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Preferred Mutual Insurance Co. v. Gonzalez

August 17, 2009


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2199-06.

Per curiam.


Argued March 17, 2009

Before Judges Winkelstein and Gilroy.

Defendant General Security Property and Casualty Insurance Company (General Security) appeals from the January 18, 2008 order of the Law Division that granted summary judgment in favor of plaintiff Preferred Mutual Insurance Company (Preferred Mutual) and its insureds, plaintiffs Eusebio Martinez, Victoria Martinez and Maria Martinez (collectively, the landlord); and from a second order of the same date that denied its cross-motion for summary judgment. We reverse.


This is a declaratory judgment action in which Preferred Mutual and the landlord seek to enforce the assignment of a liability insurance policy issued by General Security to its insured, plaintiff Eleuterio Gonzalez, individually, and t/a La Esperanza Grocery (the tenant).*fn1 To place this appeal in context, it is necessary to state the combined procedural history and statement of facts not only of this declaratory judgment action, but also of the underlying personal injury negligence action leading to the assignment of the insurance policy.

The personal injury negligence action arose out of a slip and fall accident that occurred in front of a commercial building located at 3513 Park Avenue, Union City. The building is owned by the landlord. On the date of the accident, Preferred Mutual insured the landlord for third-party liability coverage. Located on the first floor of the building is the La Esperanza Grocery store, operated by the tenant, and a laundromat operated by a third party, each commercial unit having its own entrance onto the public sidewalk.

Paragraph 8 of the lease between the tenant and the landlord obligated the tenant to "obtain or provide and keep in full force for the benefit of the [l]andlord, during the term hereof, general public liability insurance, insuring the [l]andlord against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the leased premises." The lease required that the policy contain personal injury liability limits of $250,000 per person and $500,000 per accident. Contrary to this provision, the tenant did not name the landlord as an additional insured on its General Security policy.

Paragraph 8 also provided for contractual indemnification of the landlord by the tenant:

The [t]enant also agrees to and shall save, hold and keep harmless and indemnify the [l]andlord from and for any and all payments, expenses, costs, attorney fees and from and for any and all claims and liability for losses or damage to property or injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the [t]enant or the [t]enant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, or for any cause or reason whatsoever arising out of or by reason of the occupancy or business of the tenant.

On April 10, 2001, Germania Gonzalez,*fn2 the plaintiff in the underlying negligence action, parked her motor vehicle in front of the La Esperanza Grocery store; exited the motor vehicle; crossed the public sidewalk and entered the grocery store where she remained for approximately forty-five minutes while drinking coffee and purchasing groceries from the store. After she finished shopping, Germania Gonzalez exited the grocery store. As she crossed the sidewalk to return to her car, she slipped on two plastic light covers lying on the sidewalk in front of an entranceway to an apartment located on one of the upper floors of the building. Subsequent to the accident, Germania Gonzalez filed suit naming the landlord and the tenant as defendants.*fn3

Neither Preferred Mutual nor General Security were parties to the negligence action.

The landlord filed an answer in the personal injury action, asserting a cross-claim against the tenant, demanding that the tenant assume the landlord's defense and indemnify the landlord against any and all losses pursuant to Paragraph 8 of the lease. On motion for summary judgment by the landlord, the initial trial judge entered an order on April 12, 2004, denying the motion. As to the motion for indemnity based on the last sentence of Paragraph 8, the order provided that the motion is denied "without prejudice, subject to a factfinder's determination as to whether [p]laintiff's alleged loss resulted from acts or omissions by the tenant or arising out of the business of La Esperanza Grocery as defined under the cases."

Tried in November 2004, before a jury and a different trial judge, the jury found the landlord liable in the amount of $200,000. The jury also determined that the tenant was not negligent. The issue of contractual indemnity was not submitted to the jury; rather, the court requested that the parties submit post-trial motions. The court conducted arguments on the cross-motions on January 7, 2005.

At conclusion of oral argument, the trial court: 1) denied landlord's claim for contractual indemnification under Paragraph 8 of the lease because the provision did not expressly require the tenant to indemnify the landlord for the landlord's "sole negligence"; and 2) determined that the tenant had breached the lease by failing to name the landlord as an additional insured on the tenant's insurance policy. In reaching its decision, the trial court reasoned:

[S]o that [is] why [the initial trial judge] put in her order, the way she did, that we had to wait for the jury trial to determine whether or not [the tenant] was negligent at all. If [the tenant] was negligent at all, [he] would have bought the whole thing. However, since [the tenant] was not negligent, it means the sole negligence was the landlord. If it's the sole negligence of the landlord, it's not covered in the indemnity section in that language. So, therefore, the indemnity section fades.

However, the lease is very clear, as far as I can see, that the lease required that the tenant obtain additional insurance, at least naming . . . the landlord [as] an ...

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