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National Union Fire Insurance Company of Pittsburgh, Pa, As Subrogee v. Zurich Insurance Company

March 28, 2011


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-0518-04.

Per curiam.


Argued February 16, 2011

Before Judges Axelrad, Lihotz, and J. N. Harris.

This is an insurance coverage declaratory judgment action. It has its genesis in an incident that occurred on a construction site in Wilmington, Delaware in 2000. During the construction of an elevator for a new parking garage, a subcontractor's employee suffered catastrophic injuries when a tool was launched from above and struck the worker in the head. Plaintiff -- as subrogee of the construction manager on the jobsite -- appeals the summary judgment dismissal of its complaint, which sought indemnification of the multi-million dollar payment and expenses associated with the settlement of the worker's personal injury tort action. We affirm in part, reverse in part, and remand for further proceedings.



The construction project in this case -- known to the parties as Project Blue Hen (the Project) -- involved two related elements: (1) the complete renovation of an existing structure into a mixed use office and retail building and (2) the demolition of another existing building and the construction on the site of a 650-car parking garage. To facilitate the Project, its owner, Barrow Street Blue Hens LLC (Barrow Street),*fn1 entered into a "Standard Form of Agreement Between Owner and Construction Manager" (the construction contract) with Gilbane Building Company (Gilbane). The construction contract obliged Gilbane to perform both design and construction services related to the Project. Gilbane's scope of work, among other things, was to furnish "efficient business administration and superintendence that comply with the standards of the construction profession," and to "provide leadership" on "all matters relating to construction."

During the construction phase of the Project, Gilbane agreed -- through its "competent full-time staff at the Project site" -- to "[p]rovide all supervision, labor, materials, construction equipment, tools, and subcontract items which are necessary for the completion of the Project which are not provided by either the [subcontractors] or the Owner." In addition, Gilbane was tasked to perform safety oversight responsibilities that included assessing and inspecting subcontractors' safety practices, though such services would not displace the subcontractors' own responsibilities for ensuring the safety of persons and property, as well as their compliance with safety laws and regulations. The "Tatnall Garage Project Safety Plan," developed by Gilbane pursuant to the construction contract, provided that Gilbane would "monitor all safety activities on the site."

Pursuant to the construction contract, Gilbane agreed to indemnify Barrow Street against claims for damages from bodily injuries "that may arise from [Gilbane's] operations under this Agreement." Gilbane was also contractually required to purchase a commercial general liability (CGL) insurance policy to protect itself from bodily injury claims arising from its operations, those of the subcontractors, and those of "anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable." Barrow Street was to be named as an additional insured on Gilbane's CGL insurance policy.


In order to install elevators in the multi-story parking garage, Gilbane entered into a "Trade Contractor Agreement" (the subcontract) with Montgomery KONE, Inc. (Kone) for that purpose, under Gilbane's general direction as construction manager. Pursuant to the subcontract's "General Conditions For Trade Contractor Under Construction Management Agreement" (General Conditions), Kone's safety responsibilities included a duty to "take every precaution at all times for the protection of persons, including employees and property. [Kone] shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with [its] work."

Article 5.2 of the subcontract, entitled "Insurance and Indemnity," required Kone to indemnify Gilbane (and others) for losses arising out of or resulting from the performance or failure in performance of [Kone's] work under this Agreement provided that any such claim, damage, loss, or expense (1) is attributable to bodily injury . . . [and] (2) is caused, in whole or in part, by any negligent act or omission of [Kone] or anyone directly or indirectly employed by [Kone], or anyone for whose acts [Kone] may be liable, regardless of whether caused in part by a party indemnified hereunder.

Notwithstanding the foregoing, Article 12.3(D) of the subcontract, entitled "Alterations," stated that Kone would not indemnify against losses "arising out of or resulting from the sole negligence of [Gilbane]."

