The opinion of the court was delivered by: COHEN
COHEN, Senior District Judge:
This dispute over the interpretation of a contract indemnity clause has generated five state court decisions, two settlements, and two federal suits. A declaratory judgment action and a suit for restitution have been filed in this court. Jurisdiction is based upon diversity of citizenship. The two actions have been consolidated and cross motions for summary judgment have been made by plaintiff, Continental Insurance Companies (Continental), and defendant, South Jersey Gas Company (South Jersey Gas). The controlling question is whether the declaratory judgment of the Superior Court of New Jersey, Chancery Division, Atlantic County, precludes relitigation of the indemnity clause issue in federal court. The state chancery court ruled that R. & T. Castellini Company (Castellini) and its insurer, Continental, were obligated to defend and indemnify South Jersey Gas in a personal injury action filed by Angelo Simoni in the Superior Court of New Jersey, Law Division, Cumberland County. For the reasons discussed below, Continental is collaterally estopped from relitigating the indemnity clause issue in the federal court and is not entitled to relief from the final judgment of the state court. Summary judgment will be granted in favor of defendants.
In January, 1968 South Jersey Gas entered into a contract with Castellini whereby Castellini was to install certain gas mains. The scope of the work to be performed under the contract included the following:
(1) Furnish all labor, excavating and construction equipment, tools, services, and permanent and temporary facilities required in performing all operations necessary for the complete installation of gas mains and services.
The contract further provided that:
Contractor agrees to furnish and maintain during the period of this Contract and at its own expense, policies of insurance covering:
The Contractor shall save harmless, indemnify, and in the event of suit will defend the South Jersey Gas Company from and against all loss, costs, damage, expense, claims, or demands arising out of or caused or alleged to have been caused in any manner by the doing of the work herein provided, including all suits or actions of every kind or description brought against the Company either individually or jointly with the Contractor for or on account of any damage or injury to any person or persons or property, including the Contractor's employees or their property, caused or occasioned, or alleged to have been caused or occasioned by the Contractor, a subcontractor, their employees or agents, by or on account of the performance of any work done pursuant to or in connection with this Contract, or through any negligence or alleged negligence in guarding the work or through any act or omission or alleged act or omission of the Contractor, a subcontractor, their employees or agents.
Continental provided the insurance coverage for this obligation to defend and indemnify South Jersey Gas.
In March, 1968 Angelo Simoni, an employee of Castellini, was severely injured in an accident which occurred on the premises of South Jersey Gas. The truck in which he was riding was plowing snow when it struck a raised manhole cover. Simoni instituted a tort action in the Superior Court of New Jersey, Law Division, Cumberland County, Docket No. L-19965-69, naming South Jersey Gas as one of the defendants.
South Jersey Gas then filed suit in the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-3245-70 seeking a declaratory judgment to establish the rights and obligations of the parties under the indemnity clause. A default judgment was entered against Castellini for failure to answer. The chancery court in June, 1973 issued an oral opinion ruling that Continental, as insurer for Castellini, was ...