Occhifinto v. Olivo Constr. Co.

• Decision Date: 07 May 2015
• Docket Number: A-77-13 September Term 2013, 073174
• Citation: 114 A.3d 333,221 N.J. 443
• Parties: Robert OCCHIFINTO and NVE, Inc., Plaintiffs–Appellants, v. OLIVO CONSTRUCTION CO., LLC, Martin Olivo, Houghton, Quarty & Warr, LLC, WW Construction and Masonry Star Building Systems, Andres F. Andersen Associates, Inc., Diamond Sand and Gravel Co., Inc., Antul N. Shah, P.E., ANS Consultants, Inc., and Bardo Cox & Miller, Inc., Defendants, and Robert S. Keppler Mason Contractors, LLC, a/k/a Robert S. Keppler Concrete Construction, LLC, and Mercer Mutual Insurance Co., Defendants–Respondents.
• Court: New Jersey Supreme Court

221 N.J. 443

114 A.3d 333

Robert OCCHIFINTO and NVE, Inc., Plaintiffs–Appellants

v.OLIVO CONSTRUCTION CO., LLC, Martin Olivo, Houghton, Quarty & Warr, LLC, WW Construction and Masonry Star Building Systems, Andres F. Andersen Associates, Inc., Diamond Sand and Gravel Co., Inc., Antul N. Shah, P.E., ANS Consultants, Inc., and Bardo Cox & Miller, Inc., DefendantsandRobert S. Keppler Mason Contractors, LLC, a/k/a Robert S. Keppler Concrete Construction, LLC, and Mercer Mutual Insurance Co., Defendants–Respondents.

A-77-13 September Term 2013, 073174

Supreme Court of New Jersey.

Argued Jan. 21, 2015.

Decided May 7, 2015.

Dennis T. Smith, Hackensack, argued the cause for appellants (Pashman Stein, attorneys).

Michael L. Testa, Sr., Vineland, argued the cause for respondent Mercer Mutual Insurance Company of New Jersey (Testa Heck Scrocca & Testa, attorneys; Justin R. White, Vineland, on the brief).

Gregory J. Irwin, Hackensack, submitted a brief on behalf of respondent Robert S. Keppler Mason Contractors, LLC a/k/a Robert S. Keppler Concrete Construction, LLC (Harwood Lloyd, attorneys).

Opinion

Justice SOLOMON delivered the opinion of the Court.

Plaintiff Robert Occhifinto (Occhifinto) brought an action for damages against defendant Robert S. Keppler Mason Contractors, LLC (Keppler), and other entities responsible for the construction of an addition to his manufacturing warehouse (liability action). Occhifinto alleged that defendants' negligence caused the addition's concrete floor to fracture and fail. In the liability action, Keppler was defended by its insurance carrier, Mercer Mutual Insurance Company (Mercer), under a reservation-of-rights agreement. Before trial in the liability action, Mercer filed a complaint challenging its obligation to provide coverage and to defend Keppler, which Occhifinto opposed on Keppler's behalf. The trial court found that Mercer was required to indemnify Keppler for damages assessed that were covered by the insurance policy.

The liability action proceeded to trial, and the jury found that Keppler breached its duty of care but did not proximately cause the failure of the warehouse floor and, therefore, awarded no damages against Keppler. After trial, Occhifinto moved to collect counsel fees from Mercer pursuant to Rule 4:42–9(a)(6), which authorizes trial courts to award counsel fees in “an action upon a liability or indemnity policy of insurance in favor of a successful claimant.” The trial court denied Occhifinto's motion, holding that he was not a successful claimant because Keppler was not found liable for damages in the liability action.

We conclude that plaintiff was “a successful claimant” entitled to counsel fees under Rule 4:42–9(a)(6), and therefore reverse the judgment of the Appellate Division.

I.

The following facts are undisputed for the purpose of this appeal. Occhifinto sought to expand the nutritional supplement

factory he owned and operated by constructing more manufacturing and storage space. He hired Olivo Construction Co., LLC (Olivo) as the general contractor for the expansion. Olivo hired Keppler as the masonry subcontractor. Keppler's primary responsibility under the subcontract was to pour the manufacturing building's second-story concrete floor. Several months after completion of the expansion, the second-story floor began to fracture, rendering the building unsafe for occupancy. Subsequently, Occhifinto filed a complaint alleging negligence, among other things, against Keppler and the other entities involved with the construction.¹

Keppler held a general liability insurance policy issued by Mercer, which covered property damage to third parties resulting from an “occurrence” or accident. The policy excluded from coverage damages resulting from “a failure to perform an agreement or contract in accordance with its terms”; and “property damage caused, to any extent, by [Keppler's] products or [Keppler's] work or any part of such.” Mercer initially agreed to provide Keppler with a legal defense but reserved the right to disclaim coverage.

In an effort to disclaim coverage Mercer filed a declaratory judgment action before the liability action commenced. Mercer asserted that it had no duty to defend or indemnify Keppler against Occhifinto's claims because the alleged damages fell outside of the policy's coverage. Occhifinto defended the declaratory judgment action on behalf of Keppler and filed a counterclaim asserting that (1) Mercer had a duty to defend and indemnify Keppler under the policy, and that (2) Mercer was required to pay the counsel fees incurred defending the declaratory judgment action.

