JOMAIN, LLC, ETC. VS. THE CITY OF HOBOKEN (L-3380-18, HUDSON COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: June 29, 2021
• Docket: A-3443-19
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3443-19

JOMAIN, LLC, d/b/a THE BRASS RAIL,

Plaintiff-Respondent, v.

THE CITY OF HOBOKEN,

Defendant-Appellant, and

UNDERGROUND UTILITIES CORPORATION,

Defendant-Respondent. ___________________________

Submitted March 2, 2021 – Decided June 29, 2021

Before Judges Gilson and Gummer.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3380-18.

Antonelli Kantor, P.C., attorneys for appellant (Jarrid H. Kantor, Yulieika Tamayo, Jason A. Cherchia, and Lori D. Reynolds, on the briefs). Law Offices of James H. Rohlfing, attorneys for respondent Underground Utilities Corporation (Lisa DeRogatis, on the brief).

PER CURIAM

The City of Hoboken (the City) appeals from three orders denying its

motions for partial summary judgment regarding the obligation of co-defendant

Underground Utilities Corporation (Underground) to defend plaintiff's claim

against the City and one order granting Underground summary judgment and

dismissing with prejudice all claims and cross-claims against Underground,

including the City's cross-claim for contractual indemnification. Because

Underground had a duty to defend based on its contract with the City, we reverse

the orders denying the City's motions and remand.

In 2016, after a public bidding process, the City and Underground entered

into a contract under which Underground would "perform construction services

for the Washington Street Redesign Project," which included roadway

improvements on Washington Street. The contract incorporated the City's bid

document, which contained in all capital letters an indemnification provision

requiring the successful bidder to:

defend . . . , indemnify, and hold harmless the City . . . from and against any and all claims, liabilities, judgments, lawsuits, demands, . . . proceedings, suits, actions, [or] causes of action . . . of any kind and nature

A-3443-19 2 whatsoever made upon or incurred by the City . . . whether directly or indirectly, (the "Claims"), that arise out of, result from, or relate to: (i) any of the work and services of the Provider as described in section 1 of this agreement, (ii) any representations and/or warranties by Provider under this agreement, and/or (iii) any act or omission under, in performance of, or in connection with this agreement by Provider . . . . Such defense, indemnity and hold harmless shall and does include claims alleged or found to have been caused in whole or in part by the negligence or gross negligence of any [City] person, or conduct by any [City] person or conduct by any [City] person that would give rise to strict liability of any kind. Provider shall promptly advise the City in writing of any claim or demand against any [City] person related to or arising out of Provider's activities under this agreement and shall see to the investigation and defense of such claim or demand at Provider’s sole cost and expense.

The bid document also required the successful bidder to name the City as an

"additional assured" in its liability insurance coverage.

On November 13, 2017, plaintiff, which operates a restaurant in Hoboken,

filed a notice of tort claim asserting water damage to its property was caused by

the negligence of the City "in its engagement and oversight of work performed

by city employees and/or Underground . . . in performing street and pipe work

in the vicinity" of its restaurant.

On August 27, 2018, plaintiff filed a complaint naming the City and

Underground as defendants and asserting Underground had "performed street

A-3443-19 3 and pipe work in the vicinity of" plaintiff's restaurant at the City's request and

under its "direction and supervision" and had "negligently damaged and/or

negligently disconnect[ed] sewer and/or water pipes, causing water to enter"

plaintiff's restaurant and damage it. Plaintiff also alleged the City had "breached

its duty of care [to plaintiff] by failing to properly monitor and supervise the

Washington Street Redesign Project and the work of Underground," causing

damage to plaintiff's property. All of the alleged negligence, even the City's,

was based on Underground's work on the Washington Street Redesign Project.

In a November 19, 2018 letter to Underground's president, the City's

attorney made a "formal demand for defense and indemnification of the City" in

this case and asked for written confirmation that Underground would provide a

defense. Both Underground and its insurer refused to provide a defense.

On December 20, 2018, the City filed an answer and cross-claims for

contribution, indemnification, and contractual indemnification based on the

indemnification clause in the bid document. On February 27, 2019,

Underground filed an answer to the complaint. According to the City, on May

10, 2019, Underground filed its answer to the City's cross-claims and asserted

cross-claims for contractual indemnification against the City. 1

1 We were not provided with a copy of that document. A-3443-19 4 In July 2019, the City moved for partial summary judgment. In its

statement of undisputed facts in support of its motion, the City discussed the

contractual-indemnification clause, the duties to defend and indemnify the

clause imposed on Underground, and the demand for defense and

indemnification the City had sent to Underground. Underground opposed the

motion, arguing it was "premature, as no [j]udgment has yet accrued against any

of the parties."

