Robert Occhifinto v. Olivo Construction Co., LLC (073174)
114 A.3d 333
| N.J. | 2015Background
- Occhifinto sued subcontractor Keppler for defective construction of a warehouse floor (liability action). Keppler was defended by its insurer Mercer under a reservation of rights.
- Mercer filed a declaratory judgment action seeking to disclaim any duty to defend or indemnify Keppler; Occhifinto (as a third-party beneficiary) defended Keppler in that declaratory action and counterclaimed for coverage and attorneys’ fees.
- The trial court granted partial summary judgment for Occhifinto, concluding the liability complaint alleged claims that, if proven, would fall within Keppler’s policy and that Mercer would have to indemnify Keppler if liability were proved; the court reserved the fee issue until after the liability trial.
- At the liability trial the jury found Keppler breached a duty but that the breach was not the proximate cause of Occhifinto’s damages, so no damages were awarded against Keppler.
- Occhifinto then sought attorneys’ fees under Rule 4:42-9(a)(6) (fees in an action upon a liability or indemnity policy in favor of a successful claimant); the trial court denied fees, the Appellate Division affirmed, and the Supreme Court granted limited certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Occhifinto is a “successful claimant” under R. 4:42-9(a)(6) entitled to fees | Occhifinto argued that obtaining a favorable coverage determination in the declaratory action forced Mercer to defend and thus he succeeded on a significant issue warranting fees | Mercer argued a claimant must secure indemnity (i.e., prevail in the liability action) to be a "successful claimant" under the rule; the declaratory action only addressed indemnity, not duty to defend | Court held Occhifinto was a successful claimant because he obtained a favorable adjudication on a coverage question (which enforced the duty to defend) as a result of counsel fees, so fees are available under R. 4:42-9(a)(6) |
| Whether the duty to defend qualifies as a “coverage question” under the rule | Occhifinto maintained duty to defend is a coverage question that, if adjudicated favorably, supports a fee award | Mercer contended the declaratory action only resolved indemnity and did not implicate duty to defend, so duty-to-defend-based fees are inappropriate | Court held the duty to defend is a coverage question when the complaint alleges claims that, if proven, fall within the policy; proving duty to defend can make a party a successful claimant |
| Standard of review for denial of fees | Occhifinto argued the trial court misapplied the law and deference was not warranted | Mercer argued trial court properly applied the rule requiring indemnity success | Court held the trial court misinterpreted the meaning of "successful claimant" (legal error) rather than exercising discretion; legal interpretation reviewed de novo |
| Whether public-policy reasons bar fees here | Occhifinto argued fee-shifting is appropriate to deter insurers from disclaiming coverage and forcing third parties/insureds to litigate | Mercer relied on general policy against fee-shifting and that no indemnity resulted | Court explained Rule 4:42-9(a)(6) is designed to discourage insurers from avoiding contractual obligations; policy supports awarding fees where coverage/duty-to-defend is adjudicated in claimant’s favor |
Key Cases Cited
- Transamerica Ins. Co. v. Nat’l Roofing Inc., 108 N.J. 59 (court may award fees where party obtains favorable adjudication on coverage question through counsel fees)
- Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165 (duty to defend determined by allegations of complaint; is a coverage question)
- Schmidt v. Smith, 155 N.J. 44 (party who establishes insurer’s duty to defend qualifies as a successful claimant even if no indemnity is later owed)
- Sears Mortg. Corp. v. Rose, 134 N.J. 326 (policy rationale for awarding fees to third-party beneficiaries to prevent insurers from impairing injured parties’ recoveries)
- Passaic Valley Sewerage Comm’rs v. St. Paul Fire & Marine Ins. Co., 206 N.J. 596 (fee awards under R. 4:42-9(a)(6) are discretionary and evaluated under totality of circumstances)
- Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372 (recognizing limited circumstances where fee shifting departs from American Rule)