SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-3335-95T1
DEREK MAUTZ,
Plaintiff,
v.
J.P. PATTI COMPANY, REMY
ASSOCIATES, a New Jersey
Partnership, CATERPILLAR,
INC., FOLEY MACHINERY CO.,
et als.,
Defendants,
and
REMY ASSOCIATES,
Defendant-Third Party
Plaintiff-Appellant,
v.
GAGLIANO BROS. CO. and
JOSEPH GAGLIANO t/a GAGLIANO
BROTHERS and GAGLIANO BROTHERS
EXCAVATING CO.,
Third-Party-
Defendant-Respondent.
__________________________________
Argued: January 8, 1997 - Decided: February
24, 1997
Before Judges King, Keefe and Conley.
On appeal from the Superior Court of New
Jersey, Law Division, Passaic County.
Richard E. Snyder argued the cause for
appellant (Morgan, Melhuish, Monaghan,
Arvidson, Abrutyn & Lisowski, attorneys; Mr.
Snyder, on the brief).
Anthony J. Andolino argued the cause for
respondent (Gallo Geffner Fenster, attorneys;
Mr. Andolino, Peter J. Heck and Valerie A.
Vladyka, on the brief).
The opinion of the court was delivered by
KING, P.J.A.D.
This case involves interpretation of a contractual indemnification clause in an agreement between a general contractor and a subcontractor. The case arises from a personal injury claim made by the subcontractor's employee sustained at a June 4, 1990 job-site accident during installation of a drainage system. The Law Division judge dismissed the general contractor's claim for contractual indemnity, finding the "hold harmless" clause in the contract nonefficacious. We disagree and reverse. We find that the clause expressly and unambiguously provides for partial indemnity, to the extent the subcontractor's negligent acts or omissions contributed to its employee's injury.
In 1992 plaintiff Derek Mautz sued several defendants for his severe personal injury, partial amputation of an arm, suffered on June 4, 1990 while installing a drainage grate in a catch-basin at a construction site in Ringwood Industrial Park, Ringwood, New Jersey. Plaintiff was an employee of Gagliano Brothers Excavating Company (Gagliano), a subcontractor. Plaintiff sued Remy Associates (Remy), the owner acting as general contractor on the job-site; Caterpillar, Inc., the manufacturer of the front-end loader involved in the accident; and Foley Machinery Co., which
sold the loader to his employer, Gagliano. Remy then joined
plaintiff's employer, Gagliano, as a third-party defendant seeking
contractual indemnification.
In August 1994 Gagliano moved to dismiss Remy's claim for
contractual indemnity. Remy responded by filing a cross-motion for
summary judgment. After argument, the Law Division judge granted
Gagliano's motion and denied Remy's motion, ruling as a matter of
law that the contractual indemnity clause was ambiguous and
ineffective in shifting any portion of the cost of plaintiff's
claim from Remy to Gagliano.
After this adverse ruling, Remy settled plaintiff's claim for
about $1,150,000. A consent judgment memorialized the settlement.
A few months later plaintiff settled with the remaining defendants,
Caterpillar and Foley, for $400,000. Remy then appealed from the
adverse ruling on its indemnity claim.
Plaintiff was working for Gagliano laying pipe and installing a catch-basin in an excavated trench about five-feet deep. Joe Gagliano was operating a Caterpillar 920 front-end loader. While plaintiff was lowering a two-hundred-pound steel grate for the catch-basin into the excavation, the Caterpillar lunged forward, fell into the excavation, and trapped plaintiff's arm and hand between the catch-basin and the bucket. Plaintiff lost part of his arm.
Remy was the general contractor. (Patti Roofing, an affiliate of Remy, was actually the owner.) Gagliano was a subcontractor
hired to perform site clearing, excavation and drainage work. Remy
contracted with Gagliano in a standard-form written subcontract
entitled "Standard Form of Agreement Between Contractor and
Subcontractor," American Institute of Architects (AIA) Document
A401, executed on September 7, 1989.
Plaintiff recovered his workers' compensation benefits and
then targeted Remy, as general contractor, in this third-party
action. Plaintiff relied on two expert engineers, Robert Ehrlich
and James Vigani, to establish Remy's liability in this action.
Their reports are part of this record and were relied upon in the
summary judgment proceedings. These two experts blamed the
accident in substantial part on both Remy and Gagliano.
Ehrlich said the accident was caused by the collapse of the
trench wall because it was not properly shored as required by
Occupational Health and Safety Administration regulations. Ehrlich
concluded responsibility fell on: (1) Gagliano Brothers for not
shoring the walls of the trench; (2) Joe Gagliano, personally, for
operating the front-end loader too close to the excavation wall;
(3) Remy, acting as both owner and general contractor, as
"responsible for the general safety of the worksite and responsible
that safe work practices were observed;" (4) Foley for selling an
unsafe vehicle; and (5) Caterpillar for failure to warn and
improper design.
