On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, L-958-97.
The opinion of the court was delivered by: Wecker, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Stern, Wecker and Graves.
This appeal is before us on remand from the Supreme Court. Smith v. Fireworks by Girone, Inc., 182 N.J. 138 (2004). It arises from interrelated disputes regarding (1) the proper source of payment for a judgment against a municipality and in favor of a child injured after a fireworks display, and (2) the viability of a pretrial settlement between the injured child and the fireworks exhibitor and its insurer. We now reverse an order vacating the settlement, and we hold that the exhibitor's insurer is also responsible, in its role as a statutory surety, for the judgment against the municipality.
In May 1995, defendant Fireworks by Girone, Inc. ("Girone") conducted a fireworks display under contract with defendant Township of Deptford. One week later, plaintiff Brenden Wasniewski, a minor, found an unexploded firework in the park where the display took place. He took it home, lit it several weeks later, and was seriously injured. Plaintiff Karen Smith, individually and as guardian ad litem for her son, Brenden, sued Girone, Deptford, and Girone's insurer, Lexington Insurance Company. Deptford's own insurer, Harleysville Insurance Company of New Jersey, intervened.
The underlying facts and procedural history are set forth in Smith v. Fireworks by Girone, Inc., 180 N.J. 199 (2004) (reversing our unpublished decision in Nos. A-3312-01T2 and A-3929-01T2 (App. Div. June 2, 2003)). Following is a summary of the facts, as well as the detailed procedural history relevant to the issues now before us.
On January 27, 1995, Deptford and Girone signed a written agreement for the 1995 celebration of "Deptford Day," to be held in a municipal park on Saturday, May 20, 1995. Girone had staged a yearly fireworks display for Deptford's May celebration every year for the previous twenty years. Pursuant to their contract, Girone agreed that it would furnish a licensed pyrotechnician, fireworks, and all personnel and equipment necessary to execute the fireworks display, and that it would also "furnish PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE in accordance with the limits set forth by the governing body having jurisdiction naming [Deptford] as additional insured."
Deptford also agreed to obtain the necessary permits required under N.J.S.A. 21:3-3 for a fireworks display; to provide protection and a location for the display that met or exceeded the requirements of the National Fire Protection Agency Code for Fireworks Display; and to "be RESPONSIBLE for all POST DISPLAY CLEAN-UP with respect to removal of debris and POLICING of area AT FIRST LIGHT following the exhibition." Along with the contract was an eleven-page "program," which was "[c]opyright[ed]" by Girone. On page nine of its program, Girone stated that it would provide: "Insurance In the Sum of $2,000,000.00 Naming 'DEPTFORD FUN DAY' as additional insured."
Lexington issued policy number 5632414 to Girone, providing commercial general liability and "Display of Special Effects liability" coverage, with a limit of $2 million in the aggregate and $1 million for each occurrence. The policy ran from May 31, 1994 to May 31, 1995; it was renewed for the period May 31, 1995 to May 31, 1996. A Certificate of Insurance was issued to Deptford, naming it as an additional insured for the fireworks display at the park on May 20, 1995.*fn1
On the evening of May 20, 1995, Girone proceeded with the fireworks display. Immediately following the display, Girone employees and Deptford's Fire Marshal conducted a post-display search. Six potentially live shells and various spent shells were found and turned over to Girone.
The following morning, the Fire Marshal returned to the park to search for additional fireworks. He explained that he "walked up and down the field [searching] while pushing my 2 year old daughter in a baby carriage." He found "empty tubes" and other spent fireworks debris, but no live shells.
One week after the display, ten-year-old plaintiff Brenden Wasniewski was riding his bike in the park with his father. He picked up one live firework shell and some spent fireworks debris both on and near the launch site. He disposed of the debris, but hid the live shell at home. On July 3, 1995, Brenden tried to light the live shell; it exploded in his dominant left hand, causing severe and permanent injuries.
