Eagle Fire Protection Corp. v. First Indemnity of America Insurance

CORP., THE A OF CORPORATION FIRE PROTECTION EAGLE PLAINTIFF-APPELLANT, JERSEY, v. FIRST OF NEW STATE COMPANY, DEFEN- INSURANCE AMERICA INDEMNITY OF DANT-RESPONDENT. 29, 1996 July January

Argued Decided Glavin, Jr., respondent. for Joseph C. argued the cause curiae, on of amicus Armen Shahinian submitted a brief behalf Samson, attorneys; (Wolff & Surety of America Association The Shahinian, Monaghan, on the Joseph D. Ferrucci James Mr. brief). of the court was delivered opinion

The GARIBALDI, J. question: deter- of one appeal concerns the resolution

This claimant must period under which a one-year limitation mining the bond, surety general institute a suit in a does a when contractor Specifically, “cease work” under a construction contract? we must determine if the work of subcontractors on a construction site general constitutes the work of the contractor.

I May Parkway In (Parkway), 185 Monmouth Associates a partnership, plans limited finalized its to renovate an office build- ing. plans, 1989, Parkway Pursuant to those hired Hassold, (Olsen), Olsen & Inc. charge as contractor Parkway the renovation. The contract between and Olsen envi- I, phases. sioned three In Phase Olsen was to remove the building. asbestos in the Phase II consisted of the reconstruction III, building, and restoration of the Phase Olsen was to partitions erect building. certain metal in the Olsen never reached III Phase due to its financial demise. obligations

One of Olsen’s under the contract was to hire a surety company guarantee that would perfor- Olsen’s successful result, mance of its contractual purchased duties. As a Olsen series of bonds from First of America Insurance Co. (First Indemnity), agreed guarantor. who to act as Olsen’s particular implicated in this case ais “labor and material provided bond.” Indemnity, That bond surety, as would pay Olsen, claims made principal, subcontractors of as where paid ninety contractors had not been in full days within of the completion bond, drafting subcontractor’s work. parties simply filled in the blanks of the American Institute of Architects’ standard payment-bond labor-and-material form. Parkway

The Phase II building renovation of the included the sprinkler system installation of a in building. purchased the Olsen sprinkler system the Eagle Corp. from Fire (Eagle Protection Fire), $129,437.50. and system hired it to install Eagle the for working Fire started project mid-September on the in 1989 and completed it in July June or progress of 1990. Olsen made payments Eagle Fire early from October 1989 to 1990. Howev- bounced, by May er, Olsen a later installment check from Eagle stopped making payments to Fire. When Olsen had Yinsko, that he began William to sense Eagle president, Olsen, attempted difficulty collecting from he to con- have would under bond. Indemnity regarding obligation its' tact First However, Indemnity to return numerous calls made First failed Parkway Eagle then representative on Fire’s behalf. Vinsko a Massell, counsel, Esq., or to obtain from Olsen retained Gerald Eagle sprinkler for the Indemnity money First owed vice-president system spoke with an Olsen installation. Massell April May to elicit in or but was unable about Olsen’s debt similarly his payment Massell was unsuccessful from Olsen. Indemnity persuade pay eight month First Olsen’s effort Eagle debt to Fire. 11, 1990, Parkway September terminated its contract with

On bankruptcy. April filed for On Olsen. Olsen Indemnity, claiming that against First Fire filed suit Indemnity sprinkler- First liable for Olsen’s the bond rendered Indemnity First system The sole offered debt. defense timely manner, not its in a that Fire had commenced suit recovering First precluded under bond. and was thus from argument following provision on based bond: hereunder claimant:

No suit action shall commenced by any b) following [Olsen] date on which ceased one expiration year After being if limitation understood, it [the] Contract, however, any work controlling law the construction hereof embodied in this bond is any prohibited by minimum so as to be such limitation shall be deemed to be amended equal added). (Emphasis such law. period permitted by had, fact, suit commenced its Eagle Fire countered that it day that Olsen “ceased work” on within if argued suit had Eagle Fire in the alternative contract. manner, fault of timely that was the not been commenced representatives, employed delaying tactics Indemnity’s who bringing specified misled Fire into not suit within one-year window. 1) testimony trial on two the focused issues: date Olsen 2) contract; work” under the and actions

