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concluding that provision required subcontractor to defend and indemnify management company where it stated that subcontractor would indemnify, defend, and hold harmless management company from claims for loss or injury "caused by the negligence or fault of the [management company] in failing to provide a safe work space"
Summary of this case from Air Prods. & Chems., Inc. v. Procter & Gamble Mfg. Co.Opinion
Civil Action No. 04-187.
February 9, 2005
OPINION
Plaintiff Dawn Hoffman (Hoffman) filed this "slip and fall" negligence action against Defendant/Third Party Plaintiff ARCO Management of Washington, D.C., Inc. (ARCO) in the Court of Common Pleas of Allegheny County. ARCO removed the case to this Court and subsequently joined Third Party Defendant Internal Intelligence Service (Internal Intelligence), for whom Hoffman was working as a security guard at the time of her fall. ARCO has filed a motion for judgment on the pleadings, which is the subject of this Opinion.
I. Factual Background
On November 8, 2001, ARCO and Internal Intelligence entered into a subcontract by which Internal Intelligence was to provide security services at a number of properties owned by the Department of Housing and Urban Development (HUD) and managed by ARCO. On December 9, 2001, Hoffman slipped and fell on a set of wooden stairs located at an office provided to Internal Intelligence under the terms of the subcontract. In October 2003, Hoffman filed suit against ARCO, alleging that her injury was caused by inadequate lighting and water that had been allowed to accumulate on the steps. Hoffman claimed that ARCO's negligence had been the sole, direct, legal and proximate cause of the accident. ARCO removed the case to this Court in February 2004 and subsequently joined Internal Intelligence as a Third Party Defendant. In its Third Party Complaint, ARCO cited the following indemnification agreement, contained in Section C of the subcontract:
20.0 INDEMNIFICATION
Indemnity Agreement: Subcontractor shall fully indemnify, defend and hold harmless Arco and the U.S. Dept. of HUD including the officers, directors, agents, subsidiaries and employees of both the Property Manger and the Government and/or others (hereinafter referred to as "Indemnities (sic)") from and against any claims, demands, liability, causes of action, suits, judgments, or defense expenses (including attorney's fees) for the death or personal injury of any persons (including, but not limited to, Subcontractors agents, employees, invites (sic), subcontractors, subcontractors and their agents, employees and invitees) or for damage to property of any person (including the loss of use thereof) directly or indirectly connected with, attributable to, or arising from work to be performed under the Contract, or any activities of Subcontractor (or its agents, employees, Subcontractors, Invitees, or the agents, employees, or invitees of its Subcontractors) or the providing by Subcontractor of equipment and/or operators or other personnel to Subcontractor, or its Subcontractors, in either of the following instances: (1) where injury, death, damage or loss is caused by the negligence or fault of the Indemnities in failing to provide a safe work place (sic) to work or in failing to warn or to supervisor (sic) Subcontractor (or its agents, employees, Subcontractors, invitees, or the agents, employees, or invitees of its Subcontractors), even though caused without the negligence or fault of Subcontractor, or (2) where injury, death, damage, or loss is caused by the negligence or fault of Subcontractor (or of its agents, employees, Subcontractors, invitees, or the agents, employees or invitees of its Subcontractor), even though caused in part by the joint or concurrent negligence or fault of indemnities.
The subcontractor further agrees that it waives any right to subrogation against Arco Managemement of Washington, DC and/or HUD and that subcontractor has expressly instructed all of its insurance carriers that any subrogation actions brought against Arco Management of Washington, DC or HUD shall result in determination for default.
ARCO relies exclusively upon the foregoing indemnification and subrogation provisions in its motion for judgment on the pleadings. In response, Internal Intelligence argues that the operative indemnification provision is contained in an attachment to the subcontract rather than paragraph 20.0. In this provision, entitled "Indemnification and Hold Harmless for Prevailing Wage Rates, Overtime Pay, Proper Classification and OSHA Requirements/Standards," Internal Intelligence promises to indemnify HUD and ARCO for legal costs arising from Internal Intelligence's failure to "pay, follow, or comply with, in any way, prevailing wage rates, overtime pay, proper classification, or government established labor or OSHA requirements/standards." Second, Internal Intelligence argues that neither indemnification provision waives its statutory immunity from indemnification under the Pennsylvania Workers' Compensation Act or is drafted with the clarity and specificity necessary to create an enforceable indemnification obligation under Pennsylvania law.
