STEVEN BILLIG v. DEEP RUN PLAZA

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0676-04T50676-04T5

STEVEN BILLIG,

Plaintiff,

v.

DEEP RUN PLAZA, ALLIANCE REALTY

CORP., BEST HORTICULTURAL SERVICES,

Defendants,

and

ALLIANCE REALTY ENTERPRISES,

Defendant-Appellant,

and

BLOCKBUSTER VIDEO,

Defendant-Respondent.

_____________________________________

 

Submitted September 12, 2005 - Decided

Before Judges Lintner and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County,

L-5288-02.

Hanlon, Boglioli & Hanlon, attorneys for appellant (Richard J. Mirra, on the brief).

Rawle & Henderson, attorneys for respondent (Peter A. Lentini, on the brief).

PER CURIAM

Defendant Alliance Realty Enterprises LLC (Alliance) appeals from a Law Division order awarding codefendant Blockbuster Video (Blockbuster) attorney's fees and costs and denying Alliance's motion to hold Blockbuster responsible for a portion of a settlement previously entered into with plaintiff, Steven Billig. The principal question raised in this appeal is whether the lease agreement required tenant Blockbuster to indemnify and defend landlord Alliance by providing general liability insurance naming Alliance as an additional insured covering injuries sustained by Steven Billig when he fell on ice in front of Blockbuster's store located in Alliance's shopping center.

The motion judge found that the lease agreement required Alliance to indemnify Blockbuster because Billig's fall did not occur on premises demised to Blockbuster but on a portion of the shopping center retained by Alliance, who was responsible under the lease to remove ice and snow. We disagree and hold that Blockbuster had an obligation to cover Alliance as an additional insured under the lease agreement and that under the facts of this case there existed a sufficient nexus between the occurrence of Billig's injuries and the use of the premises demised to Blockbuster.

We combine the procedural history and essential facts, which are substantially undisputed. Billig filed a permanent injury suit arising from a fall that occurred on the walkway directly outside the Blockbuster store. Billig parked his car in a short-term parking area designated for Blockbuster patrons. As he walked toward the Blockbuster store, he noticed two large piles of snow with an opening between them leading to the sidewalk. After proceeding through the snow piles, he stopped on the sidewalk and his foot "shot out" from under him causing him to fall backward, landing on his buttocks. When he got up, he noticed that the sidewalk leading to the Blockbuster store was covered with a clear sheet of ice. Billig entered the Blockbuster store, reported his fall, and advised a Blockbuster employee that there was a sheet of ice on the walkway in front of the store. The employee responded that they knew there "is ice out there" and acknowledged that they "have to take care of it."

The lease agreement obligated Alliance to maintain the common areas, which included the parking areas and the sidewalks. It also described the Blockbuster store as the Demised Premises. ARTICLE 18 of the lease provided in pertinent part:

INSURANCE

A. Landlord agrees to carry, or cause to be carried, on the Shopping Center, during the Term hereof, Commercial General Liability Insurance . . . naming Tenant as an additional insured, providing coverage of not less than Two Million Dollars ($2,000,000.00) in combined Bodily Injury and Property Damage Liability. . . .

. . . .

D. Tenant agrees to carry, Commercial General Liability . . . insurance on the Demised Premises during the Term hereof naming Landlord . . . as additional insured[] . . . . Such insurance shall be for limits of not less than Two Million Dollars ($2,000,000.00) combined Bodily Injury and Property Damage Liability.

ARTICLE 19 provided the following mutual indemnification obligations:

INDEMNIFICATION

A. Tenant hereby indemnifies and holds Landlord harmless from and against any and all claims, demands, liabilities and expenses, including attorney's fees, arising from any breach or default by Tenant of this Lease, Tenant's conduct of business from the Demised Premises or the negligence or willful misconduct of Tenant or its agents, employees or contractors in or about the Demised Premises, except to the extent caused by Landlord's negligence or willful misconduct. In the event any action or proceeding shall be brought against Landlord by reason of any such claim, Tenant shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord.