“ceased the taken Indemnity eight that suit led not to file until surety company. months after its initial contact with compliance period, To establish limitation its with bond’s prove Fire had to that Olsen “ceased work” Puth, agent Parkway, managing Edward for that testified working September was under Olsen the contract until Parkway of when terminated the contract because Olsen’s finan- inability support cial to fulfill its that contractual duties. conclusion, through presence Puth discussed the on the worksite September parti- 1990 of trailers Olsen had rented store tions that were used Phase III. Those trailers led Puth “working” conclude that Olsen was under contract until prior ultimate cancellation. Puth admitted that time at some contract, although the cancellation of he not remember could date, stopped exact paying company Olsen for the rental of trailers. The last Puth employee use time that saw an Olsen on employee LaHaye, site was “mid-1990.” That Edward was division, the Vice-President of Olsen’s asbestos removal with day whom met on that Puth Puth occasion. did not know the last employees physically working that Olsen were site. testified William Vinsko for Fire that Olsen was “still on job” January February as of working in different building. parts jury Defense counsel read to the Vinsko’s deposition testimony, in which he stated that Olsen had left by January site 1990. Vinsko testified that Olsen’s subcontractors working July August were site through at the perhaps even later. LaHaye Indemnity

Ed day testified for First the last employees physically Olsen worked at the under the site contract conceded, however, September 1989. He that when he position resigned from his in August with Olsen the metal partitions being were still stored in trailers on the site. attempted to that First

Eagle Fire also establish on Eagle filing Fire not suit an misled or lulled into impermissibly attempt to that his first obtain earlier date. Massell testified 1990, 18, Indemnity September when payment from First was on company inform it had surety he to to that Olsen wrote the warned, He “If debt Fire. this matter defaulted to against twenty days, I file within will suit cannot settled September Massell received a Indemnity.” On First Alongi, Operations proof loss and a short note from Paul of form Indemnity. Alongi note informed Massell Manager at the First of form Indemni- receipt completed proof loss First that on validity ty investigation the of begin its into would 1990, 30, completed Massell returned the On November claim. days four later he had a proof Indemnity of to First loss regarding Although the claim. telephone Alongi with conversation Alongi, subsequent attempts reach Massell never made to Massell Alongi. from heard February Massell had several

From 1990 to December Galdieri, independent Frank an claims telephone discussions with Indemnity investigate Eagle Fire’s adjuster by to hired 10,1990 conversation, told Massell In a December Galdieri claim. stall, Indemnity attempting to if felt that First was that Massell in a he memorialized this conversation should file suit. Massell After a that he sent to Galdieri. December 1990 letter February in he had with Galdieri conversation that Massell employing stalling that First began to believe good filed suit negotiating not in faith. Massell tactics and was testified for First three months later. Galdieri approximately and, dispute testimony. Indemnity, general, did not Massell’s testimony acknowledged his Galdieri never told Massell him not to suit. file parties made a motion for of all the evidence both

At the close trial court judgment. trial denied both motions. The court part: jury, pertinent instructed the If find the filed it’s action than one Protection, more you plaintiff, general contractor, Hassold, site, after the Olsen & ceased work at then enter a should verdict for defendant of no cause of action. you I instruct that the work done subcontractors Hassold you Olsen & by further does not constitute work done Olsen and themselves. by Hassold And therefore site absence such subcontractors at the is not 2S, presence May relevant Unless find First Indemni- you any representative defendant, design filing misled accident or Mr. Massell him so as cause ty, delay suit under he did not the bond and do should return a for the timely so, verdict you added). (Emphasis defendant. following special The court also interrogatories submitted jury: 1) project Did the work Hassold on Olsen and cease before 1990? 2) negotiations, Did conversations and communications between the plaintiff being filing and the defendant result in the caused of the suit plaintiff delay 23,1991? until May answering interrogatories jury Prior to those asked the court site, “If there are subcontractors the does that mean Olsen and Hassold would be considered to the be on site?” The trial court that “[T]he stated answer is no.” Plaintiffs counsel who had objected original to regarding the court’s instruction the instruc- tion work that subcontractor’s should be deemed the of work Olsen, objected response jury’s also to the court’s question. the jury questions affirmative, The answered both in the returned a Fire, Eagle $63,414. verdict for damages and assessed at On stipulation of parties, the trial court reduced the award $60,825. rejected The Eagle ensuing trial Fire’s application court attorney’s for fees. Appellate