II. Standard of Review
Rule 12(c) of the Federal Rules of Civil Procedure states:
After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
In this case, ARCO relies upon the indemnification provision contained in its subcontract with Internal Intelligence, relevant portions of which are appended to its Third Party Complaint. Likewise, Internal Intelligence relies upon an attachment to the same subcontract, and has appended relevant portions to its brief in opposition. Therefore, no matters outside the pleadings are presented, and the Court will treat ARCO's motion as a motion for judgment on the pleadings.
Although the contractual provision upon which Internal Intelligence relies was not appended to ARCO's Third Party Complaint, the Court of Appeals for the Third Circuit has found that an attachment to a defendant's motion to dismiss is part of the pleadings for purposes of a motion to dismiss so long as it is an "undisputedly authentic document" and "the plaintiff's claims are based on the document." Pension Benefit Guaranty Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Here, there is no controversy as to the authenticity of the subcontract, and ARCO's claims are based exclusively upon the subcontract, albeit a different provision than that cited by Internal Intelligence.
A motion for judgment on the pleadings pursuant to Rule 12(c) is analyzed using the same standard as a motion to dismiss for failure to state a claim under Rule 12(b)(6). Turbe v. Gov't of the Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991); Regalbuto v. City of Philadelphia, 937 F. Supp. 374, 376-77 (E.D. Pa. 1995). In deciding a Rule 12(c) motion, the district court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 406 (3d Cir. 1993). Judgment will be granted only "if it is clearly established that no material issue of fact remains to be resolved and that the movant is entitled to judgment as a matter of law." Institute for Scientific Information, Inc. v. Gordon and Breach, Science Publishers, Inc., 931 F.2d 1002, 1005 (3d Cir. 1991) (citing Jablonski v. Pan American World Airways, 863 F.2d 289, 290-91 (3d Cir. 1988)).
III. Operative Indemnification Provision
It is readily apparent that paragraph 20.0 of the subcontract between ARCO and Internal Intelligence is the operative indemnification provision in this case. Internal Intelligence argues that Hoffman's action falls within the scope of Attachment J to the subcontract because her injuries were allegedly a result of "unsafe conditions of her workplace" and were violations of the Occupational Safety and Health Act (OSHA), which provides that each employer shall provide "a place of employment which is free from recognized hazards." 29 U.S.C. § 654(a)(1). This argument fails for several reasons. First, Hoffman has not alleged any violations of OSHA standards in her Complaint. Second, Attachment J could not have been intended properly to apply to "slip and fall" personal injury suits by employees or subcontractors, as the OSHA statute does not contemplate such actions. The Court of Appeals for the Third Circuit has joined a number of other courts of appeals in holding that OSHA does not create a private cause of action against an employer for a violation of OSHA regulations. Ries v. AMTRAK, 960 F.2d 1156, 1164 (3d Cir. 1992); Dravo Corp. v. Occupational Safety Health Review Comm'n, 613 F.2d 1227, 1230 n. 2 (3d Cir. 1980). Finally, it is clear that paragraph 20.0 is a broad indemnification and subrogation provision that clearly encompasses Hoffman's suit, while the provision upon which Internal Intelligence relies deals with specific issues that are not implicated in this case.
IV. Employer Immunity Under The Pennsylvania Workers' Compensation Act
Internal Intelligence next asserts statutory immunity under Section 303(b) of the Pennsylvania Workers' Compensation Act, which states:
In the event injury or death to an employe is caused by a third party, then such employe, his legal representative, husband or wife, parents, dependents, next of kin, and anyone otherwise entitled to receive damages by reason thereof, may bring their action at law against such third party, but the employer, his insurance carrier, their servants and agents, employes, representatives acting on their behalf or at their request shall not be liable to a third party for damages, contribution, or indemnity in any action at law, or otherwise, unless liability for such damages, contributions or indemnity shall be expressly provided for in a written contract entered into by the party alleged to be liable prior to the date of the occurrence which gave rise to the action.77 P.S. § 481(b) (emphasis added).
