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Eliel Santana v. Inter-America Insurance Agency


October 23, 2012


On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-4288-09.

Per curiam.


Submitted March 6, 2012

Before Judges Baxter and Nugent.

Defendant Larimar Trucking*fn1 and its insurer, defendant Wilshire Insurance Company, appeal from a Law Division judgment that awarded attorneys' fees and costs to defendant Mediterranean Shipping Company based on Mediterranean's indemnification claim. Mediterranean had incurred fees and costs to defend itself against a lawsuit filed by plaintiff Eliel Santana, a tractor-trailer driver. Plaintiff had been injured in a vehicular accident following his dispatch by Larimar to haul freight on a trailer leased by Mediterranean. Mediterranean cross-appeals, contending that the fee award is inadequate.

We conclude that the terms of a Uniform Intermodal Interchange and Facilities Access Agreement (UIIA),*fn2 to which Larimar and Mediterranean were signatories, required Larimar to defend and indemnify Mediterranean against plaintiff's claim. We further conclude that an endorsement to the insurance policy issued by Wilshire to Larimar provided coverage for Larimar's contractual indemnification obligation. Lastly, we conclude that the UIIA choice-of-law clause required application of Maryland law to the parties' dispute, and that under Maryland law, Mediterranean was entitled to recover fees and costs that it incurred to investigate and defend against plaintiff's claim before tendering its defense to Wilshire. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.


In support of their summary judgment motions, Larimar, Wilshire, and Mediterranean presented the following facts, which were either undisputed, or presented no genuine issue, R. 4:46-2(c).

Plaintiff, the owner of a 2002 Freightliner tractor, contracted to perform "hauling services" for Larimar, a trucking company.*fn3 The contract between plaintiff and Larimar was in effect when Larimar dispatched plaintiff to transport the freight container that plaintiff was hauling on the day of his accident. On March 10, 2008, while hauling the container on the trailer leased by Mediterrean,*fn4 plaintiff lost control of the tractor-trailer when a driver "cut [him] off," causing the tractor-trailer to overturn. The other driver and car were never identified.

At the time of plaintiff's accident, Larimar and Mediterranean were signatories to a UIIA. For purposes of the UIIA, Larimar was a "motor carrier" and Mediterranean was a "provider" who "interchanged"*fn5 equipment used in intermodal*fn6 transportation. The UIIA contained an indemnity clause in section F.4(a) that required motor carriers, such as Larimar, to indemnify providers, such as Mediterranean, for certain claims. The indemnity clause states in part:

Motor Carrier agrees to defend, hold harmless and fully indemnify the Indemnitees*fn7 (without regard to whether the Indemnitees' liability is vicarious, implied in law, or as a result of the fault or negligence of the Indemnitees), against any and all claims, suits, loss, damage or liability, for bodily injury . . ., including reasonable attorney fees and costs incurred in the defense against a claim or suit, or incurred because of the wrongful failure to defend against a claim or suit, or in enforcing subsection F.4 (collectively, the "Damages"), caused by or resulting from the Motor Carrier's: use or maintenance of the Equipment during an Interchange Period

The UIAA also required a Motor Carrier to provide a commercial automobile insurance policy insuring all "Equipment involved in an Interchange," and to "name the Equipment Provider as additional insured"; and to "attach[] to its commercial automobile liability policy, a Truckers Uniform Intermodal Interchange Endorsement (UIIE-1), which includes coverage specified in Section F.4." Larimar complied with these requirements. Mediterranean was named as an additional insured and the Wilshire policy included a Truckers Uniform Intermodal Interchange Endorsement (UIIE-1). The endorsement, which identified Larimar as the named insured, stated "that such insurance as is afforded by the policy for Auto Bodily Injury and Property Damage Liability applies to liability assumed by the named insured, as 'Motor Carrier Participant,' under Subsection F.4. of the [UIIA] and any subsequent amendments thereto."*fn8

On October 5, 2009, plaintiff filed an eight-count complaint against Larimar, Wilshire, Mediterranean, and others,*fn9 alleging that an unidentified driver had caused his accident and injuries. He also alleged that Larimar had failed to provide "underinsured [sic] motorist and workers' compensation coverage," that Mediterranean had failed to provide uninsured motorist (UM) coverage, and that Wilshire had improperly denied his claim for UM benefits. Mediterranean filed its answer and a cross-claim against Larimar and Wilshire for failing to defend and indemnify Mediterranean under the UIIA and the Wilshire policy.

