A-77-13 Robert Occhifinto v. Olivo Construction Co., LLC (073174) (Sussex County and Statewide)
Argued 1/21/15
Question for the Court:
Under the circumstances presented in this appeal, were plaintiffs entitled to attorney’s fees as successful claimants pursuant to Rule 4:42-9(1)(6)?
A unanimous New Jersey Supreme Court opinion
has affirmed the rights of an aggrieved plaintiff to recover counsel
fees incurred in prosecuting relief through a declaratory judgment;
enforcing a duty to defend owed by a general liability carrier to a
contractor defendant in a construction defect action.
In Occihifinto v. Olivo Construction, LLC,
the plaintiff hired a masonry contractor to perform work on an addition
to plaintiff’s warehouse. Plaintiff sued the mason and the mason’s
general liability carrier (Mercer) refused to defend or indemnify,
instead filing a declaratory judgment action.
Plaintiff aggressively
prosecuted relief against the carrier in the declaratory judgment
action, acting as a surrogate for the insured masonry contractor.
Although the trail court and Appellate Division
ruled otherwise, the Supreme Court unanimously affirmed the aggrieved
plaintiff’s entitlement to recover his counsel fees under R.4:42-9 (a)
(6), which provides for an award of counsel fees in “an action upon a
liability or indemnity policy of insurance in favor of a successful
claimant.”
The Supreme Court determined the plaintiff was a
successful claimant by vindicating his position in the declaratory
judgment action; establishing the carrier’s duty to defend the mason.
The award of counsel fees was allowed to stand, even though the
plaintiff was unsuccessful in establishing liability in the underlying
litigation.
This is not only the correct outcome, but should
embolden and inspire aggrieved plaintiffs to take aggressive action in
declaratory judgment actions spawned by underlying defect claim
litigation. Insured defendant contractors are often disinclined to
aggressively defend their position or lack the incentive and resolve of
the underlying plaintiff; whose ability to recover is contingent upon
gaining access to available insurance proceeds, often as the singular
means to obtain relief.
This ruling is soundly based upon the express
language of the rule, which provides for this remedy, consistent with
the practical realities presented by these types of actions. Where the
obligation to carry the burden of prosecuting what would otherwise be
the insured’s rightful position to otherwise vindicate is foisted upon
the underlying plaintiff, logic dictates that the court avail the
plaintiff of the basic relief otherwise available to the insured.
This should give insurance carriers otherwise
inclined to shirk their rightful responsibility to provide a defense or
indemnity under a general liability policy in the construction defect
context, to think twice before arbitrarily seeking to avoid
responsibility.
Given the additional consequence of exposure to counsel
fees, one can only hope that insurance carriers will be more circumspect
in determining when and whether to reserve their rights, or seek to
deny coverage. At a minimum, this ruling should serve to level the
playing field in this arena, balancing the scales decidedly in favor of
an aggrieved plaintiff.