Leitao v. Damon G. Douglas Co.

• Decision Date: 22 May 1997
• Citation: 693 A.2d 1209,301 N.J.Super. 187
• Parties: Agostinho LEITAO and Elizabeth Leitao, Plaintiffs-Respondents, v. DAMON G. DOUGLAS COMPANY, Torsiello Company & Sons, Inc., Defendants-Respondents, John F. Kennedy Hospital, and The ABC Company, Defendants. DAMON G. DOUGLAS COMPANY, Defendant-Respondent/Third Party Plaintiff, v. S & J ELECTRICAL CONTRACTORS, Third-Party Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 187

301 N.J.Super. 187

693 A.2d 1209

Agostinho LEITAO and Elizabeth Leitao, Plaintiffs-Respondents, v. DAMON G. DOUGLAS COMPANY, Torsiello Company & Sons, Inc.,

Defendants-Respondents,

John F. Kennedy Hospital, and The ABC Company, Defendants.

DAMON G. DOUGLAS COMPANY, Defendant-Respondent/Third Party Plaintiff, v. S & J ELECTRICAL CONTRACTORS, Third-Party Defendant-Appellant.

Superior Court of New Jersey,

Appellate Division.

Argued May 7, 1997.

Decided May 22, 1997.

Edward L. Thornton, Rahway, for appellant (Methfessel & Werbel, attorneys; Mr. Thornton, on the brief).

Paul J. Soderman, West Orange, for respondent Damon G. Douglas Co. (Zucker, Facher & Zucker, attorneys; Mr. Soderman, on the brief).

The brief of respondents Agostinho Leitao and Elizabeth Leitao was suppressed.

The brief of respondent Torsiello Company & Sons, Inc. was suppressed.

Before BAIME, PAUL G. LEVY and BRAITHWAITE, JJ.

The opinion of the court was delivered by

BAIME, J.A.D.

This appeal requires us to construe an indemnification clause in an agreement between a general contractor and a subcontractor. The clause requires the subcontractor to indemnify the contractor for all claims caused in whole or in part by a negligent act of the subcontractor or its employees regardless of whether they also are caused in part by the contractor. An employee of the subcontractor was injured at the job site while engaged in his work duties and brought suit against the contractor. A jury found the contractor 51% negligent and the employee 49% negligent. The damage award was molded accordingly. Following entry of judgment, the Law Division granted the contractor's claim for contractual indemnity. The subcontractor appeals, contending that the Law Division misinterpreted the indemnification clause. We disagree and affirm the Law Division's judgment.

I.

Agostinho Leitao was employed by S & J Electrical Contractors (S & J). S & J entered into an agreement with Damon G. Douglas Company (Douglas) to perform electrical work at a construction project owned by JFK Hospital. As part of the electrical work, S & J was to install sleeves which would permit wires and cables to pass through the floors of the building. While engaged in this task, Leitao tripped and fell on wire mesh that had been installed by the masonry subcontractor, Torsiello & Sons (Torsiello), in preparation for pouring the concrete floors. At trial, Leitao acknowledged that he was fully aware of the presence of the wire mesh, but was not paying attention when the accident occurred. As he fell, Leitao extended his left hand which struck the wire mesh, causing severe lacerations.

Leitao sued Douglas, Torsiello, and JFK Hospital. Douglas filed a third-party complaint against S & J, which was severed for the purpose of trial. JFK Hospital was granted summary judgment. The jury found no negligence on the part of Torsiello. As we noted, Douglas was found to be 51% negligent and Leitao 49% contributorily negligent. The damages award was molded and judgment entered. The Law Division found as a matter of law that the claim arose out of the performance of S & J's work and was in part caused by Leitao's negligence, and it granted Douglas' claim for indemnification.

II.

The contractual language at issue reads in pertinent part as follows:

Indemnification Agreement--The subcontractor/vendor shall indemnify and hold harmless Damon G. Douglas Company and all of its agents and employees from and against all claims, damages, losses, and expenses, including attorney's fees arising out of or resulting from the performance of the subcontractor/vendor's work under this purchase order, provided that any such claim, damage, loss or expense a) is attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of tangible property (other than work itself), including the loss of use resulting therefrom, and b) is caused in whole or in part by any negligent act or omission of the subcontractor/vendor or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether it is caused in part by a party indemnified hereunder.

In any and all claims against Damon G. Douglas Company or any of its agents or employees by any employees of the subcontractor/vendor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Agreement shall not be limited in any way by any limitation on the amount or type of damages, compensation, or benefits payable by or for the subcontractor/vendor under workers' compensation acts, disability benefit acts, or other employee benefits acts.

