SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-2511-96T3
LIBERTY VILLAGE ASSOCIATES,
Plaintiff-Respondent/
Cross-Appellant,
vs.
WEST AMERICAN INSURANCE COMPANY,
Defendant-Appellant/
Cross-Respondent,
and
THE WILLIAM CARTER COMPANY and
TRANSPORTATION INSURANCE CO.,
Defendants-Respondents.
Argued January 5, 1998 - Decided February 18, 1998
Before Judges Petrella, Skillman and Lesemann.
On appeal from Superior Court of New Jersey,
Law Division, Middlesex County.
Alan H. Bernstein argued the cause for defendant-appellant/cross-respondent (Brach, Eichler, Rosenberg,
Silver, Bernstein, Hammer & Gladstone, attorneys; Mr.
Bernstein, of counsel and on the brief; David J. Klein,
on the brief).
Richard E. Snyder argued the cause for plaintiff
respondent/cross-appellant (Morgan, Melhuish Monaghan,
Arvidson, Abrutyn & Lisowski, attorneys; Mr. Snyder, of
counsel and on the brief).
Gerard M. Green argued the cause for defendant
respondent The William Carter Company (Charles Peter
Hopkins, II, attorneys; Mr. Green, on the brief).
Ernest W. Schoellkopff argued the cause for defendant
respondent Transportation Insurance Company (Connell,
Foley & Geiser, attorneys; John B. Lavecchia, of
counsel; Mr.Schoellkopff on the brief).
The opinion of the court was delivered by
LESEMANN, J.S.C. (temporarily assigned).
This case concerns an insurance policy provided by a
commercial tenant for the benefit of its landlord. The policy
named the landlord as an “additional insured,” but only with
respect to incidents arising “out of the use of” the tenant's
premises. The question presented is the applicability of that
language to an accident which occurred off the tenant's premises,
but close to those premises, involving a prospective customer
approaching the tenant's store. Under policy language similar to
that here, this court found coverage in Franklin Mutual Ins. Co. v.
Sec. Indem. Ins. Co.,
275 N.J. Super 335 (App. Div. 1994) and
Harrah's Atlantic City, Inc. v. Harleysville Ins. Co.,
288 N.J.
Super 152 (App. Div. 1996). Plaintiff landlord, a shopping
center, argues that those holdings dictate a similar conclusion
here. The tenant's insurer, however, says that the case is
critically different from Franklin and Harrah's and compels a
different result.
The facts can be set out briefly. Liberty Village Associates
(Liberty) operates a shopping center consisting of approximately
eighty-eight stores. One of those stores is owned by the William
Carter Company (Carter) and another is operated as the Gourmet
Basket (Gourmet). On a snowy day, February 26, 1994, Marlene
Phillips went shopping at Liberty. She first visited the Carter
store and then crossed an open cobblestone street and sidewalk to
visit Gourmet, a shop in a different building. Just before she
reached a covered entrance to Gourmet, she slipped on what she
believes to have been ice and fell, with her feet landing under the
covered entranceway. She subsequently filed suit against Gourmet
and Liberty.
There is no question that the fall occurred outside of the
premises leased to Gourmet. There is also no question that the
fall took place within very close proximity to those premises in an
area where Gourmet employees normally provided maintenance and snow
and ice removal. They had performed no such functions on the day
in question, however.
The lease between Liberty and Gourmet provided that,
Tenant's liability insurance shall indemnify
and save Landlord harmless from and against
any and all claims, actions, damages,
liability and expenses in connection with loss
of life, personal injury and/or damaged
property arising from or out of any occurrence
in, upon or at the premises, or any part
thereof....
Pursuant to that lease obligation, Gourmet obtained from defendant
West American Insurance Company (West American) a liability policy
which named Liberty as an additional insured. However, it also
stated that Liberty had that “additional insured” status “only with
respect to liability arising out of the ownership, maintenance or
use” of the premises leased to Gourmet.
Carter maintained its liability insurance with Transportation
Insurance Co. (Transportation) and that policy also named Liberty
as an additional insured.See footnote 1 Based on the two policies referred to,
and while the Phillips personal injury action was pending, Liberty
sued Gourmet's insurer (West American)See footnote 2 and Carter and
Transportation, asserting coverage in its favor under either or
both the policies maintained by its tenants. Carter and
Transportation sought summary judgment dismissing the complaint as
to them, and the trial court granted that motion, concluding that
the accident “did not arise out of the use of the Carter premises.”