The Division reversed. Fire v. First Indemni ty Corp., 430, N.J.Super. Insurance 655 (App.Div. 280 A.2d 939 1995). proofs The court found that “the raised a issue factual by jury for resolution as to working whether was still or Olsen supervising 439, Thus, 1990.” Id. at 655 A.2d 939. the court concluded that the trial properly court not to decided 439-40, rule as a matter of law on that issue. Id. at 655 A.2d 939. however, panel held submitting that “the trial court erred jury one-year to the the issue period as to whether the limitation by contained tolled bond was conduct.” Id. at defendant’s

353 tolling of a explained A.2d The court that “the 655 939. conduct, requires statutoiy due to some contractual or limitation part the insurance type conduct on the of of unconscionable Id. at negotiations not and discussions.” company and mere could not be said to 655 A.2d 939. Because Galdieri’s conduct security, false of misled or lulled Massell into a sense have one-year matter law that the Bond’s court concluded as a of Indemnity’s ongoing First period not tolled limitation was 443-44, Id. at 655 A.2d 939. investigation of Fire’s claim. untimely. Eagle’s Accordingly, the found that Fire’s suit court Id 655 A.2d 142 granted Eagle petition for certification. N.J.

We (1995), 1363 and now reverse. A.2d II resulting relation from an “Suretyship is a contractual surety, be agreement whereby person, engages answer debt, another, miscarriage principal.” able for the default Co., Corp. v. Fed. Ins. Amelco Window surety, Indemnity, agreed (App.Div.1974). Olsen, principal. The answerable for debts entered into express language the Labor and Material Bond any granted also Fire and other and First Olsen standing provisions. to enforce the bond’s Olsen subcontractors Co., 17, 20, 206 Schlanger v. Ins. 44 N.J. A.2d 874 See Federal supra, N.J.Super. at Corp., 346- and Amelco Window A.2d 398. The bond defined a claimant as having or of the a with with a subcontractor direct contract the Principal for use in the or or labor, both, for used material, reasonably required Principal of the Contract. performance Olsen, principal, with Fire had a direct contract the Because standing party beneficiary under it a third had as recognizes Indemnity. “The Olsen and First Law between surety promises in right if the party has an enforceable the third bond, by implication, to express or reasonable either in words 354

pay money Corp., supra, to him.” Amelco 127 Window N.J.Su 346, per. at 317 A .2d 398. bond, a party beneficiary

As third of rights are determined terms of the bond. “It is well party beneficiary’s rights depend upon, settled that third ‘[a] by, promisor are measured terms contract between the ” Constr., promisee.’ and the & Ribeira Laurenco Concrete Inc. v. Associates, 16, 21, N.J.Super. Jackson Health Care 231 554 A.2d o.b., (App.Div.1989), 1350 118 571 1311 N.J. A.2d aff'd Lees, (quoting N.J.Super. Roehrs v. 178 429 A.2d 388 (App.Div.1981)). Indemnity In Monmouth Co. v. Lumber Ins. Co. America, (1956), N. 21 122 A.2d 604 N.J. Court of observed, however, surety chargeable “a only according undertaking the strict terms of obligation and its cannot and by implication should not be either extended or construction beyond argues confines of the contract.” particularly time limitations strictly surety should be construed guaranteeing bonds companies the debts of construction since so many companies period those dissolve a within short time.

Ill provisions limiting parties Contract may bring time suit enforceable, have been held to be if reasonable. See Weinroth v. Jersey Co., New Ass’n Ins. 117 N.J.L. 189 A. Mfrs. (E. Ribeira, A.1936); 73 supra, 22-23, & N.J.Super. 231 554 1350; Orange A.2d A.J. Assocs. Tenwood v. Senior Citizens Co., 515, 523-24, Housing (App. A.2d 1280 Div.), denied, (1985); 101 N.J. Staehle v. certif. Co., Employers’ N.J.Super. 152, 154, American Ins. 246 A.2d (App.Div.1968).

