On March 15, 2011, the New Jersey Supreme Court decided the case of Tina Kieffer v. Best Buy, 203 N.J. 93 (2011), which will impact parties who enter into indemnification agreements with vendors that provide premise maintenance services.

Applicable Law

The objective in construing a contractual indemnity provision is to determine the intent of the parties. Mantilla v. NC Mall Assocs., 167 N.J. 262, 272 (2001). If an indemnity provision is unambigious then the words will presumably reflect the parties’ expectations. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). If the meaning of an indemnity provision is ambiguous, it is strictly construed against the indemnitee for two reasons: A party is ordinarily responsible for its own negligence, so express language is required to shift liability to the other party; and, each party is responsible for its own attorney’s fees absent statutory or judicial authority to the contrary. Mantilla, at 272; see also Am. Bldg. Maint. Co. v. L’Enfant Plaza Props., Inc., 655 A.2d 858, 861-62 (D.C. 1995).

Tina Kieffer v. Best Buy

In the Kieffer case, a cleaning company named American Industrial Cleaning Co. (“American Industrial”) contracted with Best Buy to provide maintenance and cleaning services for its stores. In turn, American Industrial subcontracted with All Cleaning Solutions (“All Cleaning”) to fulfill its contractual duties at Best Buy’s store in Holmdel, NJ.

Best Buy’s agreement with American Industrial Cleaning permitted the subcontracting of services to a third-party vendor, but explicitly indicated that American Industrial would remain “solely responsible for the conduct of all such Subcontractors.” In addition, American Industrial agreed to defend and indemnify Best Buy for “all suits, causes of action, claims, and demands” asserted against Best Buy. American Industrial’s contract with All Cleaning contained an indemnification provision which required All Cleaning to defend and indemnify American Industrial and Best Buy “from any connection with any act of negligence, omission, or conduct arising out of the operation of business and performance or non-performance of its services.”

In the underlying case, Plaintiff, Kieffer slipped and broke her ankle on a floor that had been swept, mopped and scrubbed on the day of the fall by All Cleaning. The same floor had been waxed three (3) months prior. Plaintiff admitted, however, that she did not know why she fell. The trial court granted summary judgment in favor of all three defendants, and concluded that there was no factual evidence that any Defendant was negligent and liable for Kieffer’s injuries.

Despite finding no evidence of negligence, the trial court ordered All Cleaning to pay for the legal defense of both Best Buy and American Industrial. The trial court held that it did not differentiate between the indemnification agreements in the two contracts, stating that both required the indemnifying party to defend the indemnitee against “suits, causes of action, claims and demands,” and, moreover, that both indemnification agreements were triggered by “claims” alone, without a specific finding of negligence, as required by the All Cleaning’s contract.

The Appellate Court upheld this decision, but the Supreme Court reversed, holding that:

1. All Cleaning had no contractual obligation to indemnify American Industrial or Best Buy where there was no legal determination that Plaintiff’s injuries were caused by All Cleaning’s negligence, as required by the indemnification provision contained in its contract with American Industrial.

2. The All Cleaning/American Industrial contract did not obligate All Cleaning to indemnify American Industrial or Best Buy for the cost of defending a lawsuit that was dismissed by summary judgment for lack of evidence. The contractual language specifically obligated All Cleaning to pay defense costs “from any connection with any act of negligence, omission, or conduct arising out of the operation of business.”

The Court rejected any extrapolation from this language covering “any claims or demands.” Given the fact that American Industrial wrote this contract themselves, the Court refused to consider a more a favorable position for them than the one into which they drafted. Therefore, All Cleaning was not required to indemnify absent a finding of negligence. No ambiguity in the contractual language was noted, and, even if the Court did find the language to be ambiguous, the law requires that such language be construed against American Industrial, the drafter of the contract, and the indemnitee. 

What It Means to You

When indemnification agreements are contemplated, the drafting party should attempt to craft the appropriate, all-inclusive language, in order to survive judicial scrutiny and be in a position to obtain the sought after indemnification.  For more information, or for any question regarding New Jersey indemnification law, please contact Matthew Mitchell at (856) 761-3800 or mmitchell@c-wlaw.com The information contained herein is not legal advice. It may not be copied without the written permission of Cipriani and Werner, P.C., 155 Gaither Drive, Suite B, Mt. Laurel, NJ 08054