Liberty and West American then jointly settled Phillips'
injury claim for $20,000. They also submitted cross-motions for
summary judgment under an agreed statement describing the issue to
be resolved as whether the Harrah's decision “controls the instant
matter; i.e., whether Liberty Village is entitled to coverage under
the West American additional insured endorsement.” They agreed
that the losing party would bear the entire $20,000 payment to
Phillips and also agreed that the prevailing party “will apply to
the court for attorney's fees and interest.”
The trial court granted summary judgment for Liberty,
concluding that, “The policy of West American covered the landlord
with respect to injuries arising out of the use of the demised
premises. This injury did arise out of the use of the demised
premises.” However, the judge then denied Liberty's request for
counsel fees, saying that he would “exercise the discretion that I
have” to deny the application.
West American appeals that summary judgment in favor of
Liberty. Liberty cross-appeals from the denial of counsel fees.
In addition, West American claims that if this court affirms the
decision that it has responsibility under its policy, then the
court should reverse the grant of summary judgment to Carter and
Transportation so that Carter and/or its insurer bears the same
responsibility as West American.
We are satisfied that the summary judgment in favor of Liberty
and against West American, should be affirmed. We are also
satisfied that the status of Carter is significantly different from
that of Gourmet; that the Carter policy provides no coverage for
the Phillips fall; and that the summary judgment in favor of Carter
and its insurer, Transportation, should be affirmed. We find the
trial court erred, however, in its rejection of Liberty's
application for an award of counsel fees.
In Franklin Mutual Ins. Co. v. Sec. Indem. Ins. Co., supra, 275 N.J. Super 335 this court dealt with an “additional insured” provision virtually identical to that here. The policy had been obtained by a tenant operating a luncheonette (the Jury Box) within an office building containing a number of tenants. It covered the
landlord as an “additional insured” but “only with respect to
liability arising out of the ownership, maintenance or use” of the
premises leased to the tenant. The accident in question occurred
on the exterior stairs leading away from the Jury Box and involved
a fall by a customer who had just left the luncheonette. She
slipped on a substance on the top step, her heel caught a chipped
tile and she fell down the steps. Her expert testified that the
step on which she slipped was sloped, that the tiles were not slip
resistant, and the chipped tile had created a hazard. Repairs and
maintenance of the steps were the obligation of the landlord, not
the tenant.
When the fall victim sued the landlord as well as the tenant
luncheonette, the landlord asserted coverage as an additional
insured under the tenant's policy. The trial court granted the
carrier's motion for summary judgment but this court reversed. We
noted that additional insured coverage under the policy was not
limited to an occurrence “within the leased premises” but rather,
coverage was defined by the significantly broader phrase, “arising
out of the use” of the premises. We said that phrase,
must be interpreted or construed in a broad
and comprehensive sense to mean 'originating
from the use of' or 'growing out of the use
of' the premises leased to Jury Box. Thus,
there need be shown only a substantial nexus
between the occurrence and the use of the
leased premises in order for the coverage to
attach. The inquiry, therefore, is whether
the occurrence which caused the injury,
although not foreseen or expected, was in the
contemplation of the parties to the insurance
contract a natural and reasonable incident or
consequence of the use of the leased premises
and, thus, a risk against which they may
reasonably expect those insured under the
policy would be protected.
[275 N.J. Super. at 340-341.]
This court concluded that the accident in question was a risk
against which the tenant's insurer had provided protection. We
found there was a “relationship,” a “substantial nexus,” between
the “fall on the exterior steps, and the use of the premises leased
to Jury Box,” and thus “the accident arose out of the use of
premises leased to Jury Box in the broadest and most comprehensive
sense.”