While Article 5.4 of the subcontract further obligated Kone to secure "such contractual liability insurance coverage and endorsements as will insure the indemnification obligation," Article 12.3(H) specified that Kone would obtain an "Owner's and Contractor's Protective Liability Policy" (OCP) naming Gilbane and Barrow Street as insureds as follows:

[Kone] shall name [Barrow Street] and Gilbane Building Company as named insured[s] on an Owner's and Contractor's Protective Liability Policy which shall have a per project aggregate limit o[f] $5 million dollars. This is in lieu of naming [Barrow Street] and Gilbane Building Company as additional insured[s] on the General Liability [policy] [w]ith a per project aggregate. [(emphasis added).]


Gilbane's CGL insurance policy was provided by appellant National Union Fire Insurance Company of Pittsburgh, PA (National Union). Respondent Zurich Insurance Company (Zurich) issued the contractually-mandated $5 million OCP insurance policy to Kone for the garage portion of the Project, with Gilbane and Barrow Street as named insureds. Kone also obtained, and was a named insured in, a separate $10 million CGL insurance policy issued by Zurich. At issue in this appeal is whether National Union is entitled, as subrogee of Gilbane, to coverage under, and indemnification from, either or both of the insurance policies obtained by Kone.

The OCP insurance policy promised in its "Insuring Agreement" that it would pay those sums that Gilbane "becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." Furthermore, the OCP insurance policy stated that Zurich had "the right and duty to defend Gilbane . . . against any 'suit' seeking those damages," but "no duty to defend . . . against any 'suit' seeking damages for 'bodily injury' . . . to which this insurance does not apply." Without "reduc[ing] the limits of insurance," the OCP insurance policy further stated that it would pay the expenses for defending a claim against an insured "with respect to any claim [Zurich] investigates or settles."

The OCP insurance policy delineated a covered bodily injury as one that either (1) "arises out of . . . [o]perations performed for [Gilbane] by [Kone] at the [Project]" or (2) "arises out of . . . [Gilbane's] acts or omissions in connection with the general supervision of such operations." It excluded any bodily injury "arising out of [Gilbane's], or [Gilbane's] 'employees'[] acts or omissions, other than general supervision of 'work' performed for [Gilbane] by [Kone]." "Employee" was defined to include a "leased worker," but not a "temporary worker." A "leased worker" was one supplied by a "labor leasing firm under an agreement between [Gilbane] and the labor leasing firm," whereas a "temporary worker" was "a person who is furnished . . . to substitute for a permanent 'employee' on leave or to meet seasonal or short-term work load conditions."

Kone's separate CGL insurance policy that was issued by Zurich contained an endorsement titled "Additional Insured -Owners, Lessees or Contractors (Form B)," which provided liability coverage for certain persons or organizations. This endorsement required the identification of such persons or organizations, but in place of a list of names, the endorsement simply provided: "AS REQUIRED BY WRITTEN CONTRACT." A separate endorsement titled "Blanket Additional Insured Endorsement" further provided:

In consideration of the premium charged, it is agreed that the following are added as additional insureds, but solely as respects to work performed by or on behalf of the named insured: All persons, organizations or entities for whose protection and benefits the named insured has agreed to procure liability insurance. However, insurance with respect to each such person, organization or entity shall not exceed coverage and/or applicable limits of liability that the named insured has agreed to provide, nor the coverage and/or applicable limits of liability of this policy.

It is further agreed that this extension will not apply to any person, organization, or entity who has been specifically added as an additional insured to any other general liability policy issued to the named insured.


On June 19, 2000, an employee of Kone -- Joseph P. Rapine, III -- was working on the ground floor of the parking garage in the vicinity of an elevator shaft that was under construction. Kevin Black*fn2 -- a worker performing services under the direction of a Gilbane employee -- was deployed on the seventh floor of the parking garage, along with others, to the task of collecting construction debris and securing tools known as slab grabbers. Slab grabbers are unwieldy, heavy pieces of construction equipment that are not easily moved, and which supposedly were located a safe distance away from the opening to the elevator shaft. There were no toe boards installed along the edge of the open elevator shaft to keep ...

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