Holding provision enforceable an insurance contract limit- ing the may bring year, time which claimants suit to one Weinroth, supra, Court in observed: determining whether in an provision insurance contract conflicts with any laws this test state, should be whether for, terms provide

355 unable to any statute and We are observe that which the forbids prohibit. permit, after six as in that no suit can be instituted conflict, effect, the statute provides, agree it contract that but not make unlawful for does parties years, for a lesser limitation shall be period. 73]. at 189 A. 117 N.J.L. [Weinroth, supra, Associates, supra, Appellate Similarly, A.J. Tenwood one-year period limitation contained in Division that a found 200 unfair nor unreasonable. construction contract was neither that N.J.Super. 491 1280. The court observed at A.2d Jersey limitations in for contract although New the statute by express may limitation be waived years, is “such a actions six Ibid, omitted). (citation is funda agreement parties.” “It of the barring agreements, a such mental in the absence of a statute bringing action stipulation limiting the time for an contractual period prescribed than upon a to a less contract stipulated period is reasonable foregoing is valid if the statute 523-24, 491 A.2d 1280 public policy.” not Id. at does violate omitted). (citations Constr., Inc., supra,

Finally, Concrete Ribeira & Lourenco that contained the payment involved a labor material case. limitation found in the bond this one-year provision same Appellate A.2d 1350. The Division N.J.Super. at 554 enforceable, id. and therefore provision found the reasonable 22-23, that decision. 118 N.J. A.2d and we affirmed (1990). 419, 571 A.2d1311

Indeed, routinely provisions contract upheld this Court has may one-year limitation in which claimants time that create a one-year provision in First bring Accordingly, limitation suit. Indemnity’s There surety bond reasonable and enforceable. depend on fore, Eagle ability bond will recover under the year within one date filed suit whether ascertaining the the contract. Olsen “ceased work” under work,” goal, as meaning the central the term “ceased generally, give effect to language interpreting contract Washington See Construction parties to the bond. intent (1951); Co., Town- Spinella, Inc. v. N.J. Wyckoff v. Sarna, 512, 516-17, .2d 16 ship 136 347 A of (App.Div.1975). long surety chargeable

“It has been settled law that a is only according undertaking the strict terms of its and obligations by implica be cannot should not extended either by beyond or the tion construction confínes of its contract.” See America, Monmouth Co. v. N. 21 Lumber Ins. Co. of 439, (1956); 452, Peoples N.J. 122 A.2d604 Bank N.J. National Fowler, 88, den, 101, 1096, 858, v. 73 N.J. 372 A.2d cert. 434 U.S. 182, (1977). rule, however, 98 54 131 been S.Ct. L.Ed.2d That has modified, language ambiguous. if the in the construction Son, Co., V. Petrillo & Inc. v. American 148 Const. denied, (App.Div.), 371 A.2d 799 75 N.J. certif. (1977), recognized principles concerning the court “the the con surety policy struction of bonds the of the law to favor in materialmen and laborers cases doubtful uncertain con language surety struction of in contained the bonds.” Id. at (citations omitted). 4-5, 379 A.2d 235 also 17 See Am.Jur.2d cases) § (citing George Contractor’s Bonds 6 and 13 J. Couch, (2d rev.vol.1982) (“Initial § Couch on Insurance 47:183 ed. ly, liability surety of the on contractor’s bond is deter bond, by provisions mined and cannot be extended beyond provisions. Although surety such bond is to be interpreted according provisions, against paid surety to its as any ambiguity company, liberally in a contractor’s bond should be materialmen, construed in favor laborers and for whose benefit executed.”). ostensibly it was Indemnity incorporates bond between Olsen and First (“whereas, Hassold,

the contract reference Olsen and Inc. Principal agreement has written dated entered into a contract with Owner for re-insulated structure & install Therefore, sprinkler systems____”). ascertaining meaning provisions, of the bond’s the bond and contract must integrated E.g., Schlanger, supra, considered as one document. 874; Corp., N.J. 206 A.2d Amelco supra, Window N.J.Super. at 317 A.2d 398. See also 17 Am.Jur.2d Contrac § tors’ (observing Bonds that “A contractor’s bond should be with, of, light construed connection and in the contract [the] secures, with performance which it was executed or the of which it especially where the bond refers to part the contract and makes it Thus, bond, contract, of the bond. specifications and the integrated obligation, constitute an together.”) and are to be read To determine whether Fire filed suit within one to the date project, that Olsen “ceased work” we first must define what “work” means the context of the contract between Parkway Olsen and Associates. The bond does not define the However, term “work.” provide guidance the contract does come on this issue. The first section of the contract reads as follows: Agreement 1. Scope of Agreement The terms and conditions in stated this are to the applicable of asbestos