Two years after the decision in Franklin Mutual, this court
applied those same principles to find “additional insured” coverage
for a landlord under a tenant's liability policy in Harrah's
Atlantic City, Inc. v. Harleysville Ins. Co., supra,
288 N.J.
Super 152. There the tenant was a store known as Talk of the
Walk, Inc. (TOW) which leased space within Harrah's hotel in
Atlantic City. The lease required the tenant to obtain
comprehensive general liability insurance to cover Harrah's, and
TOW did so. It obtained from Harleysville Insurance Company
(Harleysville) a policy providing coverage to Harrah's as an
additional insured but, just as in Franklin Mutual and our present
case, it provided that coverage, “only with respect to liability
arising out of the... use of” the TOW premises.See footnote 3
Although the policy language in Harrah's was essentially the
same as that in Franklin Mutual (and that used here) the facts were
quite different. In Harrah's, the injured parties were a
principal/employee of TOW and her friend, who had driven to
Harrah's and parked in its garage, a detached building across the
street from the hotel. They then entered the hotel, ate lunch at
a restaurant within the hotel and shopped at TOW. When they left
TOW they walked through the hotel, onto the sidewalk in front of
the hotel and were in the process of crossing the street to enter
the hotel's garage when they were struck by a vehicle driven by one
of Harrah's parking valets. They filed a personal injury suit
against Harrah's, and Harrah's called on Harleysville to defend and
indemnify it against the claim. Harleysville denied
responsibility; Harrah's filed suit against Harleysville;
Harleysville moved for summary judgment dismissing that suit and
the trial court granted the motion. This court reversed.
The Harrah's court relied generally on the reasoning in
Franklin Mutual. We noted that the same key words, “arising out of
the use of” the leased premises, defined coverage in each case.
Our opinion repeated the language of Franklin Mutual, that the
quoted phrase “in a broad and comprehensive sense... [means]
'originating from the use of' or 'growing out of the use of' the
leased premises.” Id. at 157. We reaffirmed that coverage under
such language is afforded for accidents “occurring outside of the
leased premises,” and we also said that coverage was not
“contingent on whether the tenant had any liability for the
accident.” Ibid.
The Harrah's opinion also noted that “physical proximity
between the leased premises and the scene of the accident” was not
essential to find coverage. Ibid. It said further that by
insisting that a tenant provide such coverage, “the landlord is
simply attempting to insure against the risk of liability generated
by the business about to be conducted by the tenant, and place the
cost of insuring that risk on the tenant. There is no prohibition
in law or public policy against such a contract.” Id. at 158.
Accordingly, we concluded, “where the landlord can trace the risk
creating its liability directly to the tenant's business presence,
it is not unreasonable for the landlord to expect coverage,
inasmuch as it can be truly said that the accident originated from
or grew out of the use of the leased premises.” Id. at 158-159.
Thus, under all the facts of the case, we found “the requisite
nexus” between the tenant's business and the accident in question
and concluded that the landlord's liability “fell within the
'landscape of risk' that Harrah's reasonably could expect to be
insured against.” Id. at 159.
Despite the parties' reference to Harrah's in the agreed
statement submitted to the motion judge, it is apparent that, as it
relates to Gourmet, this case is much closer to Franklin Mutual
than to Harrah's. Indeed, but for the fact that the injured party
in Franklin Mutual had just left the tenant's premises, while here
the injured party was approaching the tenant's premises (which we
regard as an immaterial distinction) there is no significant
difference between the two cases. In both, the critical policy
language provides coverage for an incident “arising out of the use
of” the leased premises. In both a fall occurred outside of, but
very close to, the leased premises. In both, the injured party was
where she was precisely because of the tenants' use of the
premises: it was the tenant's business that had brought her to the
area. And in both, to use the language of Franklin Mutual, the
incident was something “originating from,” or “growing out of,” the
“use of” the leased premises. Thus, if one concludes (as the court
did in Franklin Mutual) that the occurrence there was “in the
contemplation of the parties to the insurance contract a natural
and reasonable incident or consequence of the use of the leased
premises and, thus, a risk against which they may reasonably expect
those insured under the policy would be protected,” that same
conclusion must follow in this case. Just as there was a
“substantial nexus” between the occurrence and the use of the
leased premises in Franklin Mutual, so there is such a “substantial
nexus” here.
