Summary
holding that under certain factual scenarios "a party to a construction contract may claim an implied right to indemnification when it has failed to secure such protection in its contract documents"
Summary of this case from Thompson v. Murata Wiedemann, Inc.Opinion
C.A. No. 01C-11-147-JRS.
Date Submitted: May 7, 2003.
Date Decided: July 25, 2003.
Upon Consideration of Third-Party Defendant Heritage Interiors, Inc.'s Motion for Summary Judgment.
GRANTED IN PART. DENIED IN PART.
Arthur M. Krawitz, Esquire, DOROSHOW, PASQUALE, KRAWITZ, SIEGEL BHAYA, Wilmington, Delaware, 19805. Attorney for Plaintiffs.
Louis J. Rizzo, Esquire, REGER RIZZO, Wilmington, Delaware, 19801. Attorney for Defendant/Third-Party Plaintiff.
Kenneth M. Doss, Esquire, CASARINO, CHRISTMAN SHALK, Wilmington, Delaware, 19801. Attorney for Third-Party Defendant.
MEMORANDUM OPINION
I. INTRODUCTION
In this case, the Court must determine whether a party to a construction contract may claim an implied right to indemnification when it has failed to secure such protection in its contract documents. The case arises from a personal injury accident on a construction site at Wilmington College's New Castle County campus. The plaintiff, Brian K. Davis ("Davis"), was injured while in the course of his employment with third-party defendant, Heritage Interiors, Inc. ("Heritage"). The general contractor for this construction project was defendant, third-party plaintiff, R.C. Peoples, Inc. ("R.C. Peoples"). The contract between Heritage and R.C. Peoples is silent with respect to indemnification.
Davis has sued R.C. Peoples alleging, inter alia, that it negligently failed to maintain a safe work environment. R.C. Peoples has brought a third-party claim against Heritage for contribution and indemnification. Heritage has moved for summary judgment on the grounds that it is immune from claims for contribution under Delaware's workers' compensation statute, and that no indemnification obligation may be imposed as a matter of law. The contribution claim clearly is not viable and has already been dismissed by the Court. The claim for indemnification, however, involves a more complicated analysis. After studying the relevant case authority, the Court is satisfied that, under certain factual scenarios, a claim for implied indemnity may be viable. Because Heritage has focused its presentation on the legal viability of the implied indemnity claim, it has not supported its motion with a factual record which would allow the Court to determine if such a scenario is present in this case. Accordingly, the motion for summary judgment with respect to implied indemnity must be DENIED. Since the parties agree that there is no express provision for indemnity in place here, the motion for summary judgment is GRANTED with respect to R.C. Peoples' claim for indemnity based upon its contract with Heritage.
DEL CODE ANN. tit. 19, § 2304 (1995).
II. FACTS
In the summer of 1999, R.C. Peoples was the general contractor on a construction project at Wilmington College ("the Project"). On July 26, 1999, Heritage submitted a bid to R.C. Peoples to perform framing, drywall and related services on the Project. The bid outlined the work to be done and the associated cost but did not state specifically the manner in which the work would be performed. Nor did it address such customary issues as insurance coverage and indemnification. Apparently, the parties had worked together on other projects and were satisfied that such contractual formalities were not necessary on this Project. Instead, the details of the parties' relationship with respect to this Project were discussed orally among the principals prior to and during Heritage's performance. It is undisputed that the topic of indemnification was not discussed.
Interestingly, the record reveals that the parties had entered into indemnification agreements on other projects. The record is clear, however, that such agreements were limited in scope to the projects to which they related. There was no "blanket" indemnification agreement in place between the parties at the time of the events giving rise to this lawsuit.
On February 1, 2000, Davis slipped and fell on an ice-covered stairway at the construction site while carrying tools from one floor of the work area to another. He sought his exclusive remedy of workers' compensation from his employer, Heritage, and filed a claim for personal injuries against R.C. Peoples. R.C. Peoples, in turn, filed a third-party claim against Heritage for contribution and indemnification.
At the conclusion of oral argument, the Court granted Heritage's motion for summary judgment with respect to R.C. People's third-party claim for contribution. All that remains for consideration, then, is the third-party claim for indemnification. Fact discovery is closed and the motion is ripe for decision.