Vigani concluded that two OSHA violations caused the accident:
(1) no shoring or stabilization of the excavation walls existed,
and (2) no stop logs or barricades placed to prevent the operator
from driving the equipment into the excavation. Vigani said that:
Based upon my review of the material provided,
and the above understandings, it is my opinion
that the accident in which Mr. Mautz was
injured was a direct result of the lack of an
adequate safety program at the job site, and
by improper and unsafe procedures being used
by Gagliano Brothers Excavation. It is my
further opinion that it was the general
contractor's [Remy] responsibility to
implement a safety program and to ensure,
through monitoring of the work performed, that
the program was being complied with. Had an
appropriate safety program been in place and
been complied with, the subject accident would
not have occurred.
Confronted with this proposed evidence supporting plaintiff's
liability case, Remy settled and turned to this contractual
indemnity claim.
The indemnification clause in the contract between Remy, the general contractor, and Gagliano, the subcontractor, states:
11.11 Indemnification
11.11.1 To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, the Architect and the Contractor and all of their agents and employees from and against all claims, damages, losses and expenses including but not limited to attorney's fees, arising out of or resulting from the performance of the Subcontractor's Work under this Subcontract, provided that any such claim, damage, loss, or expense is attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of tangible (other than the Work itself) including the loss of use
resulting therefrom, to the extent caused in
whole or in part by any negligent act or
omission of the Subcontractor or anyone for
whose acts he may be liable, regardless of
whether it is caused in part by a party
indemnified hereunder. Such obligation shall
not be construed to negate, or abridge, or
otherwise reduce any other right or obligation
of indemnity which would otherwise exist as to
any party or person described in this
Paragraph 11.11.
11.11.2 In any and all claims against the
Owner, the Architect, or the Contractor or any
of their agents or employees by any employee
of the Subcontractor, anyone directly or
indirectly employed by him or anyone for whose
acts he may be liable, the indemnification
obligation under this Paragraph 11.11 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
under workers' or workmen's compensation acts,
disability benefit acts or other employee
benefit acts. [emphasis supplied.]
Perhaps also pertinent to the understanding of the parties is:
11.5.1 The Subcontractor shall take all
reasonable measures initiated by the
Contractor and with all applicable laws,
ordinances, rules, regulations, and orders of
any public authority for the safety of persons
or property in accordance with the
requirements of the Contract Documents.
Our review of this documentary record discloses that Remy itself was not engaged in any of the work activity at the job site. Remy did not in any sense coordinate or direct the work. Gagliano was the only contractor actively involved at the accident site. Remy's responsibility to plaintiff derived from its nondelegable duty under the OSHA regulations to provide for safety at the job site, not from an actual participation in the work. Indeed, Remy
appeared to have had no supervisory interest in the particulars of
the work or job safety, but left these matters to Gagliano as the
supposedly responsible subcontractor.
The Law Division judge found that in this circumstance the §
11.11 indemnification agreement did not "unequivocally express an
intention that Gagliano Brothers will indemnify Remy Associates for
its own negligence" and dismissed the indemnity claim by Remy. We
disagree with this outright dismissal and conclude that Gagliano
did expressly contract to indemnify Remy for claims arising from
the performance of the contract, such as plaintiff's claim in this
case, "to the extent caused in whole or in part by any negligent
act or omission of the subcontractor [Gagliano]."
The general principles of construction of contractual indemnity agreements, or "hold harmless" clauses, are clear.
Indemnity contracts are interpreted in accordance with the rules governing the construction of contracts generally. Cozzi v. Owens Corning Fiber Glass Corp., 63 N.J Super. 117, 121 (App. Div. 1960); Longi v. Raymond-Commerce Corp., 34 N.J. Super. 593, 603 (App. Div. 1955). When the meaning of the clause is ambiguous, however, the clause should be strictly construed against the indemnitee. See Longi v. Raymond-Commerce Corp., supra, 34 N.J. Super. at 603; Huck v. Gabriel Realty, 136 N.J. Super. 468, 475 (Law Div. 1975). Thus, 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. Longi v. Raymond-Commerce Corp., supra, 34 N.J. Super. at 603; see Carbone v. Cortlandt Realty Corp., 58 N.J. 366, 368 (1971); George M. Brewster & Son, Inc. v. Catalytic Const. Co., 17 N.J. 20, 33 (1954);
Rommell v. United States Steel Corp.,
66 N.J.
Super. 30, 43 (App. Div.), certif. denied,
34 N.J. 580 (1961); Cozzi v. Owens Corning Fiber
Glass Corp., supra, 63 N.J. Super. at 121;
Polit v. Curtiss Wright Corp.,
64 N.J. Super. 437, 442-43 (App. Div. 1960); Stern v.
Larocca,
49 N.J. Super. 496, 502 (App. Div.
1958).