In short, the holding and reasoning of Franklin Mutual, with
which we are in full accord, lead inexorably to the conclusion that
the injury here falls within the scope of protection afforded
Liberty as an “additional insured” under the policy obtained by
Gourmet. Questions of precisely where the fall took place
whether within or slightly outside of the extended sidelines of the
Gourmet property, or completely or only partially under the
overhang in front of the Gourmet store, and lease provisions
dealing with maintenance and snow or ice removal, are not
dispositive. As noted in Harrah's, insurance coverage for the
landlord is not contingent upon a finding of the tenant's
liability. 288 N.J. Super. at 159. Indeed, the very premise of
the need for the policy is the actual or potential liability of the
landlord - not the tenant.
West American maintains that its position and that of Gourmet on the one hand, and the position of Carter and Transportation on the other hand, are identical. From that premise it argues that the grant of summary judgment in favor of Carter and Transportation, dismissing Liberty's claim against them, compels a similar result respecting Liberty's claim against West American. Alternatively, it says that if we affirm the trial court's decision that West American's insurance policy provides benefits to Liberty here, then we should reverse the dismissal of Liberty's claim against Transportation and hold that Transportation's policy provides the same benefits to Liberty as does West American's policy.
Preliminarily, we note a substantial question as to whether West American has standing to raise these issues. West American filed no cross-claim against Carter or Transportation, nor did it
participate in the summary judgment motion brought by Carter and
Transportation which led to the dismissal of Liberty's claim
against them. Generally one defendant in a tort action may not
appeal a judgment favoring a co-defendant unless the claimed error
also prejudicially affected the proposed appellant's own defense.
Tiger v. American Legion Post No. 43,
125 N.J. Super 361, 370
(App. Div. 1973); Donofrio v. Farr Lincoln Mercury, Inc.,
54 N.J.
Super 500, 504-505 (App. Div. 1969). Here West American shows no
prejudice to its own position, and with no cross-claim for
contribution or indemnification, it is difficult to see how it
could be said to have standing to challenge the decision in favor
of Carter and Transportation.
Nevertheless, the issue of the different rights and
obligations of the two tenants and their respective insurers is a
significant one. It has been briefed and argued and we deem it
appropriate to respond to it.
We are satisfied that with respect to several factors that may
bear on a “substantial nexus” analysis the status of Carter is
significantly different from that of Gourmet.
One such factor is the relationship between the injured
party's presence at the scene and that of the tenant. The accident
occurred as Ms. Phillips was about to enter the Gourmet shop. It
was the presence and location of Gourmet that had brought her to
the spot where she fell - not that of Carter.
Another factor is the physical proximity between the accident
scene and the tenant's presence. Ms. Phillips was very close to
the Gourmet premises at the time she fell, under or almost under,
the sheltering overhang in front of Gourmet's entrance and within
a few feet of its doorway.See footnote 4 Carter, on the other hand, was on the
other side of an intervening roadway and sidewalk.
A third factor is maintenance responsibility for the area
where the fall occurred. Gourmet had such responsibilities,
including the obligation to remove snow and ice in the general area
where Ms. Phillips fell,See footnote 5 while Carter did not. Whatever common
area obligation Carter may have had for maintenance or snow removal
was related to the area adjacent to its leased premises, not that
of Gourmet.
Indeed, the only relationship Carter had to anything that took
place on the day in question comes from Ms. Phillips' having
visited Carter before she set out for Gourmet. In terms of any
relationship to the accident, that was an immaterial happenstance.
It had no more significance or connection with the injury than
would have arisen from six, eight, ten or more prior stops that Ms.
Phillips, hypothetically, might have made in other Liberty Village
shops before heading for Gourmet. Any “relationship” between such
prior visits and the fall in front of Gourmet was so attenuated as
to be virtually nonexistent. If one were to stretch a concept to
say there was some “nexus” between the earlier visits and the later
fall, it certainly could not be termed a “substantial nexus.”
Whichever of the various formulations in Franklin Mutual or
Harrah's are applied here to test whether the Phillips accident
arose out of “the use of” particular premises, the answer is
consistently affirmative respecting the Gourmet premises and
consistently negative for the Carter premises. Thus, for the
reasons stated, it is reasonable and realistic to say that the fall
was one “originating from” or “growing out of” the use of the
Gourmet premises. It did not originate from, grow out of, or have
anything to do with the Carter premises.