procurement by removal services and certain construc- Company obligation tion work, which shall include Contractor’s to the supervision, furnish engineering, tradesmen, vehicles, tools, materials, identification, equipment, pack- aging, labeling, as the asbestos transportation disposal required perform removal services and construction work as in the applicable further defined (the “Work”) drawings and attached hereto or specifications in the referenced added). Agreement. (Emphasis orders to this placed pursuant language supports That Eagle Fire’s contention that Olsen First, May ceased its “work” on the contract after Scope Agreement section notes that “Work” is defined in the “drawings specifications” attached to the in contract and placed pursuant “Orders significant to” the contract. That is purchase calling partitions because a order for Olsen to “store site trailers” was attached to the contract as Exhibit A-l. Moreover, Parkway’s specifications, bid attached to the contract as Exhibit-C, general obligation also noted the contractor’s to store 23,1990. partitions past May the trailers well

A concluding second basis for working that Olsen ceased undisputed testimony is the that Olsen subcontrac- working July August tors were under the contract as late as or 1990. That the work of the subcontractors constituted work of the general gains support language contractor from the of the con- Agreement Scope of section in the

tract. As stated supervision” of contract, “furnish[ing] the included “work” Olsen’s Lahaye, vice-president, an Olsen construction work. Edward supervise contractual duties was part that of Olsen’s confirmed supported Section 34 That conclusion the subcontractors. contract, performed subcon- the “work” which discusses contract, which discusses Olsen’s 36 of the tractors and Section duty supervise its subcontractors. world, may determine today’s general contractor

In business instead any physical labor on the work site and not to undertake context, if out all of the work subcontractors. contract not include the work of general contractor does “work” of subcontractors, would be deemed to cease general contractor owner of the day signed its contract with the work the same that it (or its last day general contractor hired project subcontractor). longer took that one If the subcontractors’ work period expire before the subcon- year, the limitation would bond’s not be what the their That result could tractors finished work. parties to the bond intended. defining to exclude the work of the problems

The with “work” are demonstrated this subcontractor of a contractor bars claimants from provision contains a case. days expiration of 90 after the date on bringing suit “before the claimant’s work or labor was done which the last of such Thus, Indemnity’s argument accepts if performed.” September working contract on ceased under the that Olsen Fire, of the Eagle completed the installation then which sprinkler system July would have had at June or Eagle completed if Fire days bring Specifically, most ten to suit. 1,1990, day the first that it could have filed its work on June then later, ninety-one days August 30. complaint its would have been 8, 1990, filing September Eagle Fire’s deadline for suit was Hence, Eagle Fire would year allegedly after Olsen ceased work. only days ten to file suit. have had completed If any its work time after June ninety day period then the Septem would have ended after 8,1990, ber any Fire would not opportunity have had complaint against file a Indemnity. Such a severe restric tion on ability bring suit would be both unreason Co., able and unenforceable. Excavating See Camelot Inc. v. St. Co., Paul Fire and Marine Insurance 410 Mich. 301 N.W.2d (1981). Camelot, supra, Michigan In Supreme Court, addressing what is a provision reasonable contractual for a suit, time limitation in which all bring claimants must observed: general The boundaries what is reasonable under rule require investigate claimant have sufficient and file an opportunity action, the time abrogation right not be so short as to work a of the action, and that the practical damage action not be barred before the loss can be ascertained. (citations omitted)]. [Id. 301 N.W.2d at 277 The period Court added that a contractual limitation would be and, therefore, “provision unreasonable if unenforceable [had] way been plaintiff constructed such could not have reason- ably prior point discovered its loss to the at which the limitation period ran.” Id. at 282. supports limited case law in this area the conclusion that performed

Olsen’s work included the work its subcontractors. Son, Inc., supra, V. Petrillo & a construction subcontractor brought against general an action contractor for amounts due performed for construction work on a housing moderate-income project partially Jersey financed Housing the New Finance Agency. 2-3, trial, 371 A.2d 799. Prior to contractor, Co., American Construction was declared bankrupt. defendant, Id. at 371 A .2d 799. The St. Paul Fire (St. Paul), Company and Marine Insurance had issued a Labor Payment Bond, and Materials and defended on the basis that the plaintiff complied had not requirements with the notice timely and had failed to file suit manner. Ibid.

