In Occhifinto v. Olivo Construction Co., decided by the New Jersey Supreme Court on May 7, 2015, the Court was asked to decide whether a third party beneficiary to an insurance policy could be considered a “prevailing party” entitled to recover attorneys fees under Rule 4:42-9(a)(6), when it prevailed against the carrier in the declaratory judgment action but did not prevail in the liability action. Robert Occhifinto sued Robert S. Keppler Mason Contractors LLC (“Keppler”) and others, seeking damages for the alleged defective construction of an addition to his warehouse. Keppler was defended by its insurance carrier, Mercer Mutual Insurance Company (“Mercer”). However, before the trial of the liability matter, Mercer filed a declaratory judgment action, challenging its obligation to provide coverage and defend Keppler in the liability action.
Occhifinto, on behalf of Keppler, contested the claims raised by Mercer and filed a counterclaim, asserting that Mercer had a duty to defend and indemnify Keppler under the policy and that Mercer was obligated for the counsel fees he incurred in defending the declaratory judgment action. The trial court found that Mercer was required to defend and indemnify Keppler under the policy but reserved judgment as to Occhifinto’s claim for attorneys fees until the conclusion of the liability action.
The liability action proceeded and Occhifinto did not prevail against Keppler. The jury found that Keppler did not proximately cause the failure of the warehouse floor and awarded no damages. After trial, Occhifinto tried to recover counsel fees from Mercer pursuant to Rule 4:42-9(a)(6), which permits an award of attoneys fees in “an action upon a liability or indemnity policy of insurance in favor of a successful claimant.” The trial court denied Occhifinto’s motion, holding that he was not a successful claimant in the liabilty action because he was not entitled to indemnity coverage in the liability action – due to his failure to obtain an award against Keppler.
The Appellate Division affirmed. The Supreme Court granted certification on the limited issue of Occhifinto’s right to counsel fees.
The Supreme Court held that Occhifinto was a successful claimant entitled to counsel fees under this court rule. The trial court had determined that Mercer would have been required to indemnify Keppler in the event Keppler was found liable. By forcing Mercer to defend the liability action, Occhifinto obtained a favorable adjudication on the merits of a coverage question, rendering Occhifinto a successful claimant under Rule 4:42-9(a)(6).
The Court found that the term “successful claimant” is broadly defined as a party that succeeds on any significant issue in litigation which achieves some benefit to the parties bringing the suit. This term also includes a third party beneficiary of a liability insurance policy who litigates a coverage question against a defendant’s insurance carrier.
Here, a coverage question includes the duty to defend question. Even though, there was ultimately no indemnification because Keppler was found not liable to Occhifinto, regardless, Occhifinto had been successful in persuading the trial court that indemnification would have been owed, had there been an adjudication against Keppler in the underlying liability action. Hence, the Supreme Court held that Occhifinto was a successful claimant and was entitled to an award of attorneys fees under this court rule.