There was a “relationship” and a “substantial nexus” between
the Gourmet premises and the Phillips accident. There was neither
a relationship (in any realistic sense) and certainly no
“substantial nexus” between the Carter store and the fall.
So too with respect to the probable intent of the parties to
the insurance contract: one can readily believe that it would make
sense to them to have Gourmet provide insurance for the landlord
concerning the area in front of the Gourmet store, where Gourmet
has maintenance responsibilities, and pedestrians are likely to be
present because Gourmet is there. It would make no sense to have
Carter provide such insurance for something involving no link to
Carter.
In sum, just as we are satisfied that the accident here arose
“out of the use of” the Gourmet premises, so we are satisfied that
it did not arise “out of the use” of Carter's premises. The two
situations are critically different and the decision in one
certainly does not dictate, or even argue for, a similar decision
in the other. The Law Division judge was correct in his decision
to dismiss the claim against Carter's insurer, Transportation, and
also in his decision not to dismiss the claim against West
American, but rather to find that West American's policy does
provide coverage for Ms. Phillips' accident.
The trial court's denial of West American's request for the award of counsel fees was made without any statement of reasons. The court simply announced that it chose to exercise its discretion against making such an award.
While the normal rule in this state is to require each litigant to pay its own counsel fees, there are certain exceptions to that policy, and a suit seeking coverage under a liability insurance policy is one of those exceptions. R. 4:42-9(a)(6). The theory is that one covered by a policy is entitled to the full protection provided by the coverage, and that benefit should not be diluted by the insured's need to pay counsel fees in order to secure its rights under the policy. Sears Mortgage Corp. v. Rose, 134 N.J. 326, 356 (1993); Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 572 (1970). An insured is not required to show bad faith
or arbitrary action by an insurer in order to recover its fees.
Corcoran v. Hartford Fire Ins. Co.,
132 N.J. Super 234 (App. Div.
1975).
The parties in this case specifically provided that the
prevailing party could apply to the court for the award of counsel
fees. While the stipulation does not, of course, promise such an
award of fees, it does suggest that both anticipated the likelihood
that the loser would pay the winner's fee. In view of the
provisions of R. 4:42-9(a)(6), such an expectation would certainly
seem reasonable.
While the granting or denial of a counsel fee application is
frequently described as a matter within the trial court's
discretion, the absence of any findings or statement of reasons by
the court here undercuts what might otherwise be an inclination to
defer to that discretion. It is impossible to weigh the propriety
of the determination when the court has not told us the reason for
its conclusion.
No reason is suggested why the apparent expectation of the
parties respecting the payment of fees should not be carried out
and why the policy underlying the rule should not be applied here.
And certainly in view of Franklin Mutual and Harrah's, a conclusion
that West American's policy does cover this accident could not be
surprising to anyone. On balance, the denial of a counsel fee
award should be reversed.
The matter is reversed and remanded with respect to the counsel fee issue; in all other respects the determinations of the Law Division are affirmed.
Footnote: 1 Transportation seems to have mistakenly issued the wrong
form of policy to Carter. The policy referred to construction
activities rather than the operation of a store. The trial court
concluded that the latter is “probably” what had been intended by
the parties and dealt with the policy on that basis.
Footnote: 2 Gourmet is not a party to this suit. We have been advised
that it is out of business and thus Liberty has proceeded only
against Gourmet's insurer.
Footnote: 3 In fact the wrong endorsement had been attached to the TOW
policy, providing “manufactures and contractors liability”
coverage rather than the “managers or lessors of premises”
endorsement that was intended. The policy was reformed by the
court to provide coverage in the form noted above which all
acknowledged to be what was intended by the parties.
Footnote: 4 While Harrah's noted that physical proximity between an
accident scene and leased premises was not essential to a finding
that the accident arose “out of the use” of those premises, it
did not say, and there is no reason to find, that such proximity
is not one of the factors that should be considered in deciding
the essential “substantial nexus” issue.
Footnote: 5 We do not imply that Gourmet was liable for the Phillips
injury because of non-compliance with any of those obligations.
We note the obligations only to demonstrate the relationship
between the Gourmet premises and the nearby common area where the
fall occurred.