The bond contained a time provision requiring limitation plaintiff against institute suit St. Paul within one American “ceased work” incorpo- under the contract. The bond contract reference and the

rated the construction contract obligations upon the totality imposed as defined work “the at trial by all Ibid. The evidence contractor contract documents.” (1) plaintiff following: performed the the last work demonstrated (2) American, 1972; defendant, 17, property on the August on the 4, 1972; the performed project work the on Oct. last on by any Ibid. last work done subcontractor December 1974, eighteen per- after the months last subcontractor work, plaintiff the suit. The contract also formed instituted Ibid. final property the owner of to issue a certificate of directed the acceptance all Ibid. correction of construction defects. A certificate was never issued. Ibid. work,”

Construing “completes the term “ceases work” to mean judge acceptance found a the trial that because certificate of final issued, general been had never ceased had never contractor meaning within the of the contract. at 371 A.2d 799. work Id. Although rejecting interpretation, Appellate the trial court’s clearly found “the American Division record demonstrates that obligations or left con performing discontinued off under the performed in December the last tract when subcontractor project.” construction work Id. 371 A.2d 799. Because plaintiff complaint year failed to within of the date file its performed, that the last subcontractor court found that plaintiffs action was Id. at 799. Accord time barred. 371 A.2d Babcock, Honeywell, Inc. v. 68 Wash.2d 412 P.2d (1966)(construing period limitation standard labor and material concluding general contractor work” when “ceased work.”). subcontractors their “his had finished decision, thus, Petrillo for proposition stands general not “cease work” if contractor does the subcontractors working The plaintiff are still under the contract. in Petrillo bond, comply provision limitation failed to with the time filing performed suit more than a after the last subcontractor recognize may in under the work contract. We there where, poor due financial stances to the contractor’s record, directly may hire the subcontractor to work for owner In pay directly it and the subcontractor for its work. that longer working general for the situation the subcontractor no contractor, his the work of the work would not be deemed general Although Parkway pay Eagle Fire for contractor. did work, payment some additional Mr. Puth testified that that work, contemplated under the for additional not the work or done Parkway Olsen and contract. asserts that Lourenco Concrete Ribeira &

Construction, Inc., 1350, 16, supra, N.J.Super. 231 554 A.2d argument supports its that the actions of subcontractors are irrelevant to the determination of when the contractor ceased case, general In its entire work. that contractor subcontracted Inc., which, turn, job Enterprises, to Green Cast subcontracted companies, including plaintiff. Ri the work to various other beira, 19-20, supra, at 554 A.2d 1350. The at bring against issue stated that subcontractors could suit surety only of the date that Cast ceased within Green 21, project. Finding A the suit work on the Id. at .2d 1350. untimely, one-year the court stated: are that the [ ] ‘We satisfied period ... ran from that [limitation] the date Green Cast ceased project, on the not from the date that the last subcontractor work 24, completed ... under contract.” at 554 A 2d its work Id. However, day working on the 1350. that Green Cast ceased project day was the contractor terminated its 20, Cast, relieving Id. contract with Green it of its duties. A .2d 1350. Ribeira, distinguished

Ribeira can be from this case. recogni- court’s refusal to look to the subcontractors’ work was a subcontractors, regardless of the actions of a contrac- tion that working project could said to be on a after its contract tor not be and it dismissed from work site. had been terminated has been case, However, terminated until this Olsen’s contract was not 23, September May Fire filed this action on Furthermore, 1991, one-year subcon- within the window. Olsen 23, 1990, giving May after working project on the tractors were May to file suit. subsequent until a date presented at trial indicated evidence The uncontroverted subcontractors storing partitions and that Olsen’s metal Olsen was August July as working under the contract as late were Therefore, jury could not a reasonable past well untimely. The trial court suit was conclude jury’s jury and in answer to the in its instruction to the erred both by subcontractors responded that “the work done question when it by Olsen and not constitute work done and Hassold does Olsen denying the close of It erred in themselves.” also Hassold judgment as a matter of law. Eagle Fire’s motion for evidence America, See, 142 N.J. e.g., v. Ins. Co. Brill Guardian Life trial, (holding that send a case “[t]o is indeed knowing jury can reach but one conclusion that a rational Ferdinand v. ”); purpose’ no useful and will ‘serve “worthless’ Co., 482, 493, (1956)(noting Agricultural Ins. N.J. 126 A.2d 323 presented jury to reasonable minds should not be when that issue resolution). regarding conclusions could not come to different Brill, supra, Furthermore, “eneourage[d] trial courts not to in we proper granting summary judgment cir refrain from when N.J. 666 A .2d 146. present themselves.” cumstances “proper circumstances.” presents This case complied the terms of the Labor and Material with against timely in a commenced suit Bond and evidence that Olsen Because there is uncontroverted manner. 23,1990, Eagle Fire is project continued to work on the amount still owed it to recover under the bond entitled sprinkler system. for installation of the Olsen within one of the date that Because Fire filed suit contract, whether under the we do not address Olsen ceased work estop Indemnity operated equitably to it from the conduct of First Similarly, do not reach the asserting the time bar defense. we Fire Insurance of Peloso v. issue whether doctrine Hartford (1970) Co., 514, 521, be extended to 56 N.J. should Peloso, period surety agreements. supra, held that the limitation policy, any legal fire action a insurance which stated policy brought under must be commenced within twelve loss, inception months after the was tolled from the time the gave liability until insured the insurer notice of its claim was formally declined.