Although Wilshire eventually settled plaintiff's claim, Mediterranean pursued its cross-claim and filed a summary judgment motion against Larimar and Wilshire. Larimar and Wilshire filed a cross-motion for summary judgment. Following oral argument, the trial court delivered its opinion from the bench, granted Mediterranean's motion, and denied Larimar and Wilshire's cross-motion. After providing the parties additional time to address the amount of counsel fees and costs sought by Mediterranean, the court entered judgment in favor of Mediterranean in the amount of $15,840.67, the reasonable fees and costs incurred by Mediterranean after it tendered its defense of plaintiff's claim to Larimar and Wilshire. The court denied Mediterranean's application for reimbursement of those fees it had incurred to investigate and defend against plaintiff's claim before tendering its defense to Larimar and Wilshire. This appeal followed.*fn10


Larimar and Wilshire raise a single argument:

Point I

There is no coverage under the Wilshire policy and therefore [Mediterranean] is not entitled to reimbursement of attorneys' fees.

When reviewing an order granting summary judgment, we "'employ the same standard [of review] that governs the trial court.'" Henry v. N.J. Dep't of Human Serv., 204 N.J. 320, 330 (2010) (quoting Busciglio v. DellaFave, 366 N.J. Super. 135, 139 (App. Div. 2004)). Thus, we must determine whether there was a genuine issue of material fact, and if not, whether the trial court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Legal conclusions are subject to de novo review. Henry, supra, 204 N.J. at 330.

Larimar and Wilshire do not dispute that the terms of the UIIA required Larimar to defend and indemnify Mediterranean against plaintiff's personal injury claim.*fn11 Rather, they argue that the Wilshire policy did not provide UM coverage for plaintiff because neither the tractor he was driving nor the trailer he was pulling was described in the declaration page of the Wilshire policy, and the policy provided UM coverage only for "Larimar-owned" vehicles described in the declarations page.

Larimar and Wilshire's argument overlooks the UIIE-1. That endorsement provided coverage for liability assumed by Larimar under section F.4 of the UIIA. Under that section, Larimar assumed the obligation to defend and hold Mediterranean harmless against claims or suits, including reasonable attorneys' fees and costs incurred in defense of claims or suits, that resulted from Larimar's use of Mediterranean's trailer. Plaintiff's suit resulted from Larimar's use of Mediterranean's trailer; precisely the type of claim covered by the UIIE-1. Thus, though the Wilshire policy may not have provided coverage for a UM claim made by plaintiff, the policy provided coverage for Larimar's obligation under the UIIE-1 endorsement to defend a "Provider" against such a claim. Larimar and Wilshire do not dispute Mediterranean's standing to enforce the terms of the UIIE-1. Accordingly, there is no reason to disturb the trial court's grant of summary judgment to Mediterranean.

We turn to Mediterranean's cross-appeal. Mediterranean argues it is entitled to a judgment for all of the fees it incurred to investigate and defend against plaintiff's claim, not merely the fees it incurred after tendering its defense to Wilshire. Mediterranean retained counsel on October 27, 2009, but did not tender its defense to Wilshire until December 4, 2009. In the interim, Mediterranean incurred $6,420 in legal fees.

