Appellate Division Unanimously Reverses Dismissal of Breach of Contract for Failure to Indemnify for Settlement

Partners Gil Coogler and Alexandra Rigney argued that Defendant breached its contractual obligation to indemnify and procure insurance for Plaintiffs, and sought reimbursement of a settlement amount, as well as attorneys’ fees paid in connection with an underlying personal injury action. At the trial level, the court dismissed Plaintiffs’ breach of contract claim, but the Appellate Division unanimously reversed, holding that where an indemnitor has notice of a claim against the indemnitee, the indemnitor is bound by a reasonable and good faith settlement made by the indemnitee. The Appellate Division held that the trial court improperly dismissed Plaintiffs’ indemnification claim, finding that the subcontract plainly required indemnification for claims arising out of Defendant’s work on the construction project, and there was no dispute that Defendant had notice of the claim as well as the settlement negotiations. Further, the Court held that Defendant failed to show that the settlement was unreasonable or not made in good faith. The court rejected Port Richmond’s assertion that because the underlying action was dismissed against Aragon, plaintiffs could not establish Aragon’s liability for those injuries.   Instead, the court reasoned that where, as here, notice has been given, the indemnitee need not establish its own liability for the underlying claim.  The Appellate court further held that the lower court also should not have dismissed the Complaint’s insurance procurement claim because issues of fact existed as to whether the insurance coverage purportedly procured by Port Richmond satisfied its contractual obligations.

A copy of the decision can be found here: