Subcontractor Did Not Owe Express Indemnity for Contractor’s Negligence in Wrongful Death Action.

Construction Company v. Metal Deck Specialists (2005) 133 Cal.App.4th 1528.

As every contractor and subcontractor knows (or should know), the precise language of an indemnity clause in a subcontract can have a profound impact upon who ultimately bears the burden of a claim for damages. In this case, a general contractor was not entitled to express indemnity from its subcontractor on a claim for the wrongful death of a carpenter-even though the carpenter fell through a hole made by the subcontractor in material installed by the subcontractor.

The general contractor was actively negligent and allocated 45 percent responsibility for the accident. The indemnity clause in this case was a "general indemnity" clause. The Court of Appeal found no reason to depart from the general rule that an actively negligent indemnitee cannot recover under a general indemnity clause.

The leading case in interpreting express indemnity contracts is the 1975 California Supreme Court case Rossmoor Sanitation, Inc. v. Pylon, Inc. The Supreme Court in Rossmoor explained that provisions purporting to hold an owner harmless "in any suit at law," "from all claims for damages to persons," and "from any cause whatsoever," without expressly mentioning an indemnitee's negligence, are "general" indemnity clauses.

  • "If an indemnity clause does not address itself to the issue of an indemnitee's negligence, it is referred to as a 'general' indemnity clause. While such clauses may be construed to provide indemnity for a loss resulting in part from an indemnitee's passive negligence, they will not be interpreted to provide indemnity if an indemnitee has been actively negligent."

This "general" indemnity provision contrasts with what is commonly referred to as a "Type I indemnity agreement" that explicitly provides indemnification against an indemnitee's own negligence, whether active or passive. The "Type I" reference springs from the well-known 1972 Court of Appeal caseMacDonald & Kruse, Inc. v. San Jose Steel Co., and references to "Type I" indemnity persist to this day (recently addressed in AB758 regarding indemnity agreements in residential construction contracts). The potentially staggering consequences of a "Type I" indemnity obligation were made clear in the 1997 case Continental Heller Corp. v. Amtech Mechanical Services, Inc., which found that such a clause may establish a duty in the indemnitor to save the indemnitee harmless from the indemnitee's active negligence, even if the indemnitor is not negligent at all.

McCrary provides a useful primer on how California courts currently interpret express indemnity agreements, and illustrates how subtle differences in the language of different indemnity agreements can critically impact the indemnity obligation. Frederick Kimbark died after falling through a hole in a metal roof at a construction site where he was working as a carpenter. McCrary was the general contractor on the project; Metal Deck was a subcontractor, responsible for furnishing and installing the metal deck system on the roof; and Horizon was another subcontractor, responsible for installing heating, ventilation and air conditioning units, and for performing miscellaneous sheet metal work.

Metal Deck's employees cut the hole through which Kimbark subsequently fell, but left the work site without covering it. A Horizon employee covered the hole at the request of McCrary's superintendent, but did not secure the covering. Kimbark fell through the hole when he lifted the plywood covering it and stepped forward, not realizing the plywood had been covering a hole. Among many disputed issues at trial were whether Metal Deck had a duty to cover the holes it cut or properly left that task to McCrary, and whether McCrary agreed to assume responsibility for covering the holes or was forced to do so by Metal Deck's refusal.

At the wrongful death trial, the jury concluded that Metal Deck, McCrary, Horizon, and Kimbark himself were all negligent with respect to the accident. The jury apportioned fault 45 percent to McCrary, 30 percent to Metal Deck, and 25 percent to Kimbark. The jury found that Horizon's negligence was not a substantial factor in causing Kimbark's fall.

McCrary's cross-complaint for breach of contract and indemnity against Metal Deck was bifurcated from the wrongful death action and tried to the court after the jury trial. The court's statement of decision concurred with the jury's allocation of fault, but found McCrary's conduct (negligence) should not preclude indemnity because the parties negotiated Metal Deck's obligation to cover the holes it cut, and, quoting Morton Thiokol, Inc. v. Metal Building Alteration Co., "indemnity should be afforded under any circumstances where to do so furthers the manifest intent of the parties to the contract and where the loss sustained would not have occurred without the indemnitor's negligence."

But the California Court of Appeal reversed, holding Metal Deck was not obligated to indemnify McCrary. The court noted that, although Metal Deck's failure to cover the holes it cut created the hazard that ultimately caused the accident, all the experts at trial agreed that once McCrary's foreman assumed the obligation of covering the holes- whether voluntarily or by necessity- McCrary became responsible for doing so appropriately.

Ultimately, the decision turned on how the indemnity clause in the contract treated McCrary's (the indemnitee's) negligence. The indemnity provision in Metal Deck's and Horizon's subcontracts with McCrary provided:

  • Subcontractor agrees to defend and indemnify Contractor against, and save him harmless from, any and all claims, suits or liability for injuries to property, injuries to persons, including death, and from any other claims, suits or liability on account of, or related to, any act or omission, or alleged act or omission of the Subcontractor, or any of his officers, agents, employees, or servants. Subcontractor shall be liable to Contractor for all expenses, including court costs and attorney's fees incurred by Contractor in connection with any such claims, suits or liability, and/or in connection with any claim by Contractor against Subcontractor arising out of the provisions of this article.

Because the language of the indemnity clause did not purport to require indemnity from Metal Deck for negligence by McCrary, and there was nothing otherwise to suggest that the intent of the parties was to provide indemnity under these circumstances, the court found no reason to depart from the general rule that an actively negligent indemnitee cannot recover under a general indemnity contract.

The moral of the story for McCrary is that, although the language of the indemnity clause in their contract may have seemed broad and expansive and all encompassing, it was really nothing more than a general indemnity agreement where each party was responsible for the consequences of its own negligence. The moral of the story for readers of this case comment is that risk allocation in indemnity clauses is open for negotiation. California courts provide contracting parties wide latitude to negotiate broad and expansive indemnity agreements. What is essential is that the parties understand the ramifications of the indemnity obligations they are entering into.

- Randel J. Campbell