See Precision Air, Inc. v. Standard Chlorine of Del., Inc., 654 A.2d 403, 407 (Del. 1995) ("Because the employer cannot be held liable as a joint tortfeasor, it is not obligated to provide contribution to the third party.").
III. DISCUSSION
A. Summary Judgment Standard
When considering a motion for summary judgment, the Court's function is to examine the record and determine whether genuine issues of fact exist. If, after viewing the record in a light most favorable to the non-moving party, the Court finds that there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, then summary judgment will be granted. Summary judgment will not be granted, however, if the record indicates that a material fact remains in dispute, or if judgment as a matter of law is not appropriate.
Oliver B. Cannon Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del.Super.Ct. 1973).
Id.
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
B. Implied Indemnification
The parties agree that the contract documents between Heritage and R.C. Peoples do not address the issue of indemnification. The parties did not discuss indemnification orally, and did not otherwise address the topic in their communications about the Project. Express indemnification, therefore, is not an issue in this case.
R.C. Peoples contends that even in the absence of an express commitment to indemnify, Heritage may be liable for indemnification on the basis of its breach of an implied promise to perform its work on the project in "a workmen like manner." According to R. C. Peoples, this breach, standing alone, creates the right of indemnification even when the parties do not expressly contemplate indemnification. Heritage responds by arguing that R.C. Peoples must establish some aceeptance of the obligation of indemnification by Heritage — in writing, orally or otherwise — in order to prevail on its claim of implied indemnification.
(D.I. 48)
R.C. Peoples has not argued that it enjoyed a "special relationship" with Heritage from which an obligation to indemnify maybe implied. See SW(Delaware), Inc. V. American Consumers Indus., Inc., 450 A.2d 887, 889 (Del. 1982) (indemnification obligation may arise when a "special relationship" exists between the parties of a nature that such an obligation should be implied).
The majority of jurisdictions do not recognize an implied right to indemnification. Delaware, however, appears to side with the minority. For instance, in Diamond State Tel. Co. v. University of Delaware, the court held that a contractor may be liable on a theory of implied indemnity when he breaches "an obligation to perform his work with due care." The court identified three specific factual scenarios where the employer may be liable to a third party for implied indemnity, notwithstanding workers' compensation exclusivity, when the employer's conduct places the third party in a position where it is exposed to liability to the employee. These include instances where the employer creates a dangerous condition on the third party's premises which causes injury to the employee, instances where the employer knowingly permits the employee to work under dangerous conditions which may have been caused or created by the third party, and instances where the employer activates a latent dangerous condition caused or created by the third party which, in turn, causes injury to the employee. After describing the scenarios, the court concluded: "From the foregoing, it is obvious that whether or not there exists liability to indemnify a third party depends entirely upon the factual circumstances surrounding the incident."
7 LARSON, WORKERS' COMPENSATION LAW, § 121.07[1] (2002) ("we find a sharp divergence of opinion between the small minority of jurisdictions holding that, when the relation between the parties is based on contract, an obligation of care with accompanying indemnity obligation can be implied that survives the exclusivity defense, and the majority that reject the implied indemnity doctrine").
269 A.2d 52 (Del. 1970).
Id. at 57.
Id. at 57-58.
Id.
Id.
Since deciding Diamond State, our Supreme Court in other decisions has embraced the notion that an obligation to indemnify may be implied from the circumstances of the case. Heritage acknowledges that Delaware courts have declined to recognize worker's compensation exclusivity when an implied obligation of indemnity is present. But, according to Heritage, our Supreme Court further refined the right of implied indemnity in Precision Air, Inc. v. Standard Chlorine of Del., Inc., and a critical component of the claim, as recognized in Precision Air, is missing here. In Precision Air, the court held:
See, e.g., SW(Del.), Inc., 450 A.2d at 889-90; Howard, Needles, Tammen Bergendoff v. Steers, Perini Pomeroy, 312 A.2d 621, 623 (Del. 1973).
