In New Jersey, contracts for indemnification are interpreted under the same set of rules that govern the interpretation of contracts, in general. “When the meaning of the clause is ambiguous… the clause should be strictly construed against the indemnitee.” Ramos v. Browning Ferris Indus. of S. Jersey, Inc., 103 N.J. 177, 191 (1986); see also, Azurak v. Corporate Property Investors, 175 N.J. 111-12 (2003); Mantilla v. NC Mall Assocs., 167 N.J. 262, 272 (2001).
A recent case, Sayles v. G&G Hotels, Inc., 429 N.J. Super. 266 (App. Div. 2013) addressed the issue of whether an inartfully drawn indemnification agreement constitutes ambiguity. In Sayles, one Plaintiff died and another was seriously injured when they both fell though a third story window at an Atlantic City hotel owned and operated by Defendant G&G Hotels, Inc. (“G&G”) under a brand-name license from Howard Johnson International, Inc. (“HoJo”). The licensing agreement entered into by G&G and HoJo contained an indemnity provision.
Prior to trial, HoJo moved for summary judgment citing the indemnity provision. In deciding the motion, the Trial Court acknowledged that the indemnity provision was “not a model of clarity” because it contained “too many, far too many disjunctives, conjunctives, and commas, and an insufficient amount of periods.” Notwithstanding, the Trial Court granted HoJo’s motion. The Court stated that the enforcement of the indemnity provision was consistent with caselaw.
G&G appealed, stating that the indemnification provision did not unequivocally express the parties’ intent that G&G indemnify HoJo for claims based upon HoJo’s negligence. Further, the lack of clarity in the provision required fact-finding. The indemnity provision in question required G&G to:
indemnify, defend and hold [HoJo] harmless, to the fullest extent permitted by law, from and against all Losses and Expenses, incurred by [HoJo] in connection with any … claim … relating to or arising out of any transaction, occurrence or service at or in conjunction with the operation of the Facility, any breach or violation of any contract or any law, regulation or ruling by, or any act, error or omission (active or passive) of, [G&G], any party associated or affiliated with [G&G], or any of their respective owners, officers, directors, employees, agents or contractors, including when the active or passive negligence of [HoJo] is alleged or proven.
G&G alleged there were two possible interpretations; hence, the clause was ambiguous and therefore unenforceable. The first interpretation was how the Trial Court interpreted the provision – the ending phrase (“including when the active or passive negligence of [HoJo] is alleged or proven”) related to all instances in which expenses and losses might be incurred. G&G stated that there was a second interpretation. This second interpretation viewed the ending phrase as relating only to the portion that preceded it (“any act, error or omission (active or passive) of, [G&G], any party associated or affiliated with [G&G], or any of their respective owners, officers, directors, employees, agents or contractors”).
The Appellate Division rejected G&G’s arguments and upheld the grant of summary judgment. The Appellate Division found that the indemnification provision expressly included situations in which HoJo’s negligence was alleged or proven to have been caused by HoJo’s active or passive negligence. Further, G&G’s interpretation made no logical sense since it would have only applied to G&G.
The Appellate Division further commented that style should not trump substance. The Appellate Division agreed that the provision could have been better written. However, simply because something could have been better written does not make it ambiguous or equivocal. A court must look at the parties’ true intent. As the Appellate Division found no doubt that the provision intended to indemnify HoJo for its own negligent acts or omissions, the provision is enforceable.