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Watkins Engineers & Constructors, Inc. v. Essex Insurance Co.

September 21, 2007

WATKINS ENGINEERS & CONSTRUCTORS, INC., PLAINTIFF-RESPONDENT,
v.
ESSEX INSURANCE COMPANY, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, L-1558-03.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted September 10, 2007

Before Judges Lintner, Parrillo and Sabatino.

In this insurance coverage action, defendant Essex Insurance Company ("Essex") appeals a final judgment entered against it on March 15, 2006, as supplemented by a July 11, 2006 order awarding counsel fees. The orders were entered following a three-day bench trial in the Law Division.

The judgment against Essex was procured by plaintiff Watkins Engineers & Constructors, Inc. ("Watkins"). Watkins had been hired by St. Lawrence Cement, Inc. ("St. Lawrence") to serve as the general contractor for construction work at St. Lawrence's cement plant in Camden. Watkins hired various subcontractors for the work, including Brennan Industrial Contractors ("Brennan") and C.H. Schwertner & Son, Inc. ("Schwertner"). Brennan was hired to perform certain structural tasks on the project, while Schwertner was responsible for designing and building two large silos and supplying cement.

As part of their underlying contracts, Schwertner and Brennan each agreed to insure and indemnify Watkins for liabilities created on the job site. Accordingly, Watkins was designated as an additional insured under an insurance policy issued to Brennan by Royal Surplus Lines Insurance Company ("Royal"), as well as an additional insured under a policy issued by Essex to Schwertner.

The claim that gave rise to the present coverage lawsuit arose out of an August 2000 accident involving John Knoll, an iron worker employed by Brennan. Knoll fell in a depression on the job site and injured his back. About two days before Knoll's accident, Schwertner, at the direction of Watkins, had poured material known as "flowable fill" into the depression. Allegedly, the fill material was still in a slippery condition when Knoll walked upon it.

Knoll claimed that this incident had exacerbated his injuries from several prior accidents, causing him to need major back surgery. He consequently filed a negligence action against Watkins and Schwertner. Watkins cross-claimed against Schwertner for contribution and indemnification in the event that it was found liable to Knoll.

Concurrently, Knoll also filed a separate lawsuit against Durand Glass Manufacturing Co. ("Durand"), for injuries he sustained in an accident unrelated to the one on the St. Lawrence job site. Because his injuries from these accidents were overlapping, the two negligence cases were consolidated. As part of his damages, Knoll claimed, among other things, a prospective wage loss of over $500,000.

After the Knoll lawsuit against Watkins and Schwertner had been pending for over three years, Watkins filed the instant declaratory judgment action against Essex for failing to defend it in that case. Although Essex acknowledged that Watkins was listed as an additional insured under its policy, it disclaimed coverage, principally relying upon a policy exclusion for claims "arising out of the rendering of, or the failure to render, any professional architectural, engineering or surveying services.

. . ." Essex took the position that this particular exclusion applied because Schwertner's negligence, if any, concerning the fill material allegedly involved "professional" or "engineering" decisions. However, Essex agreed to pay $50,000 in defense costs to Watkins on behalf of Schwertner, pursuant to the contract between Watkins and Schwertner.

Following their consolidation, the two negligence cases were submitted to a mediator. The mediator recommended that the cases should settle for a combined sum in the range of $600,000 to $650,000, allocated equally to the two lawsuits. The mediator thus suggested that the joint exposure of Watkins and Schwertner could be valued between $300,000 and $325,000. After further negotiations, Knoll agreed to accept a total gross settlement of $480,000, with $240,000 paid on behalf of Durand and another $240,000 paid on behalf of Watkins by Royal.

Watkins then looked to Schwertner for indemnification of its share of the Knoll settlement. This coverage action ensued to resolve whether Watkins could recover any of the $240,000 settlement as an additional insured under the Essex policy. Those remaining issues became the ...


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