654 A.2d 403 (Del. 1995).
An employer, even though it has paid workmen's compensation benefits to an injured employee, can be held contractually liable to a third party where a contract between the employer and third party contains provisions requiring the employer to: (i) perform work in a workmanlike manner; and (ii) indemnify the third-party indemnitee for any claims arising from the employer-indemnitor's own negligence. (citation omitted) (emphasis in original).
Where both of the above-mentioned provisions are provided for by an express or implied contract, "a third party has a right to maintain an action against a negligent employer who may be held liable for indemnity if the employer has breached and independent duty owed a third party, or if in the circumstances there is a basis for finding an implied promise of indemnity.' (citations omitted) (emphasis supplied).
Id. at 407.
Heritage contends that Precision Air now makes clear that the third party must establish that the employer promised both to perform in a workman-like manner and to indemnify for any claims arising from the employer's negligence before the court may impose upon the employer an implied obligation to indemnify. Heritage argues that, according to Precision Air, these criteria apply to both express and implied indemnification claims. In this case, R.C. Peoples has conceded that Heritage never promised to indemnify R.C. Peoples for any loss which may have occurred on the Project (regardless of whose fault may have caused the loss). Indeed, the issue of indemnification was never discussed. Moreover, the record is devoid of any evidence that Heritage, either orally or in writing, ever expressed its commitment to perform its services on the Project in a workman-like manner.
At first glance, Diamond State and Precision Air appear to be at odds. Diamond State holds that an indemnity obligation may be implied under the circumstances of a given case depending upon the conduct of the employer/putative indemnitor; Precision Air appears to suggest that an indemnity obligation may be implied only when the employer/indemnitor acknowledges in some way an obligation to perform in a workman-like manner and to indemnify. On further inspection, however, the Court is unable to conclude that Precision Air intended to overrule or limit the right to implied indemnity recognized in Diamond State.
At the outset, it bears emphasis that Precision Air involved an express indemnification provision that was negotiated into a written contract between the employer and the third-party indemnitee. There was no need in to imply an indemnity obligation; it arose from the parties' express contract. Thus, when the court discussed the "provisions" which are required to create "contractual liab[ility], " it would appear that it was discussing these provisions in the context of an express, written contract. Indeed, to speak of "provisions" of an implied contract would be inconsistent with the concept of implied contract. Since there are no words to comprise the "provisions" of an implied contract, ipso facto, there are no provisions of an implied contract.
Id.
See Capital Management Co. v. Brown, 813 A.2d 1094, 1098 (Del. 2003) ("[A]n implied contract is one inferred from the conduct of the parties, though not expressed in words. The parties' intent and mutual assent to an implied-in-fact contract is proven through conduct rather than words.") (citations omitted).
"Provision" is defined as: "A clause in a statute, contract or other legal instrument." BLACK'S LAW DICTIONARY 1240 (7th ed. 1999).
The Court acknowledges the language in Precision Air: "Where both of the above-referenced provisions are provided for by an express or implied contract. . . ." Precision Air, 654 A.2d at 407 (emphasis supplied). This reference to "provisions" of an implied contract is not explained. It is possible that it was inadvertent given that it was made in the context of a discussion of cases where the claim for implied indemnity arose by virtue of the relationship between the parties or the conduct of the employer. See American Consumers, 450 A.2d at 889-90; Diamond State, 269 A.2d at 55.
In cases where the claim to indemnity is based upon a theory of implied indemnification, the Court is not willing to read Precision Air to require the putative indemnitee to establish that its contractual arrangement with the employer/indemnitor contained a "provision requiring the employer to perform in a workman-like manner and indemnify the third-party-indemnitee for any claims arising from the employer's own negligence." When the circumstances warrant, the obligation to perform in a workman-like manner and to indemnify may be implied in the relationship, as a matter of law or fact, even in the absence of contractual "provisions."
Precision Air, 654 A.2d at 407.
See Bye v. George McCaulley Son, Co., 76 A. 621, 622 (Del.Super.Ct. 1908) (when a contractor "holds himself out as a competent contractor to perform labor of a certain kind, the law presumes that he possesses the requisite skill to perform such labor in a proper manner and implies as part of his contract that the work shall be done in a skillful and workmen like manner"); Diamond State, 269 A.2d at 58 ("employer maybe liable in indemnity for breach of his implied agreement of workmanlike performance").