B. Landlord hereby indemnifies and holds Tenant harmless from and against any and all claims, demands, liabilities, and expenses, including attorney's fees, arising from any breach or default by Landlord of this Lease, or the use operation or maintenance of the Shopping Center, except to the extent caused by the willful misconduct or negligence of Tenant occurring in the Demised Premises. In the event any action or proceeding shall be brought against the Tenant by reason of any such claim, Landlord shall defend the same at Landlord's expense by counsel reasonably satisfactory to Tenant.

Billig filed a complaint for personal injuries naming Alliance, Blockbuster, and Best Horticultural Services, the company retained by Alliance to clear snow and ice. Eventually Billig's case settled for $150,000. Best Horticultural Services contributed $35,000 while Alliance and Blockbuster agreed to contribute $115,000 but reserved their right to litigate the insurance indemnification issues between them.

Although Alliance failed to have Blockbuster named as an additional insured on its general liability policy, its carrier, Franklin Mutual, agreed to cover Blockbuster as an additional insured during the underlying litigation. The record does not indicate whether Blockbuster actually had Alliance named as an additional insured on its general liability policy. Instead, Blockbuster never notified its carrier because its self-retention was greater than the loss.

In granting Blockbuster's motion to hold Alliance responsible for attorney's fees and the entire $115,000 portion of the settlement, the judge found it not relevant whether Blockbuster had Alliance named as an additional insured. He concluded that the indemnification provision protected Blockbuster because it was Alliance's responsibility to remove ice and snow from the common areas where Billig's injury occurred.

On appeal, Alliance asserts that there was a substantial nexus between Billig's injuries and the risk of liability generated by Blockbuster's obligation to its patron. Blockbuster counters, arguing Article 18 required it to obtain insurance coverage for injuries occurring only on the Demised Premises and, because Billig's accident occurred on a common area, it was under no obligation to obtain coverage. Blockbuster also argues that the indemnification provisions of the lease are consistent with its insurance obligation to provide insurance only for injuries occurring on the Demised Premises because it too requires the Landlord to indemnify Blockbuster for all accidents occurring outside the store.

In advancing its position, Blockbuster places heavy reliance on Pennsville Shopping Center Corp. v. American Motorists, Ins. Co., 315 N.J. Super. 519 (App. Div. 1998), certif. denied, 157 N.J. 647 (1999). In Pennsville, the plaintiff carrier provided liability coverage to the owner (landlord) of a shopping center and the defendant carrier insured the tenant who operated a supermarket. The landlord's carrier brought a declaratory judgment action against the tenant's carrier after both insureds were sued by a patron who fell in a pothole located in the parking lot. The lease agreement between the landlord and tenant specifically provided that the landlord had an "absolute" obligation to indemnify the tenant from liability resulting from the landlord's failure to repair or maintain the common areas. The tenant's carrier, pursuant to the lease agreement, named the landlord as an additional insured under its policy.

The landlord's carrier appealed from a dismissal of its declaratory judgment action arising from the grant of summary judgment in favor of the tenant's carrier. We noted that we agreed with the motion judge's finding that a substantial nexus did not exist. Pennsville, supra, 315 N.J. Super. at 523. We added, "a tenant cannot logically be seen to be providing insurance to a landlord in respect of a liability for which the landlord has assumed sole responsibility and has agreed to indemnify the tenant." Ibid. We also observed that a tenant "undertaking to name landlord as an additional insured must be taken to be coextensive with the scope of tenant's own liability." Ibid. (emphasis added). Stated another way, where a landlord's liability arises out of the risk generated by the tenant's invitation to conduct business, the tenant's insurer cannot reasonably assert that it did not anticipate it would have to cover a landlord named as an additional insured for its liability arising from injures sustained by the tenant's invitee. See Harrah's Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J. Super. 152 (App. Div. 1996).

We, therefore, turn to the concept that a substantial nexus must be present between the occurrence and the use of the leased premises to trigger coverage. In a dispute over the application of an insurance contract, it is the insured's burden "to bring the claim within the basic terms of the policy." Reliance Ins. Co. v. Armstrong World Indus., Inc., 292 N.J. Super. 365, 377 (App. Div. 1996) (citing Diamond Shamrock Chems. v. Aetna Cas. & Sur. Co., 258 N.J. Super. 167, 216 (App. Div. 1992), certif. denied, 134 N.J. 481 (1993)).

