Continental Insurance Companies v. South Jersey Gas Co.

409 F. Supp. 1130, 1976 U.S. Dist. LEXIS 15974
CourtDistrict Court, D. New Jersey
DecidedMarch 23, 1976
DocketCiv. Nos. 75-0423, 75-1200
StatusPublished
Cited by1 cases

This text of 409 F. Supp. 1130 (Continental Insurance Companies v. South Jersey Gas Co.) is published on Counsel Stack Legal Research, covering District Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Continental Insurance Companies v. South Jersey Gas Co., 409 F. Supp. 1130, 1976 U.S. Dist. LEXIS 15974 (D.N.J. 1976).

Opinion

On Cross Motions for Summary Judgment

OPINION

COHEN, Senior District Judge:

This dispute over the interpretation of a contract indemnity clause has generated five state court decisions, two settlements, and two federal suits. A declaratory judgment action and a suit for restitution have been filed in this court. Jurisdiction is based upon diversity of citizenship. The two actions have been consolidated and cross motions for summary judgment have been made by plaintiff, Continental Insurance Companies (Continental), and defendant, South Jersey Gas Company (South Jersey Gas). The controlling question is whether the declaratory judgment of the Superior Court of New Jersey, Chancery Division, Atlantic County, precludes relitigation of the indemnity clause issue in federal court. The state chancery court ruled that R. & T. Castellini Company (Castellini) and its insurer, Continental, were obligated to defend and indemnify South Jersey Gas in a personal injury action filed by Angelo Simoni in the Superior Court of New Jersey, Law Division, Cumberland County. For the reasons discussed below, Continental is collaterally estopped from relitigating the indemnity clause issue in the federal court and is not entitled to relief from the final ■ judgment of the state court. Summary judgment will be granted in favor of defendants.

In January, 1968 South Jersey Gas entered into a contract with Castellini whereby Castellini was to install certain gas mains. The scope of the work to be performed under the contract included the following:

(1) Furnish all labor, excavating and construction equipment, tools, services, and permanent and temporary facilities required in performing all operations necessary for the complete installation of gas mains and services.

The contract further provided that:

Contractor agrees to furnish and maintain during the period of this Contract and at its own expense, policies of insurance covering:
1. Indemnity Clause The Contractor shall save harmless, indemnify, and in the event of suit will defend the South Jersey Gas Company from and against all loss, costs, damage, expense, claims, or demands arising out of or caused or alleged to have been caused in any manner by the doing of the work herein provided, including all suits or actions of every kind or description brought against the Company either individually or jointly with the Contractor for or on account of any damage or injury to any person or persons or property, including the Contractor’s employees or their property, caused or occasioned, or alleged to have been caused or occasioned by the Contractor, a subcontractor, their employees or agents, by or on account of the performance of any work done pursuant to or in connection with this Contract, or through any negligence or alleged negligence in guarding the work or through any act or omission or alleged act or omission of the Con[1132]*1132tractor, a subcontractor, their employees or agents.

Continental provided the insurance coverage for this obligation to defend and indemnify South Jersey Gas.

In March, 1968 Angelo Simoni, an employee of Castellini, was severely injured in an accident which occurred on the premises of South Jersey Gas. The truck in which he was riding was plowing snow when it struck a raised manhole cover. Simoni instituted a tort action in the Superior Court of New Jersey, Law Division, Cumberland County, Docket No. L-19965-69, naming South Jersey Gas as one of the defendants.

South Jersey Gas then filed suit in the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-3245-70 seeking a declaratory judgment to establish the rights and obligations of the parties under the indemnity clause. A default judgment was entered against Castellini for failure to answer. The chancery court in June, 1973 issued an oral opinion ruling that Continental, as insurer for Castellini, was obligated to defend and indemnify South Jersey Gas in the Simoni tort action. This judgment was never appealed.

In the interim, the tort action was dismissed as to South Jersey Gas. The trial judge relied upon the rule that a landowner is not liable to an invitee for injuries caused by a dangerous condition when the invitee comes onto the land for the purpose of rectifying that dangerous condition. This decision was appealed to the Superior Court of New Jersey, Appellate Division, Docket No. A-1906-7. In August, 1973 the appellate court reversed and remanded stating that the plaintiff came onto the land to remove snow and not to repair the protruding manhole cover. The appellate court ruled that there was a jury issue as to whether South Jersey Gas was negligent in maintaining the manhole cover on its land.

Continental attempted unsuccessfully to reopen the default declaratory judgment entered against Castellini. A release was subsequently executed by South Jersey Gas in exchange for Continental’s payment of $5,665.35 to cover costs which had been incurred in defending the tort action.

Continental then filed suit in the federal district court seeking a declaratory judgment that the indemnity clause did not require Castellini and Continental to defend and indemnify South Jersey Gas in the Simoni tort action. In addition to South Jersey Gas, all the parties to the Simoni tort action were named as defendants. Continental’s request for an order staying the state court proceedings pending resolution of the federal declaratory judgment action was denied.

The parties to the Simoni tort action reached a settlement prior to retrial which required South Jersey Gas to pay $100,000 to the plaintiff. Continental paid this obligation on behalf of South Jersey Gas and then filed suit for restitution in the federal district court.

The declaratory judgment action has been dismissed as to all defendants except South Jersey Gas and Castellini. Pursuant to Fed.R.Civ.P. 42(a) the declaratory judgment action and the suit for restitution have been consolidated.

A.

The declaratory judgment entered by the state chancery court has the force and effect of a final judgment and is binding upon the parties in subsequent actions. N.J.S.A. § 2A:16-59; Washington Township v. Gould, 39 N.J. 527, 189 A.2d 697 (1963); McCrory Stores Corp. v. Braunstein, 102 N.J.L. 590, 134 A. 752 (E & A 1926). Continental, Castellini, and South Jersey Gas were all parties to the state chancery court action. The interpretation of the indemnity clause was a material and relevant issue and the judgment was rendered by a court of competent jurisdiction. Therefore, Continental is collaterally es-topped from relitigating this issue even though the present suit involves a different cause of action. See 1 B. Moore’s, Federal Practice § 0.441[2].

[1133]*1133Plaintiff, however, contends that because of the intervening appellate court decision the doctrine of collateral estoppel should not preclude reconsideration of the indemnity clause issue. It is argued that the appellate division’s finding of potential liability on the part of South Jersey Gas constituted a change in circumstances which removed the collateral estoppel effect of the prior chancery court judgment. Plaintiff implies that the chancery court interpreted the indemnity clause without realizing that negligence on the part of the indemnitee, South Jersey Gas, gave rise to the Simoni tort action.

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409 F. Supp. 1130, 1976 U.S. Dist. LEXIS 15974, Counsel Stack Legal Research, https://law.counselstack.com/opinion/continental-insurance-companies-v-south-jersey-gas-co-njd-1976.