As many are aware, with the advent of Code of Civil Procedure ยง 2782.05, which bars express contractual indemnity for the active negligence of the indemnitee (and typically, that would be a developer or a general contractor), there will still be a significant period of time in which the Courts will delve into traditional "Type 1" indemnity contracts (which provide express indemnity for the indemnitees active negligence) and there will also continue to be many disputes involving broad indemnity agreements where the indemnitee is not actively negligent.
In that regard, one issue that the Courts continue to grapple with is who determines whether an indemnity obligation is owed. The Court of Appeal (Second Appellate District) in Centex vs. R-Help, Inc. (2109) Westlaw 1109627 ("Centext case") provides quite a bit of guidance in answering that question.
The facts of the Centex case are relatively routine. Centex was the developer of the Novella residential development located in the City of Thousand Oaks, California. The work appears to have occurred between 2003 and 2007. Centex hired R-Help Construction Co., Inc. ("R-Help") to trench, install, and inspect utility boxes and conduits for the Novella development. The Centex subcontract required that R-Help defend and indemnify Centex for all claims "to the extent such Claim(s) in whole or in part arise out of or relate to" R-Help's work.
Plaintiff Matthias Wagener ("Wagener") filed a civil Complaint against Southern California Edison and others alleging he was injured when he fell into a utility box at the Novella Development. The Complaint alleged that the Defendants negligently managed, maintained, and inspected the utility box cover so as to create an unstable platform. Centex and R-Help were later added as DOE Defendants. In answering R-Help's interrogatories, Wagener stated, "It appears as though R-Help installed and thereafter abandoned the subject junction box." Wagener contended that, as a Centex agent, R-Help and Centex were both jointly and separately liable. Centex tendered the Complaint to R-Help for defense and indemnity, but R-Help did not respond. Centex then filed a Cross-Complaint against R-Help, alleging Causes of Action for Breach of Contract, Indemnity, and Declaratory Relief. Centex eventually obtained a Dismissal of the Wagener action pursuant to a settlement. Wagener also settled his action with the remaining Defendants, leaving the Centex Cross-Complaint against R-Help to be decided by the Court.
The Morrison Law Journal
March 2019
Volume XIV, Edition 3
When It Is Not For The Jury: Court Of Appeal Rules The Jury May Not Determine
Whether Contractual Indemnity Is Owed By A Subcontractor To A Developer/General
Contractor In A Personal Injury Case Arising From Alleged Construction Defects
By: Edward F. Morrison, Jr., Esq.
Larry A. Schwartz, Esq.
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Prior to trial, Centex moved for Summary Adjudication, contending that the allegations of Wagener's Complaint alone required R-Help to defend Centex under the indemnity agreement as a matter of law. R-Help moved for Summary Judgment contending that undisputed evidence showed the utility box in which Wagener was injured was not within the scope of R-Help's work under the R-Help subcontract. Both Motions were denied. After pretrial Motions in Limine, the Court determined the question of indemnity should be for the jury. At trial, Centex put on a percipient witness and an expert witness, testifying that R-Help was responsible for the utility box. R-Help submitted its own witnesses who testified that the box was not part of the work of R-Help. The Trial Court gave the jury a special verdict form that included the following question: "Did the information available to both parties at the time of the tender [by Centex] eliminate any reasonable potential that the allegation in WAGENER's claim arose out of or were related to R-HELP's work?" The jury answered "yes." The Trial Court entered judgment in favor of R-Help on that issue.
On appeal, Centex argued that the Trial Court improperly delegated the duty to defend issue to the jury. The Court of Appeal agreed. The Court ruled that Wagener's allegation that the utility box was within the scope of work of R-Help performed was sufficient to trigger a defense obligation under Crawford v. Weather Shield, Inc. (2008) 44 Cal.4th 541. The Court of Appeal acknowledged that there was a question as to whether the utility box was in R-Help's scope of work, but noted that, because the Trial Court denied summary judgment, R-Help failed to "conclusively show" by undisputed evidence that no indemnity obligation existed and, therefore, the duty to defend and indemnify existed.
The Centex case is important in that it demonstrates that, where there is a general, broad, contractual indemnity obligation and the third party claim, on its face, is embraced in the indemnity contract, there will be a duty to defend and indemnify unless the indemnitor conclusively demonstrates, by undisputed evidence, that the claim is not embraced within the indemnity contract.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.
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