[Ramos v. Browning Ferris Industries,
103 N.J. 177, 102-03 (1986).]
As Judge Pressler stated, when carefully summarizing the purpose of
these agreements 20 years ago:
As a matter of well-settled legal
doctrine, it is clear that an indemnity
provision is to be construed in accordance
with the rules for the construction of
contracts generally, and hence that the
judicial task is to ascertain the intention of
the parties from the language used, the
surrounding circumstances and the objects
sought to be attained by the parties under
their agreement. It is also a well-settled
principle in this jurisdiction that there is
no essential public policy impediment to an
indemnitor undertaking to indemnify the
indemnitee in respect of the indemnitee's own
negligence. That 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 and the
parties ought therefore to be free to
determine how the insurance burdens will be
distributed between them and who will pay for
specific coverage for specific risks. The
impact of the indemnity agreement between
owner and contractor and contractor and
subcontractor is therefore, in practical
effect, the parties' allocation between
themselves of the total required insurance
protection for the project.
[Doloughty v. Blanchard Const. Co.,
139 N.J.
Super. 110, 116 (Law Div. 1976).]
We are cognizant of the statement of Justice Pollock for the Court
in Ramos, 103 N.J. at 191, that "nothing in the [Workers'
Compensation] Act precludes an employer from assuming a contractual
duty to indemnify a third party through an express agreement."
However, an indemnitee cannot be indemnified for its own negligence
if it is the only negligent party. N.J.S.A. 2A:40A-1.See footnote 1 This is
the only pertinent public policy caveat: if Remy was solely
negligent and Gagliano free of fault, this action would be barred
by this statute, no matter what the contractual clause said. Thus,
our interpretative task is to determine the parties' intent, if
that intent is made clear.
The indemnity provision is somewhat stilted in expression.
But stripped of unnecessary surplusage for purposes of our
analysis, the clause says:
To the fullest extent permitted by law,
the Subcontractor [Gagliano] shall indemnify .
. . the Contractor [Remy] from all claims . .
. arising out of or resulting from the
performance of the Subcontractor's work under
this Subcontract, provided that any such claim
. . . is attributable to bodily injury . . .
to the extent caused in whole or in part by
any negligent act or omission of the
Subcontractor, . . . regardless of whether it
is caused in part by a party indemnified
hereunder. . . .
We find this clause clear and unambiguous. The clause states
Gagliano's obligation to indemnify Remy but only to the extent that
the claim is caused by Gagliano's own negligence. The clause does
not provide for indemnity to Remy for Remy's own negligence, but
only to the extent of Gagliano's negligence. And the indemnity is
available "regardless of whether [the claim] is caused in part by
a party indemnified hereunder [Remy]."
We can find only one other court's interpretation of this
precise clause. In Braegelmann v. Horizon Development Co.,
371 N.W.2d 644 (Minn. Ct. App. 1985), a construction accident case, the
court observed that "The additional phrase, `to the extent caused,'
however, suggests a `comparative negligence' construction under
which each party is accountable `to the extent' their negligence
contributes to the injury. . . ." Id. at 646. The Minnesota court
concluded that: "Under the terms of this indemnification clause,
the general contractor is not contractually entitled to
indemnification from the subcontractor to the extent the damages
were caused by the general contractor's own negligence." Id. at
646-47. We agree with the "comparative negligence" analogy. The
clause seemingly was intended to provide indemnity but only to the
extent the subcontractor's negligence contributed to the loss.
We reject Remy's claim for recovery of the full settlement
under any theory of implied indemnity or implied contract damages
in this situation. Implied indemnity is obviously disfavored in
this context, see Ramos v. Browning Ferris Industries, 103 N.J. at
189, and only express indemnity agreements are deemed efficacious.
Id. at 190-91.
As noted, Section 11.5.1 states: "The Subcontractor shall take
all reasonable measures initiated by the Contractor and with all
applicable laws, ordinances, rules, regulations, and orders of any
public authority for the safety of persons or property in
accordance with the requirements of the Contract Documents." This
section may provide some guidance to the trier-of-fact on remand on
the intent of the parties with respect to safety responsibilities
on the job. However, we are satisfied that Section 11.11 is the
only portion of the contract which creates a contractual right to
indemnification. This section is quite specific and we conclude it
was the only loss-shifting mechanism contemplated in the contract.
We remand for a plenary hearing. On remand, the trier-of-fact
must, of course, first be satisfied of the reasonableness of the
settlement under the circumstances. If the amount of the claim is
reasonable, the fact-finder must then apportion the causative
negligence between Remy and Gagliano; "to the extent" that
Gagliano's negligence caused the plaintiff's injury, Gagliano must
then reimburse Remy pursuant to Section 11.11 of the contract.
Reversed.
Footnote: 1N.J.S.A. 2A:40A-1 states:
A covenant, promise, agreement or understanding in, or in connection with or collateral to a contract, agreement or purchase order, relative to the construction, alteration, repair, maintenance, servicing, or security of a building, structure, highway, railroad, appurtenance and appliance, including moving, demolition, excavating, grading, clearing, site preparation or development of real property connected therewith, purporting to indemnify or hold harmless the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, his agents, or employees, is against public policy and is void and unenforceable; provided that this section shall not affect the validity of any insurance contract, workmen's compensation or agreement issued by an authorized insurer.