On August 29, 2019, after hearing oral argument and commenting on

how the City's notice of motion referenced its "contractual indemnification

cross-claims" and not specifically a duty to defend, the motion judge in an oral

opinion denied the motion, finding it was "premature" on the issue of

indemnification and declining to decide the duty-to-defend claim because the

judge believed it had been only "obliquely referenced" in the moving papers.

In October 2019, the City moved for partial summary judgment expressly

on Underground's duty to defend. Underground opposed the motion, arguing

the City had failed to "prove the causative trigger," the City knew as of July 25,

2019, that Underground had not caused plaintiff's leak, and the indemnification

clause was ambiguous. After oral argument on December 6, 2019, the motion

judge denied the motion, holding the duty to defend was triggered based on

A-3443-19 5 contractual language only if plaintiff's damages "ar[o]se out of, result[ed] from

or relat[ed] to" Underground's work and could not be enforced because a genuine

issue of fact existed as to whether a nexus existed between Underground's work

and the damage to plaintiff's restaurant. The judge referenced documents

obtained during discovery from the City's engineering-consulting firm

indicating a water-main leak unrelated to Underground's work may have caused

the damage.

In February 2020, the City moved again for partial summary judgment on

Underground's duty to defend. Underground opposed the motion, arguing the

City had not demonstrated the "causative trigger" of the duty to defend because

the leak's cause was determined to be unrelated to Underground's work, which

the City knew at the end of September 2017. Underground also moved for

summary judgment, which plaintiff and the City opposed.

On March 27, 2020, after hearing oral argument, the motion judge denied

the City's motion and granted Underground's motion, finding no genuine issue

of fact existed indicating Underground could have caused the leak that damaged

plaintiff's restaurant. Noting plaintiff did not have an expert on the issue of

causation of the leak, the motion judge cited an investigation by a company

retained by the City that had determined the leak had come "from a weight of

A-3443-19 6 the existing concrete electrical conduit bank that was resting directly on top of

the water main"; a daily work report of the City's engineering-consulting firm

reaching the same conclusion and noting the leak was "coming out of an old

repair clamp"; and the testimony of Underground's project manager who stated

Underground's work was "installed in accordance with the contract documents."

As to the City's cross-claim, the motion judge concluded the genuine issue of

fact regarding Underground's liability he had found in his December 6, 2019

decision no longer existed because "nothing point[ed] to what [Underground

had] done wrong" and any finding of liability by a trier of fact would be "a pure

guess" based on "speculation." Accordingly, he found summary judgment in

favor of the City on its cross-claim not "appropriate."

On appeal, the City argues the motion judge "erroneously conflated the

duty to defend with the duty to indemnify"; the "clear and unambiguous

language of the [c]ontract requires Underground to defend the City when a claim

is asserted relating to the work completed as [p]art of the Washington Street

Redesign Project"; and the duty to defend was triggered by the filing of the

complaint in which plaintiff made allegations which, if true, established

Underground's liability. The City also argues "public policy considerations"

requires a finding that Underground had a duty to defend based on the language

A-3443-19 7 of the complaint and contract and a duty to defend would have no value if it did

not attach at the beginning of a case. In response, Underground asserts the City

"has known since the outset that Underground's work had nothing to do with,

and was wholly unrelated to, the water leak that caused [p]laintiff's damages"

and argues the motion judge correctly interpreted the contractual provision at

issue and, therefore, correctly decided the motions.

We review a trial court's summary-judgment ruling de novo, applying the

same standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017);

see also Nelson v. Elizabeth Bd. of Educ., 466 N.J. Super. 325, 336 (App. Div.

2021). We consider whether the evidence, when viewed in a light most

favorable to the non-moving party, raises genuinely disputed issues of material

fact sufficient to warrant resolution by the trier of fact, or whether the evidence

is so one-sided one party must prevail as a matter of law. Brill v. Guardian Life

Ins. Co. of Am., 142 N.J. 520, 540 (1995). A dispute of material fact is "genuine

only if, considering the burden of persuasion at trial, the evidence submitted by

the parties on the motion, together with all legitimate inferences therefrom

favoring the non-moving party, would require submission of the issue to the trier

of fact." R. 4:46-2(c); see also Bhagat v. Bhagat, 217 N.J. 22, 38 (2014). We

A-3443-19 8 review a trial court's legal conclusions de novo. Clark v. Nenna, 465 N.J. Super.