Pennsylvania courts have interpreted this provision to provide employers with broad statutory immunity from suit by third parties. In the case of Bester v. Essex Crane Rental Corp., 619 A.2d 304 (Pa.Super. 1991), which both parties agree is the starting point of the analysis here, the Pennsylvania Superior Court stated: "[u]nder this section [Section 303(b)], a third party may not seek contribution or indemnity from the employer, even though the employer's own negligence may have been the primary cause of the employee's injury, absent an express provision for indemnity in a written contract." Id. at 306-07 (internal citation omitted) (emphasis added). Therefore, "[n]ot only does that Act provide an employer with immunity from suit for accidents within the scope of employment, it also bars an employer from being joined in a suit against a third party arising from such an accident. The purpose of such a bar is to avoid a situation where the employer would become doubly liable for the same accident." Clark v. Williamette Indus., 918 F. Supp. 139, 141 (W.D. Pa. 1996).
To facilitate the purpose of the Act, any purported indemnity provision "must be construed strictly, and general indemnity language such as `any or all' or `any nature whatsoever' is insufficient." Bester, 619 A.2d at 307 (citing Pittsburgh Steel Co. v. Patterson-Emerson-Comstock, Inc., 171 A.2d 185 (Pa. 1961)). The Bester court elaborated:
In order to avoid the ambiguities which grow out of the use of general language, contracting parties must specifically use language which demonstrates that a named employer agrees to indemnify a named third party from liability for acts of that third party's own negligence which result in harm to the employees of the named employer. Absent this level of specificity in the language employed in the contract of indemnification, the Workmen's Compensation Act precludes any liability on the part of the employerId. at 308-09.
Although Internal Intelligence implies that a valid indemnification provision must expressly mention the statutory immunity under the Act, the Bester court rejected such a requirement. Id. at 307 (clear indemnification in the event of employer's own negligence need not in haec verba waive immunity provided by section 303(b) of the Workers' Compensation Act). Nevertheless, the intent to indemnify for injuries to the indemnitor's employees "must clearly appear from the terms of the agreement." Id.
In Remas v. Duquesne Light Co., 537 A.2d 881 (Pa.Super. 1988), the Pennsylvania Superior Court addressed a situation very similar to the one presented here. There, plaintiff sued Duquesne Light asserting that he fell and suffered injuries in the course of his duties as a security guard on Duquesne Light property. Id. at 881. As in this case, the plaintiff attributed his fall and subsequent injuries to the failure of Duquesne Light to properly maintain the premises. Id. Also like this case, the defendant sought to implead the security company that employed the plaintiff at the time of the accident on the basis of an indemnification provision contained in the subcontract between Duquesne Light and the security company. Id. That provision stated:
Although Remas was decided approximately three years before Bester, nothing in the Bester opinion calls into question the analysis or result of Remas. In fact, the Bester court cited the Remas decision with approval. Bester, 619 A.2d at 308.
INDEMNIFICATION — To hold harmless and indemnify the Company from and against any liability, loss, damages, cost and expense which the Company may suffer from any claim, demand, action, suit or cause of action which may be made or had against the Company by reason of any act committed by the Contractor, its agents, servants or employees other than an act performed by the Contractor, its agents, servants or employees at the specific instruction of the Company.Id. at 882.
The Superior Court in Remas affirmed the lower court's dismissal of the security company from the case. The court noted the Act's requirement of an express provision for the statutory employer to assume an indemnity obligation and caselaw holding that indemnification contracts will be closely scrutinized and subject to strict construction. Id. at 883. Noting that the provision contained no express waiver of statutory protection and did not assume liability for damages arising from harm suffered by its own employees as a result of the negligence of Duquesne Light, the court found that the security company had not waived immunity under the Act and refused to enforce the indemnification provision. Id.
The indemnification provision at issue in Remas differs substantially from the one at issue in the instant case. While both provisions require the contractor to indemnify the company, the provision at issue here specifies indemnification "where injury, death, damage or loss is caused by the negligence or fault of the Indemnities in failing to provide a safe work place (sic) to work or in failing to warn or to supervisor (sic) Subcontractor." Agreement at paragraph 20.0 (emphasis added). The ARCO-Internal Intelligence provision specifies indemnification for the "death or personal injury of any persons (including, but not limited to, Subcontractors' agents, employees, invites (sic), subcontractors, subcontractors and their agents, employees and invitees)." Id. (emphasis added).
