Decided: July 13, 1987.
TRANSAMERICA INSURANCE COMPANY, PLAINTIFF-APPELLANT,
NATIONAL ROOFING, INC., EAST ORANGE BOARD OF EDUCATION, UNI-PLAN, A NEW JERSEY PARTNERSHIP, CERAMI CONSTRUCTION COMPANY, POLYLITE ROOF DECKS, INC., W.R. GRACE, INC., OLENICK PLUMBING AND HEATING COMPANY, U.S. FIDELITY & GUARANTY CO., RELIANCE INSURANCE COMPANY, CONTINENTAL INSURANCE CO., NORTH RIVER INSURANCE COMPANY, THE AMERICAN INSURANCE CO. AND AMERICAN NATIONAL FIRE, DEFENDANTS, AND ALL WEATHER CRETE, INC., DEFENDANT-RESPONDENT. TRANSAMERICA INSURANCE COMPANY, PLAINTIFF-APPELLANT, V. ALL WEATHER CRETE, INC., DEFENDANT-RESPONDENT, AND EAST ORANGE BOARD OF EDUCATION, UNI-PLAN, A NEW JERSEY PARTNERSHIP, CERAMI CONSTRUCTION COMPANY, NATIONAL ROOFING, INC., POLYLITE ROOF DECKS, INC., W.R. GRACE, INC., OLENICK PLUMBING AND HEATING COMPANY, AND NUMEROUS JOHN DOE INSURANCE COMPANIES PROVIDING GENERAL LIABILITY, COMMERCIAL UMBRELLA LIABILITY AND EXCESS LIABILITY INSURANCE TO ALL WEATHER CRETE, INC. FROM JULY 1, 1975 TO JULY 1, 1983, WHOSE EXACT IDENTITIES ARE YET UNKNOWN, DEFENDANTS
On certification to the Superior Court, Appellate Division.
For modification and remandment -- Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.
In an unreported opinion, the Appellate Division summarized the factual and legal background of this matter:
This case presents the novel issue of whether the settlement of an underlying lawsuit by an insurer on behalf of its insured and the subsequent mootness dismissal of the insurer's declaratory judgment action against the insured regarding coverage renders the insured a "successful claimant" for R. 4:42-9(a)(6) counsel fee purposes. More particularly, defendant All Weather Crete, Inc. (All Weather Crete) here challenges the dismissal of its counterclaim for counsel fees in a declaratory judgment action brought by its insurer, plaintiff Transamerica Insurance Company (Transamerica), to determine a coverage question. The underlying suit against All Weather Crete which precipitated the declaratory judgment action was settled on All Weather Crete's behalf by Transamerica. The trial judge thereafter dismissed the complaint and counterclaim with prejudice on the basis that the coverage question was moot. All Weather Crete argues that the settlement of the underlying suit and the dismissal of Transamerica's declaratory judgment action rendered it a "successful claimant" entitling it to attorneys fees pursuant to R. 4:42-9(a)(6) and that it should have been afforded a plenary hearing on such fees as requested in its counterclaim. Since we agree that under the facts of this case All Weather Crete was a successful claimant, we reverse and remand the matter to the trial judge for a hearing on that issue.
The case arose in 1980 when the East Orange Board of Education filed a complaint against certain contractors for damages it allegedly sustained as a result of faulty construction on a school roof. One of the original defendants in the case was the roofing subcontractor, National Roofing, Inc. Thereafter the complaint which alleged, among other claims, negligence, breach of warranty, faulty workmanship and defective materials was amended to add All Weather Crete, a subcontractor of National Roofing. All Weather Crete forwarded a copy of the complaint to Transamerica with a request that it assume the defense of the action. Transamerica responded with a reservation of rights letter.
On July 1, 1982 after filing a declaratory judgment action seeking a declaration of no coverage for National Roofing, Transamerica filed a second action seeking a declaration of no coverage for All Weather Crete based on the following policy exclusions:
(d) to property damage . . . (7) to work performed by the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith;
(e) to loss of use of tangible property which has not been physically injured or destroyed resulting from . . . (2) the failure of the named insured's products or work performed by or on behalf of the named insured to meet the level of performance, quality, fitness or durability warranted or represented by the named insured; . . . .
In August 1982, All Weather Crete answered and counterclaimed alleging the refusal of Transamerica to defend the action despite the reservation of rights and seeking a declaration that Transamerica was obligated to provide defense and coverage in the Essex County action. On October 1, 1982 Transamerica amended the declaratory judgment complaint against All Weather Crete. The amendment did not alter the claims against All Weather Crete but added new defendants and sought a declaration of insurance coverage for All Weather Crete against various John Doe insurance companies. All Weather Crete responded, essentially repeating the details of the earlier counterclaim with the addition that Transamerica had failed to defend the Essex County action "until recently."
Thereafter discovery was attempted by All Weather Crete on several occasions concerning Transamerica's denial of coverage. These attempts were unsuccessful, culminating in All Weather Crete's January 1984 motion to compel the production of witnesses, to dismiss the declaratory judgment complaint for failure of Transamerica to comply with discovery and for counsel fees. At the hearing on the discovery motion on March 5, 1984, various counsel explained to the trial judge that settlement negotiations were pending in the underlying case in Essex County. At the conclusion of the hearing the trial judge agreed to carry the declaratory judgment actions until April and indicated that All Weather Crete would have its opportunity for discovery, if necessary.
In December 1984, Transamerica moved for judgment dismissing the complaint with prejudice: All Weather Crete moved for entry of judgment on its counterclaim with respect to which it filed an affidavit of attorney's services. At the hearing on the motion on December 21, 1984, the trial judge was apparently advised of the settlement of the underlying action in Essex County to which Transamerica contributed $29,710 on All Weather Crete's behalf. The judge then stated that both declaratory judgment complaints would be dismissed with prejudice as well as All Weather Crete's counterclaim. All Weather Crete argued for attorneys fees; contending that a voluntary dismissal of the complaint with prejudice was a resolution in its favor. The judge ultimately disallowed any claim for fees reasoning that there was no adjudication on the merits since ...
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