The guiding principles in construing indemnification agreements are well-settled. Although such agreements are interpreted in accordance with the rules governing construction of contracts generally, see Cozzi v. Owens Corning Fiber Glass Corp., 63 N.J.Super. 117, 121, 164 A.2d 69 (App.Div.1960); Longi v. Raymond-Commerce Corp., 34 N.J.Super. 593, 603, 113 A.2d 69 (App.Div.1955), ambiguous clauses should be strictly construed against the indemnitee. Ramos v. Browning Ferris Indus. of S. Jersey, Inc., 103 N.J. 177, 191, 510 A.2d 1152 (1986). A contract will not be construed to indemnify the indemnitee against losses resulting from its own negligence unless such an intention is expressed in unequivocal terms. George M. Brewster & Son, Inc. v. Catalytic Const. Co., 17 N.J. 20, 33, 109 A.2d 805 (1954). This general rule is fortified by N.J.S.A. 2A:40A-1 which specifies that an indemnification agreement in a construction contract purporting to hold harmless the indemnitee for losses or damages resulting from its "sole negligence" is a violation of public policy. Carvalho v. Toll Bros. and Developers, 143 N.J. 565, 578, 675 A.2d 209 (1996); see also N.J.S.A. 2A:40A-2.

We hasten to add that "there is no essential public policy impediment to an indemnitor undertaking to indemnify the indemnitee in respect of the indemnitee's own negligence." Doloughty v. Blanchard Const. Co., 139 N.J.Super. 110, 116, 352 A.2d 613 (Law Div.1976). Even in the context of an indemnity agreement in a construction contract, it is not against public policy for the indemnitor to promise to hold harmless the indemnitee for the indemnitee's own negligence as long as the indemnitee is not solely at fault. See Carvalho v. Toll Bros. and Developers, 143 N.J. at 578, 675 A.2d 209; Bradford v. Kupper Assocs., 283 N.J.Super. 556, 584, 662 A.2d 1004 (App.Div.1995), certif. denied, 144 N.J. 586, 677 A.2d 759 (1996). This principle "derives from the judicial recognition that ordinarily the financial responsibility for the risk of injury during the course of a construction project is shifted in any event by the primary parties to their insurance carriers." Doloughty v. Blanchard Const. Co., 139 N.J.Super. at 116, 352 A.2d 613. The impact of the indemnity agreement "is therefore, in practical effect, the parties' allocation between themselves of the total required insurance protection for the project." Ibid. The parties ought to be free to determine how the insurance burdens will be distributed between them and "who will pay for specific coverage for specific risks." Ibid.

The freedom to allocate risk for the ultimate responsibility for injuries on the job is predicated upon other policies as well. We note the plethora of suits by injured workers against the owners of premises and general contractors. As other jurisdictions have recognized, "[t]hose suits are brought in many instances as attempts to escape the limitations of work[ers'] compensation and are often encouraged by work[ers'] compensation carriers seeking subrogation recoveries." Willey v. Minnesota Mining & Mfg. Co., 755 F.2d 315, 323 (3d Cir.1985); see also Westinghouse Elec. Co. v Murphy, Inc., 425 Pa. 166, 173 n. 5, 228 A.2d 656, 660 n. 5 (Pa.1967). Exposure to such liability "explains why owners seek to have contractors and subcontractors bear the risk of insuring against claims by their own workers." Willey v. Minnesota Mining & Mfg. Co., 755 F.2d at 323. Although agreements indemnifying the indemnitee for its own negligent acts are perhaps antithetical to the policy of compelling tortfeasors to bear responsibility for conduct heedless of the risks to others, the practical reality is that, through insurance or otherwise, allocation of financial responsibility is often part of the bargaining process. See Jamison v. Ellwood Consol. Water Co., 420 F.2d 787, 789 (3d Cir.1970).

Against this backdrop, we first hold that Leitao's claim was one "arising out of or resulting from the performance of the subcontractor[ ]'s work," within the meaning of the indemnity clause. In similar contexts, we have construed the words "arising out of" in accordance with their common and ordinary meaning as referring to a claim "growing out of" or having its "origin in" the subject matter of the subcontractor's work duties. See, e.g., The Pep Boys v. Cigna Indem. Ins. Co. of N. America, 300 N.J.Super. 245, ----, 692 A.2d 546 (App.Div.1997); Harrah's Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J.Super. 152, 157, 671 A.2d 1122 (App.Div.1996); Vitty v. D.C.P. Corp., 268 N.J.Super. 447, 453, 633 A.2d 1040 (App.Div.1993); cf. Franklin Mut. Ins. v. Security Indem. Ins. Co., 275 N.J.Super. 335, 340, 646 A.2d 443 (App.Div.) (involving insurance liability coverage), certif. denied, 139 N.J. 185, 652 A.2d 173 (1994). Although the words "resulting from" perhaps imply some causal relationship between the subcontractor's work and the claim, we do not interpret this clause as requiring fault on the subcontractor's part as a prerequisite to indemnification. Instead, we view these words as requiring only a substantial nexus between the claim and the subject matter of the subcontractor's work duties. Cf. Harrah's Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J.Super. at 158, 671 A.2d 1122; ...