also specifically stated that it was “the intention of the parties hereto to have these terms interpreted in the broadest legally permissible fashion in favor of the [general contractor].” Under the contract, the paving contractor named the contractor as an additional insured under its liability insurance coverage.

A young boy was badly injured while riding his bicycle in a partially paved area of the complex. He hit a raised manhole and allegedly sustained injuries. A jury trial was held and the jury found that neither the general contractor nor the paving contractor was negligent. The general contractor then requested the Court to compel the paving contractor and its insurance company “to reimburse [its] counsel fees, costs and expenses incurred to date in defending” the action. The lower court rejected that claim, interpreting the contract as providing “that the duty to indemnify is triggered by a finding of fault on the part of [the paving contractor].” The Appellate Division agreed with the lower court’s decisional rationale. Indemnity provisions are “construed as contracts generally are construed, but ... in the event of ambiguity such a clause ‘should be strictly construed against the indemnitee.’” Here, the paving contractor “did what was required of it. It provided coverage to [the general contractor] as an additional insured.” The duty to indemnify had to be triggered by a finding of fault on the part of the paving contractor. “Inasmuch as [it] was not at fault, it was not obligated under the agreement to indemnify. The agreement to provide insurance must be read in its context, which is an agreement to indemnify.” The Court held that the insurance obligation was not broader than the indemnification obligation.

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