JOMAIN, LLC, ETC. VS. THE CITY OF HOBOKEN (L-3380-18, HUDSON COUNTY AND STATEWIDE), A-3443-19

Background

The City of Hoboken contracted with Underground Utilities Corp. to perform the Washington Street Redesign Project; the bid/contract included a broad indemnity clause requiring Underground to defend, indemnify, and hold the City harmless for claims "arising out of, result from, or relate to" Underground's work, and to name the City as an additional insured.
A restaurant tenant sued the City and Underground for water-damage allegedly caused by negligent street/pipe work performed during the project; the complaint expressly tied the claims to Underground's work on the Washington Street project.
The City demanded that Underground defend and indemnify it; Underground and its insurer refused.
The trial court initially denied the City’s motions to enforce contractual indemnity/duty-to-defend as premature; after additional motions and discovery, the court granted summary judgment for Underground on liability (finding the leak unrelated to Underground’s work) and again denied the City’s duty-to-defend motion.
On appeal the Appellate Division held Underground had a contractual duty to defend because the complaint alleged claims that, if true, fell within the indemnity language; the court reversed the denials of the City’s motions on duty-to-defend, affirmed the summary judgment on liability, and remanded to determine the City’s recoverable defense fees.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Underground had a contractual duty to defend the City under the indemnity clause	The complaint alleged damages arising out of or relating to Underground's work, so the contractual indemnity (including duty to defend) was triggered when the complaint was filed	Duty to defend not triggered because subsequent evidence showed the leak was unrelated to Underground's work; City must prove causation/nexus before duty attaches	Held: Duty to defend attached upon filing because the complaint's allegations corresponded to the indemnity language; City did not need to prove causation at the pleading stage
Whether the City had to prove a causative trigger or nexus at summary judgment to enforce the duty to defend	Duty to defend determined by comparing complaint to contract; no proof of causation required to establish duty	Duty-to-defend requires factual showing that Defendant’s work caused the loss; without that, no duty	Held: Court rejected defendant's position — proof of causation is irrelevant to the question whether the complaint alleges potentially covered claims
Whether summary judgment for Underground on liability defeated the City's contractual claim and defenses	City sought enforcement of indemnity/duty-to-defend and reimbursement for defense costs because Underground refused to defend covered claims	Underground argued it was not liable because evidence showed the leak resulted from unrelated preexisting conditions	Held: Appellate Division affirmed trial court's grant of summary judgment for Underground on liability; but that outcome did not negate that Underground had an earlier duty to defend; City remanded for recovery of reasonable defense costs related to covered claims

Key Cases Cited

Flomerfelt v. Cardiello, 202 N.J. 432 (duty to defend governed by the nature of the claim and broader than the duty to indemnify)
SL Indus. v. Am. Motorists Ins. Co., 128 N.J. 188 (insurer must defend when complaint corresponds to coverage language)
Danek v. Hommer, 28 N.J. Super. 68 (duty to defend arises when the complaint states a risk insured against)
Wear v. Selective Ins. Co., 455 N.J. Super. 440 (duty to defend determined by side-by-side comparison of complaint and policy/contract)
Hebela v. Healthcare Ins. Co., 370 N.J. Super. 260 (duty to defend is fixed when a complaint is filed; later merit determinations are irrelevant)
Polarome Int'l, Inc. v. Greenwich Ins. Co., 404 N.J. Super. 241 (duty to defend persists even if the underlying claims are meritless)
Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165 (insurance-law principles on duty to defend can apply by analogy to contractual indemnities)
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (summary judgment standard)
Conley v. Guerrero, 228 N.J. 339 (appellate review of summary-judgment rulings is de novo)