505, 511 (App. Div. 2020).

A duty to defend "comes into being when the complaint states a claim

constituting a risk insured against." Danek v. Hommer, 28 N.J. Super. 68, 77

(App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954). A duty to defend "is generally

determined by a side-by-side comparison of the policy and the complaint, and is

triggered when the comparison demonstrates that if the complaint's allegations

were sustained, an insurer would be required to pay the judgment." Wear v.

Selective Ins. Co., 455 N.J. Super. 440, 453 (App. Div. 2018); see also Hebela

v. Healthcare Ins. Co., 370 N.J. Super. 260, 268 (App. Div. 2004) (finding "the

obligation to defend is fixed when a complaint is filed . . . [because] the duty to

defend is ascertained by comparing the allegations in the complaint with the

language of the policy" providing the duty). "In making that comparison, it is

the nature of the claim asserted, rather than the specific details of the incident

or the litigation's possible outcome, that governs the insurer's obligation."

Flomerfelt v. Cardiello, 202 N.J. 432, 444 (2010). If the allegations in the

complaint "correspond" to the "language of the policy," then "the insurer must

defend the suit." SL Indus. v. Am. Motorists Ins. Co., 128 N.J. 188, 197 (1992).

"A later determination that the claim against the insured is without merit . . . is

A-3443-19 9 irrelevant." Hebela, 370 N.J. Super. at 268. Because it is based on the

allegations and not proof of the allegations, the duty to defend is broader than

the duty to indemnify. See Polarome Int'l, Inc. v. Greenwich Ins. Co., 404 N.J.

Super. 241, 272 (App. Div. 2008).

When the City first moved for partial summary judgment, the motion

judge declined to make that required comparison because, in the judge's

mistaken view, the City only "obliquely referenced" Underground's duty to

defend in the moving papers. Rule 1:6-2 requires a moving party to submit a

written "notice of motion" and to "state . . . the grounds upon which [the motion]

is made and the nature of the relief sought." In the notice of motion, the City

stated it was moving for partial summary judgment "as to contractual

indemnification cross-claims asserted."2 As defense counsel correctly pointed

out to the motion judge, the duty to defend was part of the contractual-

indemnification clause the City was seeking to enforce. The City specifically

referenced Underground's duty to defend in its moving brief and in its statement

of undisputed material facts. In that statement, the City bolded the duty-to-

defend language contained in the parties' contractual-indemnification clause. In

2 We were not provided with a copy of the notice of motion. We take that language from the motion judge's description. A-3443-19 10 its moving papers, the City clearly stated pursuant to Rule 1:6-2 the grounds on

which it was making the motion and the nature of the relief sought – enforcement

of the contractual-indemnification clause including the duty to defend contained

in that clause. Instead of addressing the duty to defend issue substantively at

the beginning of the case when it should and could have been addressed, the

motion judge evaded the issue on inaccurate technical grounds and allowed it to

linger. See Eastampton Center, LLC v. Planning Bd. of Twp. of Eastampton,

354 N.J. Super. 171, 187 (App. Div. 2002) (finding "a matter of substantial

public interest should be resolved on the merits and not by a procedural

default").

Had he then performed the required side-by-side comparison of the

language of the complaint and the language of the contract, the motion judge

would have seen that plaintiff's complaint contained allegations which, if

sustained, would have required Underground to pay the judgment. Plaintiff's

complaint falls squarely within the language of the contractual-indemnification

provision. It is a "claim[]," "lawsuit[]," "demand[]," "suit[]," "action[]," and

"cause[] of action" that "directly . . . arise[s] out of" or "relate[s] to: (i) any of

the work and services of" Underground or "(iii) any act or omission under, in

performance of, or in connection with this agreement by" Underground.

A-3443-19 11 Plaintiff's complaint is based expressly and unambiguously on the work

Underground performed in connection with the Washington Street Redesign

Project, which was the subject of the contract between the City and

Underground. Because plaintiff's complaint contained allegations which, if

proven, would have required Underground to pay the judgment, Underground

had a duty to defend those claims. See Wear, 455 N.J. Super. at 453.