The parties filed cross motions for summary judgment on the insurance coverage question. Mercer also requested an adjournment of the liability action pending resolution of the declaratory judgment action on coverage. The trial court denied Mercer's summary judgment motion and partially granted Occhifinto's, reserving the claim for counsel fees until the conclusion of the liability action. In his decision the trial judge stated, “I am satisfied that with regard to the proofs that have been presented on this application, that there is coverage under the policy.” The judge then determined “that there is a duty to provide indemnification in the event that there is a finding of liability at trial.” Finally, the judge denied Mercer's request for an adjournment, and consolidated Occhifinto's claim for counsel fees in the declaratory judgment action with the liability action.

At the conclusion of the liability trial, the jury found Keppler not liable, determining Keppler had breached its duty of care to Occhifinto but the breach was not a proximate cause of Occhifinto's damages. Thereafter, Occhifinto moved pursuant to Rule 4:42–9(a)(6) to recover counsel fees incurred defending Keppler in Mercer's declaratory judgment action. The court denied the motion because the jury found Keppler was not liable. The court reasoned that Occhifinto was not a “successful claimant” because success under the rule “is contingent upon the securing of indemnity coverage.”

The Appellate Division affirmed in an unpublished opinion. We granted certification limited to the issue of Occhifinto's right to counsel fees under Rule 4:42–9(a)(6). Occhifinto v. Olivo Constr. Co., LLC, 217 N.J. 291, 88 A. 3d 187 (2014).

II.

Occhifinto contends he is a “successful claimant” under Rule 4:42–9(a)(6) because the trial court required Mercer to defend and, if necessary, indemnify Keppler. In addition, he argues that no deference is owed to the trial court's decision because it was predicated upon a misconception of controlling legal principles, not upon an exercise of its discretion.

Mercer counters that to be a “successful claimant” under Rule 4:42–9(a)(6), Occhifinto was required to prevail in the liability action. Thus, Mercer maintains that the trial court applied the correct legal standard governing the award of counsel fees under Rule 4:42–9(a)(6). Mercer also asserts that it provided a defense to Keppler under a reservation of rights agreement; thus, the only issue decided by the declaratory judgment action was whether Mercer was contractually obligated to indemnify Keppler against the types of claims alleged in Occhifinto's complaint. Accordingly, Mercer claims the duty to defend was never at issue, and Occhifinto must show he succeeded in securing indemnity coverage to be a “successful claimant.”

III.

A.

Resolution of the present issue requires an understanding of New Jersey's policy regarding fee shifting, which is the award of counsel fees to a successful party. New Jersey courts “have traditionally adhered to the American Rule as the principle that governs the allocation of attorneys' fees.” Walker v. Giuffre, 209 N.J. 124, 127, 35 A. 3d 1177 (2012). The American Rule “ ‘prohibits recovery of counsel fees by the prevailing party against the losing party.’ ” In re Estate of Vayda, 184 N.J. 115, 120, 875 A. 2d 925 (2005) (quoting In re Niles Trust, 176 N.J. 282, 294, 823 A. 2d 1 (2003) ). Thus, litigants typically bear the cost of their own legal representation. Ibid. “The purposes behind the American Rule are threefold: (1) unrestricted access to the courts for all persons; (2) ensuring equity by not penalizing persons for exercising their right to litigate a dispute, even if they lose; and (3) administrative convenience.” Niles Trust, supra, 176 N.J. at 294, 823 A. 2d 1.

Notwithstanding New Jersey's “ ‘strong public policy against the shifting of costs,’ ” counsel fees may be awarded in certain circumstances.²

Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 404–05, 982 A. 2d 420 (2009) (quoting Vayda, supra, 184 N.J. at 120, 875 A. 2d 925 ). A goal of fee shifting is to discourage parties from using the costs of litigation to gain an advantage over their opponent. See Niles Trust, supra, 176 N.J. at 299–300, 823 A. 2d 1 ; In re Estate of Lash, 169 N.J. 20, 26, 776 A. 2d 765 (2001). Here, Occhifinto's fee-shifting claim is based on Rule 4:42–9(a), which authorizes fee shifting in eight specific circumstances,³ including “an action upon a liability or indemnity policy of insurance in favor of a successful claimant.” R. 4:42–9(a)(6). Fee shifting under Rule 4:42–9(a)(6) discourages insurance companies from attempting to avoid their contractual obligations and force their insureds to expend counsel fees to establish the coverage for which they have already contracted. Sears Mortg. Corp. v. Rose, 134 N.J. 326, 356, 634 A. 2d 74 (1993) ; Guarantee Ins. Co. v. Saltman, 217 N.J.Super. 604, 610, 526 A. 2d 731 (App.Div.), certif. denied, 109 N.J. 484, 537 A. 2d 1278 (1987) ; Kistler v. N.J. Mfrs. Ins. Co., 172 N.J.Super. 324, 329–30, 411 A. 2d 1175 (App.Div.1980).

The term successful claimant is broadly defined as a party that “ ‘succeed [s] on any significant issue in litigation which achieves some benefit the parties sought in bringing suit.’ ” R.M. v. Supreme Court of New Jersey, 190 N.J. 1, 10, 918 A. 2d 7 (2007)(...