In March 1997, plaintiffs filed a twenty-one count complaint in the Law Division against Girone, Deptford, and other, later dismissed defendants. In an amended complaint, plaintiffs added Lexington, Girone's insurer, as an additional defendant. The counts of the amended complaint relevant to this appeal were:
Counts One to Three against Girone for negligence, breach of contract, and strict liability; Counts Four to Six against Deptford for negligence, breach of contract, and strict liability; and Count Twenty-three against Lexington for strict liability as surety, pursuant to N.J.S.A. 21:3-5, for personal injuries arising out of the fireworks display.
Deptford and Lexington filed cross-claims for contribution and indemnification against all co-defendants. Deptford filed an amended answer and cross-claim seeking defense and indemnification from Girone, alleging that Girone was contractually obligated to provide $2 million insurance for Deptford, as well as defense and indemnification. In November 1999, plaintiffs moved to allow proofs at trial against Lexington as a direct defendant on the grounds that Lexington's liability arose from its role as a surety under N.J.S.A. 21:3-5. The motion was granted.
Thereafter, Deptford moved for summary judgment dismissing plaintiffs' complaint on several grounds. The motion judge dismissed plaintiffs' claims against Deptford alleging strict liability and seeking punitive damages, but denied summary judgment with respect to plaintiffs' negligence and breach of contract claims. The judge held that a reasonable factfinder could conclude that the combination of fireworks and the park could constitute a dangerous condition that would not entitle Deptford to immunity under the Tort Claims Act, N.J.S.A. 59:4-2.
Plaintiffs reached a settlement with Girone and Lexington. The nature and terms of the settlement were placed on the record in "friendly" proceedings, conducted pursuant to Rule 4:44-3, on two separate dates prior to the trial against Deptford. On September 4, 2001, in the presence of counsel for plaintiffs, for Girone, for Lexington, and for Deptford, the Law Division judge was advised that plaintiffs had agreed (subject to court approval of a settlement on behalf of a minor) to settle their claims against Girone and Lexington, but retained the right to a jury trial against Deptford.
Counsel for Lexington told the judge:
I've agreed with the plaintiff's [sic] attorney that the terms that are set forth are the only terms that are acceptable to him, the only terms on which this case can settle to the extent that it's being settled today.
The plaintiffs have indicated that the only other alternative available to Lexington to settle this case is a trial of all issues as to all parties. And that option is not acceptable to Lexington because it leaves their insured exposed to claims against their personal assets so this settlement has been arrived at by the parties.
Significantly, Lexington's counsel had written to plaintiffs' counsel, noting that the alternative of letting plaintiffs go to trial against Girone and Deptford was "unacceptable to Lexington, since it exposes both the Township of Deptford and Fireworks by Girone to the possibility of a verdict in excess of all available limits." (Emphasis added).
Deptford's counsel was present at that hearing, but merely noted that it was not a party to the agreement. Deptford's counsel told the judge:
Your Honor, if I may add one thing. Mr. Hopkin [counsel for Lexington] said that the [sic] agreed to by all the parties. I just want to make it clear that Deptford Township was not made party to any of these agreements.
THE COURT: Okay. That is so noted.
Under the settlement agreement, Lexington would pay out $977,300,*fn2 the sum remaining on the $1 million per occurrence policy covering Girone, and plaintiffs would release Lexington and Girone, while capping their claims against Deptford so that they could "never recover more against Deptford Township than their available insurance policy limits." Counsel for Lexington represented to the judge:
The plaintiffs will cap their claim against the Township of Deptford at available limits of the Township of Deptford which have been represented as being a million dollars primary policy and a $4 million umbrella policy.*fn3 And the plaintiffs will not reach the personal or private assets of Deptford Township but only recover from available coverage.
The parties appeared again before the judge on September 10, 2001 to present the final terms of the settlement, including a structure for the major portion of the net settlement for Brenden's benefit (after deduction of attorney's fees, costs, and certain outstanding medical bills). That sum was to be $647,430.91, with $600,000 to be used to purchase the structured payout through two insurance companies. After all the details of the proposal were placed before the court, counsel for Deptford asked to add one "comment." Deptford's counsel neither objected nor agreed to the substantive terms of the settlement, but stated that he had "[n]o objection to the ...