Thus the ARCO-Internal Intelligence indemnification provision is materially different than that in Remas. Indeed, it is difficult to conceive how Internal Intelligence could have more clearly assumed liability for claims by its employees against ARCO, short of explicitly stating it was waiving its statutory immunity under the Act. In some ways, the provision exceeds the heightened specificity standards of Bester because it not only mentions negligence, but specifically states the precise negligent conduct (failure to provide a safe work place, failure to warn, failure to supervise) that will trigger the indemnification obligation. Likewise, the provision covers injury to Internal Intelligence's agents, invitees, subcontractors and their agents, employees and invitees, making it clear in no uncertain terms that injuries to employees and any individuals who may be construed as employees are covered by the provision.
The foregoing analysis is supported by the Superior Court's decision in Hackman v. Moyer Packing Co., 621 A.2d 166 (Pa.Super. 1993). In Hackman, a cleaning company employee sued the owner of the premises upon which she had fallen and injured herself. Id. at 167. The owner of the premises sought indemnification from plaintiff's employer on the basis of an indemnification provision contained in the contract for cleaning services. Id. That provision read, in relevant part:
[Cleaning company] agrees to indemnify, save and hold harmless Moyer Packing Company, its subsidiaries, affiliates, their directors, officers, agents, workmen, servants or employees, against any and all claim or claims brought by the agents, workmen, servants or employees of [cleaning company] for any alleged negligence or condition, caused or created, [in] whole or in part, by Moyer Packing Company.Id. at 168. The Superior Court enforced the indemnification provision because it was specific enough to satisfy the waiver requirements under the Workers' Compensation Act. Id. The ARCO-Internal Intelligence indemnification provision is more specific and precise than the one at issue in Hackman. The language indicating that injuries to employees of the indemnitor is nearly identical, and the ARCO-Internal Intelligence subcontract goes much further in describing the specific character of the negligent conduct covered by the provision. Accordingly, paragraph 20.0 of the subcontract is enforceable and Internal Intelligence has waived its statutory immunity under the Workers' Compensation Act.
V. Indemnification Under Pennsylvania Law
Internal Intelligence also argues that the indemnification provision is not sufficiently clear and unequivocal to satisfy the rule laid down by the Supreme Court of Pennsylvania in Ruzzi v. Butler Petroleum Co., 588 A.2d 1 (Pa. 1991). In Ruzzi, the state Supreme Court refused to enforce an indemnity provision because it failed to include an express stipulation concerning the negligent acts of the indemnitee. Id. at 9. The Court made clear that any indemnity provision must leave no doubt as to the indemnitor's intent to assume liability for the negligent acts of an indemnitee:
[A] contract of indemnity against personal injuries should not be construed to indemnify against the negligence of the indemnitee, unless it is so expressed in unequivocal terms. The liability on such indemnity is so hazardous, and the character of the indemnity so unusual and extraordinary, that there can be no presumption that the indemnitor intended to assume the responsibility unless the contract puts it beyond doubt by express stipulation. No inference from words of general import can establish it.Id. at 7-9 (quoting Perry v. Payne, 66 A. 553 (Pa. 1907)). The cases of Bethlehem Steel Corp. v. Matx, Inc., 703 A.2d 39 (Pa.Super. 1997) and Morgan v. Harnischfeger Corp., 791 A.2d 1273 (Pa.Commw. 2002) are instructive as to the precise level of precision and clarity required to create an enforceable indemnification provision under the Perry-Ruzzi rule. In Bethlehem Steel, the court enforced a provision that a subcontractor was to indemnify Bethlehem Steel from all loss or liability on account of any injury or damages "received or sustained" by the subcontractor or "any of its subcontractors or any employee, agent, or invitee" of the subcontractor "by reason of any act or omission, whether negligent or otherwise, on the part of any of the Bethlehem Companies or any employee, agent or invitee thereof or the condition of the Site or other property of any of the Bethlehem Companies or otherwise." Bethlehem Steel, 703 A.2d at 43. The court found that the provision at issue clearly indicated an intent that the subcontractor indemnify Bethlehem Steel of injuries arising from Bethlehem's own negligence. Id. at 43. Likewise, in Morgan the court enforced an indemnification provision contained in a contract between a contractor and the state turnpike commission which provided that the contractor would indemnify the turnpike commission for injury to "all persons, whether employees of [contractor] or otherwise . . . whether or not . . . claims are based upon the alleged active or passive negligence or participation in the wrong of the Commission, its Commissioners, agents, servants, and/or employees . . . or upon any alleged breach of any statutory duty or obligation on the part of the Commission. . . ." Morgan, 791 A.2d at 1277. The court rejected as "meritless" the contractor's claim that this provision was not sufficiently specific or unequivocal. Id.
