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Centennial Insurance Co. v. Horizon Contracting Co.

October 30, 2008


The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.


This indemnity action arises out of an agreement between plaintiff ("Centennial"), an insurance company acting as surety to defendant general contractor ("Horizon"). Centennial seeks the recovery of losses incurred under various performance and payment bonds issued by Centennial on behalf of Horizon and the individually named defendants for several public construction projects. Centennial has moved for summary judgment, which the Court now grants in part and denies in part.


The Court has jurisdiction pursuant to 28 U.S.C. § 1332(a) because the plaintiff is a corporation formed under the laws of the State of New York, with its principal place of business in that state; all defendants are citizens of the State of New Jersey (including Horizon, which is incorporated in and has its principal place of business in New Jersey); and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332(a).


Summary judgment may be granted under Rule 56(c) of the Federal Rules of Civil Procedure "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The Court is duty-bound to "view the facts in the light most favorable to the non-moving party and [must] draw all inferences in that party's favor." Gray v. York Newspapers, 957 F.2d 1070, 1080 (3d Cir. 1992). Summary judgment is inappropriate if there is evidence sufficient to allow a reasonable jury to return a verdict for the non-moving party, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), or if the factual dispute is one which might affect the outcome of the suit under the governing law . . . ." Id. The movant's burden, however, "may be discharged by "showing' . . . that there is an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Additionally, the non-movant "may not rest upon mere allegations or denials of the . . . pleading"; instead, the non-movant, "by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Matushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).


A. Indemnity Agreement

At all times relevant to this dispute, Horizon engaged in the construction contracting business, carrying out both public and private construction projects. See Centennial's Rule 56.1 Statement of Undisputed Material Facts ("Centennial's Statement of Facts") ¶ 2. Because New Jersey law requires contractors carrying out public projects to post performance and payment bonds, see N.J. Stat. Ann. 2A:44-143 et seq., Horizon engaged Centennial to post several bonds on its behalf relating to three public construction projects for which Centennial had been retained. See Centennial's Statement of Facts ¶ 3; Affidavit of Robert A. Wheeler ("Wheeler Aff.") ¶ 13. The parties executed a surety agreement that included an express indemnity provision, in which Horizon, John Downey, Roseanne Nardone, and Scott Beffert, jointly and severally (collectively, "indemnitors"*fn1 ), agreed to indemnify the Surety and hold it harmless from and against all liability, losses, costs, damages, attorneys' fees, disbursements and expenses of every nature which the Surety may sustain or incur by reason of having executed or procured the execution of any such Bonds; and they will pay over and make good to [Centennial] all money which [Centennial] or its representatives shall pay, or cause to be paid or become liable to pay, by reason of its execution of any such Bonds as soon as it shall become liable therefore, whether [Centennial] shall have paid out such sum or any part thereof, or not. The Surety, in its sole discretion, from time to time may advance funds to or for the account of the Contractor for or in connection with the completion of the work under any contract in connection with which it has executed or may execute a Bond or Bonds . . . and for the discharge of obligations incurred in connection therewith or relating thereto, and such advances shall be deemed "losses" under the terms of this instrument whether or not such advances have been so used by the Contractor.

Wheeler Aff. Ex. A, ¶ 6. The indemnitors further agreed that if the Surety shall set up a reserve to cover any contingent claim or claims, loss, costs, attorney's' fees and/or other expenses in connection with any such Bond the [indemnitors], within ten (10) days after receipt of written demand, as evidenced by registry or certified mail return receipt, will pay to the Surety current funds in an amount equal to such reserve, and any subsequent increase thereof, such funds to be held by the Surety as collateral, in addition to the indemnity afforded by this instrument, with the right to use the same or any part thereof, at any time, in payment or compromise of any judgment, claim, liability, loss, damage, attorneys' fees and disbursements or other expenses. . . .

Id.¶ 7. Finally, the indemnitors agreed that

[t]he Surety may settle or compromise any claim, demand, suit or judgment upon any Bond or Bonds executed by it, and any such settlement or compromise shall be binding upon the [indemnitors]. If, however, the [indemnitors] shall timely request the Surety to litigate such claim or demand, or to defend such suit, or to appeal from such judgment, and shall deposit with the Surety at the time of such request cash, or other collateral satisfactory to the Surety in kind and amount, to be used to pay any judgment or judgments rendered or that may be rendered, with interest, costs, expenses and attorneys' fees, including those of the Surety, the Surety shall so litigate, defend or appeal; but nothing herein contained shall be deemed to impose a duty upon the Surety to give notice to the Undersigned of any such claim, demand, suit or judgment. The vouchers or other evidence of payments made by the Surety shall be prima facie evidence of the fact and amount of the liability of the [indemnitors] to the Surety.

Id. ¶¶ 8-9.

As a result of this agreement ("Indemnity Agreement"), Centennial issued three performance and payment bonds on behalf of Horizon in connection with three separate public construction projects, detailed below.

B. Sparta Township Project

On September 10, 2003, Centennial issued a labor and material payment bond and performance bond, labeled # 447-406616 (the "Sparta Bond"), on behalf of Horizon for the completion of a new municipal building for Sparta Township (the "Sparta Project"). See Wheeler Aff. Ex. B. Once the Sparta Bonds were posted, Horizon entered into a general contracting agreement with Sparta Township ("Sparta") for construction of the building, see Wheeler Aff. Ex. C, upon which Horizon began performance ...

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