Both the Wilshire insurance policy and the UIIA required the parties to provide prompt notice of any claims. The UIIA not only required prompt notice, but further stated that the "Provider, Equipment Owner and/or Facility Operator shall not undertake any legal defense of or incur any legal expenses pertaining to the claim submitted to the Motor Carrier, unless Motor Carrier fails to timely do so. . . ." To be sure, Mediterranean breached both its contractual duty to provide prompt notice of plaintiff's claim and its contractual duty to refrain from incurring pre-notice legal expenses. Mediterranean's breach was fatal to its claim to recover pre-notice legal expenses, according to the trial court. Although the court reached the correct result under New Jersey law, it does not appear from the record before us that the court considered the UIIA choice-of-law clause requiring the application of Maryland law to the parties' dispute. *fn12

Relying upon SL Indus., Inc. v. Am. Motorists Ins. Co., 128 N.J. 188, 199-200 (1992), the trial court held that Mediterranean was obligated to promptly and properly notify Wilshire of plaintiff's claims. The court further held that Mediterranean could not demand reimbursement for costs over which Wilshire had no control due to Mediterranean's failure to promptly notify Wilshire of plaintiff's claim. The trial court did not apply Maryland law, however, as required by the UIIA.

Section G.7 of the UIIA, provides that the laws of Maryland "shall govern the validity, construction, enforcement and interpretation of this Agreement without regard to conflicts of law principles." Wilshire contests neither the enforceability of the choice-of-law clause nor its applicability to Wilshire's obligation under the UIIE-1 to insure claims that fall within section F.4 of the UIIA. Wilshire does dispute that Mediterranean is entitled to recover pre-notice defense costs under Maryland law, however.

In Sherwood Brands v. Hartford Accident and Indem. Co., the Maryland Court of Appeals held that in those cases of delayed notice where an insurer declines to defend on the erroneous basis that a claim is not covered by the policy, and thereby breaches its duty to defend, the insurer is liable for reasonable pre-notice fees and expenses incurred by the insured. 698 A.2d 1078, 1086--87 (Md. 1977). The Court explained that under Maryland law, an insurance policy provision requiring prompt notice is a covenant, not a condition, and the materiality of the covenant's breach is measured by the standard of actual prejudice to the insurer. The Court reasoned that in a situation where the insurer declines to defend on the erroneous basis that a claim is not covered by the policy, the timing of the notice by the insured is ordinarily irrelevant, because the insurer "would have declined the defense in any event based on its mistaken conclusion that there was no potential coverage [.]" Ibid. The Court concluded that under those circumstances, an "insurer should not later be allowed to use the delay as a bar to reimbursing the insured for the reasonable expenses incurred in defending the covered claim." Id. at 1087.

Wilshire asserts that Sherwood Brands is distinguishable for two reasons: unlike the claimant in Sherwood Brands, here Mediterranean is not Wilshire's insured; and, Sherwood Brands did not involve the UIIA. We find those distinctions unpersuasive. Although Mediterranean is not a named insured under the Wilshire policy, Mediterranean is an additional insured. More significantly, Wilshire has not asserted that Mediterranean lacks standing to enforce either the UIIA indemnification clause or the provisions of Wilshire's insurance policy.

Additionally, Wilshire has not explained its assertion that Sherwood Brands is distinguishable because it did not involve a UIIA. We fail to see the significance of such a distinction. When the terms of an insurance policy obligate an insurer to provide a defense against specified claims, it does not matter whether the claims are based upon contractual indemnification or some other insured risk. Here, Larimar contracted in the UIIA to defend, hold harmless, and indemnify providers such as Mediterranean against certain claims. Wilshire, through the UIIE-1, insured Larimar's contractual obligation to defend and indemnify such providers. Wilshire was therefore required to provide a defense to Mediterranean and the breach of its duty to defend entitled Mediterranean to recover its reasonable defense costs from Wilshire.

For the foregoing reasons, we remand this matter to the trial court to determine the reasonableness of Mediterranean's pre-notice defense fees and costs.

Affirmed in part, reversed in part, and remanded for further proceedings. We do not retain jurisdiction.

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