The Court's interpretation of Precision Air recognizes that there is a meaningful distinction between a claim of indemnity based upon an express agreement and a claim of indemnity implied from the conduct of the parties. In the case of express indemnification, the parties are free to negotiate the scope of the indemnity and the circumstances under which it will arise. Indeed, the law recognizes that, under certain circumstances, the parties may agree that one party to a contract will bear the risk of all losses (an indemnity obligation) regardless of which party may be at fault for the loss. On the other hand, when the indemnity obligation is implied, the obligation will be limited to the extent of the fault attributed to the indemnitor. In recognition of this distinction, Precision Air concentrated its analysis on the express "provision" of the parties contract in order to ascertain the scope of the indemnitor's obligation. This exercise is not necessary when the indemnification obligation is implied.
5ee State v. Interstate Amiesite Corp., 297 A.2d 41, 44 (Del. 1972) (party may contract for indemnification for all acts of negligence, including its own negligence, if the contract so providing is "crystal clear and unequivocal.").
See Precision Air, 654 A.2d at 410.
Id. at 407-08.
Finally, the Court must take note of the fact that Precision Air cites Diamond State with approval. of particular relevance to this analysis is the absence of any expression of intent to overrule or limit Diamond State's recognition of an implied indemnity obligation which may arise from "the factual circumstances surrounding the incident." And, significantly, Heritage has offered no rational basis for the Court to read that intent into Precision Air or to take it upon itself to limit Diamond State. Accordingly, the Court concludes that R. C. Peoples may prosecute a claim for implied indemnification against Heritage assuming it can produce evidence that will fit into one of the three scenarios recognized in Diamond State, or some other scenario which would implicate the burden-sharing considerations that buoy the implied indemnity concept.
Id. at 407.
Diamond State, 269 A.2d at 58.
Id. at 57-58. See also 7 LARSON, WORKER'S COMPENSATION LAW, § 121.07[2] (2000) ("It is difficult to see why there should be any conceptual obstacle to saying that when the employer negligently creates a dangerous condition in performing a service for the third party, the employer should indemnify the third party even if the third party was negligent to the extent of failing to discover the danger").
There remains a matter of procedure not addressed by the parties. R.C. Peoples' third party complaint alleges that Heritage's indemnity obligation arises from the "terms and conditions of the subcontractor agreement between [the parties]." The pleading makes no reference to implied indemnity. The parties have agreed that there is no express contractual obligation to indemnify applicable to Heritage's work on the Project. Accordingly, summary judgment with respect to the express indemnification claim is appropriate. The Court will allow R.C. Peoples to amend its third party complaint in conformity with the evidence developed in discovery to plead a claim for implied indemnity. The Court will also allow Heritage to renew its motion for summary judgment in the event it determines that the undisputed facts would not support a claim for implied indemnity as recognized in Diamond State.
(D.I. 5, ¶ 7)
See Del. Super. Civ. R. 15(b). The amended third-party complaint shall be filed within twenty (20) days of this Opinion and Order.
In the motion sub judice, Heritage focused its presentation on whether an implied indemnity claim would be viable in light of R. C. Peoples' admission that it had no "contract for indemnity [with Heritage], "written, oral or otherwise."' (D.I. 38) Now that the Court has determined that the indemnity obligation can be implied from the "factual circumstances surrounding the incident, " it remains to be seen whether the "factual circumstances surrounding [this] incident" will support the claim. As the Court has not been supplied with any of the specifics of this incident, it cannot evaluate the bona fides of the implied indemnity claim on this record.
IV. CONCLUSION
Based on the foregoing, Heritage's motion for summary judgment is GRANTED in part and DENIED in part. The Court already has granted summary judgment to Heritage with respect to R.C. Peoples' claim for contribution. Because the undisputed facts reveal that the parties did not expressly agree to any indemnification commitments, summary judgment must be granted with respect to R.C. Peoples' claim for indemnification based upon an express contract. The claim for implied indemnity, although not currently plead, is legally viable and will be permitted to survive this motion. If Heritage determines that the claim is not supported factually, it may renew its motion for summary judgment on that ground.IT IS SO ORDERED.