IV Finally, attorney’s Eagle Fire is not entitled to fees. 4:42-9(a), legal Pursuant to R. “no fee for services shall be allowed except Upon or ... In an action the taxed costs otherwise insurance, liability indemnity policy in favor of a or successful 4:42-9(a)(6). question R. then claimant.” The whether obligation surety company pay of a under a labor and material liability indemnity policy of insur ment bond constitutes “a commentary following provides ance.” The R. 4:42-9 that “since permit intention of this rule an award of counsel the stated only indemnify fees where an insurer refused to or defend another, respect party liability of its insured’s third it should extended, terms, beyond express permit not be a counsel fee brings against an award to be made to insured who direct suit his Pressler, casualty coverage.” insurer to enforce or other direct Rules, (emphasis R. 4:42-9 Current N.J. Rules Court Comment added). parties litigation rule is that should bear their Bros., legal

own costs. Coleman v. Fiore 113 N.J. (1989). fact, ] A.2d 141 “our court rules ... the view embrace[ judicial by having that sound administration will best be advanced litigant except in each bear his own counsel fee those few situa Cos., designated.” specifically tions v. Ins. Gerhardt Continental (1966). 291, 301, 48 N.J. 225 A.2d328 4:42-9(a)(6) “only express applies The terms of Rule state that it indemnify when ‘an insurer refuses to or defend its insured’s third party liability to another’ and does not authorize an award of against counsel fees to an insured ‘on a direct suit the insurer to 364 ” coverage.’ v. casualty first-party direct Giri a or other

enforce Inter-Insurance, N.J.Super. 597 A.2d 561 251 Medical omitted). (citations that court observed (App.Div.1991) Giri by the rejected recommendations Supreme Court has twice “the 9(a)(6) R. to allow awards Practice to amend Civil Committee 4:42— brought by insureds range suits of counsel fees a broader the committee’s Ibid. The court concluded that against insurers.” “suggests expand the rule rejection any attempts to or broaden apply expansively to to the rule should not be construed beyond literal and insured which fall disputes between insurers Furthermore, Fengya v. Id. at 597 A .2d 561. terms.” (App.Div.1978),where Fengya, N.J.Super. brought pursuant guardian’s bond in which a mother suit to a a daughter’s surety guaranteed protection faithful of his a father’s 4:42-9(a)(6) applies R. to money, Appellate Division found that insurance, pro “ordinary buys to obtain situation where one against liability parties third and to be indemnified when tection ... guardian’s bond issued herein upon pay,” and “the called liability agrees indemnify in against nor an neither insures rather, guard agrees pay any defalcations of the it sured — ian____” 344-46, court, hence, 383 A.2d 1170. The conclud- Id. at liability indemnity policy guardian’s bond was not a ed that 4:42-9(a)(6) purview R. and the trial court was within the legal Id. at 383 A.2d 1170. power to award fees. without Colen, Township Similarly, in v. Middletown (Law Div.1978), that R. A.2d 928 the court concluded 4:42-9(a)(6) brought against surety apply in an action a did not completion company guaranteed the successful under a bond private residence. The court observed of the construction of strictly limit its rule “has been construed so as to liability indemnity policies.” application only to true insurance surety do A.2d 928. The court held that contracts Id. at applica purview plaintiffs and denied the not fall under the Rule’s attorney’s fees. Ibid. tion for

The insurance contract in this case did not constitute a commit- Indemnity pay Eagle liability ment First to a third Rather, party indemnify Eagle or to liability. Fire for such simply required Indemnity pay Eagle First Fire for its if work Olsen did not do so. Because this is a case where the not R. agreed claims, protect third-party insurer the insured from 4:42-9(a)(6) inapposite. Accordingly, is given we hold that of R. 9(a)(6), scope Eagle legal narrow not entitled to 4:42— fees.

