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New Jersey Property-Liability Insurance Guaranty Association v. Hill International

July 19, 2007

NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION, PLAINTIFF-APPELLANT,
v.
HILL INTERNATIONAL, INC., DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. GLO-L-1266-05.

The opinion of the court was delivered by: Fuentes, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued May 23, 2007

Before Judges Cuff, Fuentes and Baxter.

In this appeal, we are required to determine whether the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) is liable for a claim filed by the issuer of a surety bond, which acted as the guarantor of the performance of a subcontractor in a school construction project. PLIGA argues that under its legislatively created role as the insurer of last resort, it is not obligated to pay such claims. The trial court disagreed. We affirm.

We hold that the direct negligence claim asserted by the surety against the company now insured by PLIGA is a covered claim under both the policy issued by the insolvent carrier, and the statute defining what is a compensable, covered claim against PLIGA. In this context, we reject PLIGA's argument that the surety's claim here is analogous to the subrogation claim asserted by the workers' compensation carrier in Sussman v. Osterhoff, 232 N.J. Super. 306 (App. Div.), certif. denied, 117 N.J. 143 (1989).

I.

The Monroe Township Board of Education (Board), retained Hill International, Inc. (Hill) as a construction manager on a school construction project on which William Hughes was the general contractor. Fidelity & Deposit Company of Maryland (Fidelity) issued a performance and payment bond as surety for the work of William E. Snell, Inc. (Snell), the electrical contractor on the project.

One of Hill's responsibilities was certifying to the Board that Snell's applications and certificates for progress payments were accurate and that Snell was entitled to payment in accordance with the work reflected in the request-for-payment applications. Fidelity alleges that during the period of September 1994 through July 1996, Hill and the architect for the school construction project improperly certified to the Board that the work performed by Snell had progressed sufficiently and that Snell was entitled to receive payments. These unwarranted payment authorizations were the proximate cause of the damages incurred by Fidelity as guarantor of Hill's performance.

On July 24, 1996, Snell ceased work on the project, and on August 2, 1996, he filed for Chapter 7 bankruptcy. After Snell ceased work, Fidelity retained contractors to complete the work remaining under Snell's contract. By this time, however, Snell had received all of the payments he was entitled to under its contract with the Board.

From this point, the school construction project degenerated into a quagmire of litigation. The general contractor (William Hughes) sued the Board; the Board sued Fidelity, prompting it to file a fourth-party complaint against Hill for negligence in certifying that the electrical contractor had performed sufficiently and was entitled to payment.

Hill was insured by Reliance National Indemnity Company (Reliance) under a liability policy effective from November 1, 1996, to November 1, 1999. Reliance assumed Hill's defense limited to Fidelity's allegations of negligent supervision over Snell.*fn2 On October 3, 2001, Reliance was declared insolvent, triggering PLIGA's involvement in the case under the New Jersey Property-Liability Insurance Guaranty Association Act, N.J.S.A. 17:30A-1 to -20 (Act).*fn3

II.

Upon assuming Reliance's role, PLIGA filed a declaratory action against Hill, seeking a judicial declaration that it was not required to indemnify Hill. These ...


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