Contrary to Underground's argument, and the motion judge's conclusion

after the City's second motion, to establish a duty to defend the City was not

required to "prove" any "causative trigger," prove plaintiff's damages resulted

from Underground's work, or prove a "nexus" existed between Underground's

work and the damage to plaintiff's restaurant. The City didn't have to prove

anything; it was enough that plaintiff had alleged those things. The City simply

had to demonstrate – which it did in its first motion for partial summary

judgment – that the plaintiff's allegations fell within the language of the

contractual-indemnification provision. As our Supreme Court held in

Flomerfelt, "[t]he duty to defend . . . is not dependent upon whether there is a

finding that the claim is covered; instead it attaches because . . . there are

potentially covered claims." 202 N.J at 458. Because plaintiff's complaint

A-3443-19 12 contained claims potentially covered by the contractual-indemnification clause,

Underground had a duty to defend those claims.

Underground attempts to avoid our longstanding duty-to-defend caselaw

by arguing those cases involved insurance companies and insurance policies.

That is a distinction without a difference. Just as insurance companies are bound

by the language of their contracts, i.e., their policies, so too is a party to a

contract bound by the language of its contract. Here, Underground is bound by

the language of the contract it had with the City, including the contractual-

indemnification language which required Underground to defend the City in

claims, lawsuits, or causes of action, like those set forth in plaintiff's complaint,

arising out of or relating to the work Underground performed in the Washington

Street Redesign Project.3 Defense of such claims was a "risk" the City "insured

against" and a risk Underground accepted when they entered into the contract.

See Danek, 28 N.J. Super. at 77.

3 Ironically, Underground cites an insurance case in attempting to support its interpretation of the contractual-indemnification language. See Am. Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 35 (1998). That case addresses coverage and not a duty to defend, it does not address the meaning of "relate to," and even its discussion of "arising out of" supports our conclusion that plaintiff's causes of action arose out of Underground's work on the Washington Street Redesign Project. A-3443-19 13 We are mindful that a duty to defend attaches only to a covered claim.

See Wear, 455 N.J. Super. at 456. Here, all of plaintiff's allegations in the

complaint were premised on Underground's work on the Washington Street

Redesign Project and all were covered claims. This is not a case in which "the

underlying coverage question cannot be decided from the face of the complaint."

Flomerfelt, 202 N.J. at 444; see also Wear, 455 N.J. Super. at 455-56. Even if

it were, the duty to defend remains "until all potentially covered claims are

resolved." Id. at 447; see also id. at 444 (finding in cases with "multiple or

alternative causes of action, the duty to defend will attach as long as any of them

would be a covered claim and it continues until all of the covered claims have

been resolved").

The covered claims in this case were resolved when Underground

prevailed on its motion for summary judgment and the motion judge found no

genuine issue of fact regarding Underground's alleged negligence. That the

motion judge ultimately found plaintiff's claims regarding Underground's

alleged negligence to be without merit does not render meaningless the duty to

defend that attached when plaintiff filed a complaint with claims clearly covered

by the contractual-indemnification clause. See Polarome, 404 N.J. Super. at 273

(finding a duty to defend "remains . . . even if the claims are meritless,

A-3443-19 14 fraudulent, or 'poorly developed and almost sure to fail'") (quoting Voorhees v.

Preferred Mut. Ins. Co., 128 N.J. 165, 174 (1992)). A duty to defend is not

determined through the prism of hindsight.

Because the motion judge erred in denying the City's motions for partial

summary judgment on the issue of Underground's duty to defendant, we reverse

those orders. We affirm the order granting Underground summary judgment.

Because Underground refused to defend the covered claims set forth in

plaintiff's complaint, the City is entitled to reimbursement for the counsel fees

and expenses it incurred in its efforts to defend those claims. Hebela, 370 N.J.

Super. at 274.4 We remand for a determination of those fees.

Reversed and remanded. We do not retain jurisdiction.

4 The City is entitled to reimbursement of "only those defense costs reasonably associated with [covered] claims." SL Indus., 128 N.J. at 214-15. The claims set forth in plaintiff's complaint are covered claims. We are unaware of any subsequent amendments or assertions by plaintiff of other claims. If the City made any effort to defend claims other than those asserted in the complaint, Underground would be entitled to a determination of whether those later- asserted claims were covered by the contractual-indemnification clause. See Grand Cove II Condo. Ass'n, Inc. v. Ginsberg, 291 N.J. Super. 58, 74 (App. Div. 1996) (finding a question existed as to whether later-raised claims in an amended pleading were covered claims). A-3443-19 15