V Eagle Fire commenced suit within one of the date that Complying Olsen ceased work under the contract. with the terms bond, surety judgment of the against Fire is entitled to Indemnity not, however, First as a matter of law. Fire is attorney entitled to an award fees and must bear its own litigation judgment Appellate costs. We reverse the Divi- sion entry and remand the matter to the Law Division for judgment opinion. consistent with this

HANDLER, O’HERN, COLEMAN, JJ., join STEIN opinion. Justice GARIBALDI’s

POLLOCK, J., separate dissenting opinion. filed a WILENTZ, C.J., participate. did not POLLOCK, J., dissenting. dispositive plaintiff, Eagle issue is whether Fire Insurance Fire), defendant,

Company (Eagle against instituted this action (First Indemnity Company First of America Insurance Indemni- ty), one-year period required by Indemnity’s within the performance bond. First furnished the bond to a contractor, Hassold, (Olsen), guaranty Olsen & Inc. payment Olsen’s to subcontractors such as Fire.

The bond bars an action commenced year after Olsen responsibilities I accept premise that Olsen’s ceased work. supervi only furnishing of also the “included not workers but Eagle Fire v. storing tradesmen and the of debris.” sion of the Ins., A.2d 939 280 655 jury that Olsen work before (App.Div.1995). The found ceased later, May commenced this 1990. Over a Fire May straightforward interpretation A action on leads to the that the action is time-barred. bond conclusion limitations, one-year period of Fire To circumvent urges by work contractors constitutes Olsen’s done Olsen’s purpose determining the for the time within which work may Indemnity. Eagle Fire sue First also asserts that presence by of trailers after it ceased work leased Olsen otherwise majority adopts The likewise constitutes work. both Olsen’s I arguments. respectfully dissent. “ jury T

In its instructions to the the Law Division stated that you by instruct done further that the work subcontractors Olsen Hassold, does not Hassold them & constitute work Olsen & presence and therefore the or absence of such subcontrac selves ” Id. at 23rd, at the site after 1990 is not tors relevant.’ jury). (quoting trial court’s instructions Appellate entry Division instruction affirmed that and directed Id. judgment a of no cause for action favor of defendant. substantially 655 A .2d 939. I affirm reasons would for the Appellate stated Division. work, general stopped I

After contractor has itself would not impute unsupervised to it the work of subcontractors that remain job. “Any performs original work on the a subcontractor after the obligations surety’s contractor’s have ended should not extend the liability, original it is since the conduct of the contractor which Ins., Hayward v. W.F. Transamerica relates.” (1993). Cal.App.4th. 468, 471-72 Cal.Rptr.2d agree I likewise courts with lower that after Olsen ceased work, presence on the work site of trailers that Olsen had repos- equally The date on which a lessor rented is irrelevant. from a work site should not sesses a contractor’s trailers surety determine the time to sue under that contractor’s bond. I dissent. HANDLER, remandment —Justices

For reversal and O’HERN, GARIBALDI, STEIN COLEMAN —5.

Dissenting POLLOCK —1. —Justice

678 A.2d MILBURN, THE P. IN MATTER OF THOMAS AT AN ATTORNEY LAW.

July ORDER METUCHEN, P. who was admitted THOMAS MILBURN of 1978, having to the bar of this State in tendered his consent to Jersey, attorney of New disbarment as an at law State good appearing; cause by

It that THOMAS P. MILBURN is disbarred is ORDERED consent, immediately; further effective and it is respondent’s name stricken from the roll of

ORDERED enjoined attorneys permanently restrained and and that he be law; practicing from and it is further funds, any, currently existing any that all if New ORDERED MIL- Jersey financial institution maintained THOMAS P. BURN, 1:21-6, pursuant to Rule shall be restrained from dis- Court, application good except upon bursement to this for cause shown, be transferred the financial institution to the shall Superior deposit the funds Clerk of the Court who directed

Case Details

Case Name: Eagle Fire Protection Corp. v. First Indemnity of America Insurance

Court Name: Supreme Court of New Jersey

Date Published: Jul 22, 1996

Citation: 678 A.2d 699

Court Abbreviation: N.J.