(Article from Insurance Law Alert, June 2015)
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The Supreme Court of New Jersey ruled that a factory owner was entitled to statutory attorneys’ fees as a “successful claimant” in litigation against a contractor’s insurer even though a jury found that the factory owner was not entitled to recover damages.
Occhifinto v. Olivio Construction Co., LLC, 2015 WL 2095767 (N.J. May 7, 2015).
A factory owner sued a contractor alleging negligent construction. The contractor’s insurer sought a declaration that it had no duty to defend or indemnify the claims. The factory owner defended that action as a third-party beneficiary of the contractor’s liability policy. A trial court ruled that the policy provided coverage for the claims. Thereafter, the negligent construction suit proceeded to trial, and a jury found that the contractor breached its duty of care, but did not proximately cause the property damage. Therefore, no damages were awarded. After trial, the factory owner moved to collect attorneys’ fees from the insurer pursuant to N.J. Rule 4:42-9(a)(6), which authorizes fee shifting in “an action upon a liability or indemnity policy of insurance in favor of a successful claimant.” The trial court denied the motion, ruling that the factory owner was not a “successful claimant” because no damages were awarded in the negligent construction trial. The appellate division affirmed.
The Supreme Court of New Jersey reversed, ruling that the factory owner was a “successful claimant” because in the coverage action, the trial court had ruled that the insurer was required to defend and, if necessary, indemnify the negligent construction claims. The court held that a party does not need to prevail on all issues in the underlying litigation in order to be a “successful claimant.” Rather, under New Jersey precedent, a “successful claimant” is a party that “succeed[s] on any significant issue in litigation which achieves some benefit the parties sought in bringing suit.” Applying this standard, the court deemed the factory owner a successful claimant because he secured a successful coverage ruling as a “third-party beneficiary of a liability policy,” notwithstanding the absence of an underlying damage award requiring indemnification.
The impact of
Occhifinto may be limited. First, attorneys’ fee awards under N.J. Rule 4:42-9(a)(6) are not mandatory and are within the sound discretion of a trial court. Second, because Rule 4:42-9(a)(6) is procedural, its application is generally limited to actions filed in New Jersey state court and should not extend to federal cases or out-of-state cases applying New Jersey substantive law.