On appeal from the Superior Court, Law Division, Mercer County, whose decision is reported at N.J. Super. .
King, R.s. Cohen and Stern. The opinion of the court was delivered by Cohen, R.s., J.A.D.
The Law Division held that plaintiff was not entitled to indemnification from settling co-defendants in a personal injury action for the amount of its own later settlement with the
injured party. The basis of the decision was that the claims that plaintiff, a paint distributor, paid to settle were based on charges of its own independent fault, and not charges of vicarious liability for the fault of the settling co-defendants, the paint manufacturers. The facts and sound reasoning are fully and clearly set forth in the opinion of Judge Philip Carchman, which is found at 251 N.J. Super. 34, 596 A.2d 773 (Law Div.1989). We affirm on that issue substantially for the reasons set forth in Judge Carchman's opinion.
There was another issue in the case. It was plaintiff's claim for its costs of legal defense in the personal injury action. The Law Division denied relief on the basis that plaintiff did not have a valid claim for indemnification. We disagree in part.
A common-law indemnitee, forced to defend claims for which its liability is only vicarious, is entitled not only to the cost of any judgment or reasonable settlement, but also to costs of defense occasioned by the indemnitor's fault.*fn1 Such is the case where a retailer or distributor is sued for damages for a defective product which it merely passed through in the chain of commercial distribution to the injured customer.
R. 4:42-9(a) does not bar indemnification for legal defense costs. It is not that one of the rule's exceptions apply. It is that the rule addresses only legal fees for a party who prevails on a cause of action which does not itself include legal fees as damages. The rule does not bar a claim for fees occasioned by the wrongful act of another. It does not purport to deal with substantive damage rights at all. Where one is obliged by another's tort to bring or defend an action, the fees are damages resulting from the tort and are recoverable as such. See Department of Envtl. Protection v. Ventron Corp., 94 N.J. 473, 504-505, 468 A.2d 150 (1983); Penwag Property
Co. v. Landau, 76 N.J. 595, 598, 388 A.2d 1265 (1978); Pressler, Current N.J. Court Rules, Comment to R. 4:42-9(a)(8) (1991). Conversely, a seller, like plaintiff, who successfully sues the manufacturer of a defective product for legal defense costs is barred by R. 4:42-9 from recovering the legal fees incurred in prosecuting the claim.
To a blameless indemnitee sued for alleged independent fault by an overcautious or overoptimistic plaintiff, defense costs are frequently the principal risk of loss.
Thus, an indemnitee who defends exclusively against the acts of the indemnitor may recoup from the indemnitor the reasonable costs of its defense. Westfield v. Mayo, 122 Mass. 100 (1897). The picture becomes less clear when a plaintiff alleges that a retailer or distributor entitled to indemnification for selling a defective product is also independently liable for plaintiff's damages as the result of its own conduct. The bare statement of the rule is that an indemnitee who has defended against allegations of its independent fault may not recover its costs. See e.g., Weston v. Globe Slicing Mach. Co., 621 F.2d 344, 349 (9th Cir.1980); Davis v. Air Technical Industries, Inc., 22 Cal. 3d 1, 148 Cal.Rptr. 419, 421-422, 582 P. 2d 1010, 1012-1013 (1978); Conrad v. Suhr, 274 N.W. 2d 571, 578 (N.D.1979).
The reported cases diverge on the question what it means for a party to defend against allegations of its independent fault, or of breach of its own warranties, and how to determine whether the party has done so. Some decisions suggest that courts should look to the pleadings to find the answer. For instance, the Conrad court said that if the indemnitee had defended itself at all against allegations of its independent fault, it could not collect counsel fees, and the question who the indemnitee was defending could be made on the basis of the pleadings. 274 N.W. 2d at 578. In Weston, the ...