We dealt with a similar provision in Franklin Mutual Ins. Co. v. Security Indemnity Ins. Co., 275 N.J. Super 335 (App. Div.), certif. denied, 139 N.J. 185 (1994). The endorsement in Franklin Mutual provided coverage "only with respect to liability arising out of the ownership, maintenance, or use of that part of the premises . . . leased" to the tenant. Id. at 340. In Franklin Mutual, a patron of the tenant luncheonette located inside an office building fell on exterior steps of the office building after leaving the luncheonette. Although the exterior steps were not part of the premises leased to the luncheonette, we found that coverage was afforded the landlord under the additional insured provisions of the luncheonette's liability policy. Construing the language in the broadest and most comprehensive way, we found that coverage was afforded if the incident either "originated from" or "grew out of" the use of the premises. We concluded:

Thus, there need be shown only a substantial nexus between the occurrence and the use of the leased premises in order for the coverage to attach. The inquiry, therefore, is whether the occurrence which caused the injury, although not foreseen or expected, was in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the leased premises and, thus, a risk against which they may reasonably expect those insured under the policy would be protected.

[Id. at 340-41]

Where a landlord requires a tenant to have the landlord named as an additional insured, the landlord essentially is "attempting to insure against the risk of liability generated by the business about to be conducted by the tenant," thereby placing the cost of insuring the risk on the tenant. Harrah's, supra, 288 N.J. Super. at 158.

Article 18 of the lease requiring Blockbuster to name its landlord as an additional insured on a general liability policy "on the Demised Premises" was even broader than the lease provision in Franklin Mutual. Here, Alliance can trace its risk of liability directly to Blockbuster's business presence. Blockbuster concedes in its appellate brief that Billig, as patron, was a business invitee to whom Blockbuster owed a non-delegable duty. At the time of his fall, he was intending to enter the Blockbuster store and was using a path directly in front of it to gain access. Blockbuster's employee was aware of the dangerous condition and acknowledged the need to do something about it. Simply put, Billig's accident was the type of occurrence contemplated by the parties to have been a natural and reasonable consequence of the use of the leased premises. We are satisfied that a substantial nexus between Billig's accident and the operation of Blockbuster's business was established.

Our conclusion is bolstered by the express wording of the indemnification provisions in Article 19. Although "[e]ntirely different principles of law apply . . .," Harrah's, supra, 288 N.J. Super. at 159, the Article 19 provisions are consistent with our determination that Alliance could reasonably expect that it would be covered as an additional insured by Blockbuster for Billig's injury because his fall was within the landscape of risk contemplated by the parties. Contrary to Blockbuster's contention, the Article 19A indemnification provisions are not limited to the location of Billig's injury. Blockbuster agreed to indemnify Alliance in part against "liabilities" arising from Blockbuster's "conduct of business from the Demised Premises" or "the negligence of its . . . employees." Billig's presence was directly related to Blockbuster business and its employees were aware of the condition and the need to do something about it.

The indemnification provision in subsection B inuring to Blockbuster's benefit specifically excepts negligence "occurring in the Demised Premises." Both clauses speak in terms of where negligence occurs, not the location where the injury or accident actually happened. The negligent conduct of Blockbuster's employee, specifically his knowledge of the dangerous condition and his failure to act despite that knowledge, occurred while on duty at the Blockbuster store. Accordingly, we reverse the order awarding Blockbuster counsel fees and costs and denying Alliance's motion to hold Blockbuster responsible for a portion of a settlement. We remand for further proceedings to permit allocation of the insurance coverage pursuant to Blockbuster's obligation under the lease.

Reversed and Remanded.

 

Improperly pleaded as Alliance Realty Enterprises.

According to Blockbuster, the settlement was placed on the record, however, a transcript is not provided in the appendix on appeal. Alliance claims that each agreed to pay fifty percent of the $115,000, subject to their right to litigate the coverage and indemnity issues.

(continued)

(continued)

12

A-0676-04T5

September 20, 2005