Applying the foregoing legal principles to the case at bar, the Court finds that the indemnification provision here is more specific and unequivocal than those enforced in Morgan and Bethlehem Steel. As mentioned previously, the plain language of the provision makes clear that Internal Intelligence intended to assume liability for injuries to its own employees arising from the negligence of ARCO. Furthermore, the language used to convey that injuries to Internal Intelligence employees are covered by indemnification — "including, but not limited to, Subcontractors' agents, employees, invites, subcontractors, subcontractors and their agents, employees and invitees" — is quite similar to the provision enforced in Bethlehem Steel. Moreover, the ARCO-Internal Intelligence indemnification is more specific than both Morgan and Bethlehem Steel insofar as it specifically delineates the negligent conduct of the indemnitee that will trigger indemnification, rather than simply using more general language such as "act or omission, whether negligent or otherwise" or "active or passive negligence or participation." Although liability on such an indemnity provision is "hazardous" and its character is "unusual and extraordinary," Ruzzi, 588 A.2d at 7-9, the explicit language of the provision, and its similarities to indemnification provisions found enforceable by the Pennsylvania courts in the past, leads ineluctably to the conclusion that Internal Intelligence assumed liability for precisely the type of injury alleged by Hoffman in this case.
VI. Right of Subrogation
Internal Intelligence also argues that its absolute right of subrogation under Section 671 of the Workers' Compensation Act vitiates its waiver of subrogation rights in the last sentence of paragraph 20.0 of the subcontract. Section 319 provides:
Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe . . . against such third party to the extent of the compensation payable under this article by the employer;77 P.S. § 671.
Internal Intelligence correctly notes that Pennsylvania courts have found that "as a general principle of law," the statutory right of subrogation is absolute. Thompson v. Workers' Compensation Appeal Board (USFG) 781 A.2d 1146, 1153 (Pa. 2001); Winfree v. Phila. Elec. Co., 554 A.2d 485, 487 (Pa. 1989). Indeed, subrogation is both absolute and automatic, as the statute establishes "that the employer is not given a right of subrogation only, but is `subrogated' to the extent of the compensation paid." Thompson, 781 A.2d at 1151 (internal citation omitted) (emphasis in original). Yet Internal Intelligence fails to also note that the courts have held that an agreement under which an employer releases or waives its subrogation rights is enforceable under the Act. SKF USA, Inc. V. Workers' Compensation Appeal Board (Smalls), 714 A.2d 496 (Pa.Cmwlth. 1998); Baus v. Workmen's Compensation Appeal Board (Nelson Co.), 585 A.2d 573 (Pa.Cmwlth. 1991); Dasconio v. Workmen's Compensation Appeal Board (Aeronica, Inc.), 559 A.2d 92 (Pa.Cmwlth. 1989). Therefore, the mere fact that Internal Intelligence's statutory subrogation rights are "absolute" does not preclude their waiver in paragraph 20.0 of the subcontract.
Moreover, whether paragraph 20.0 is a valid and effective waiver of Internal Intelligence's subrogation rights is beside the point. Internal Intelligence does not cite — and the Court cannot find — anything in the statute or caselaw to suggest that Internal Intelligence's statutory right of subrogation, no matter how absolute, vitiates its duty to defend and indemnify ARCO against Hoffman's suit. The statute does not confer upon the employer a broad right of subrogation to all potential claims of the injured employee against third parties, but "only to the extent of the compensation paid" by the employer under the Workers' Compensation Act. Id. Thus, the statute merely gives Internal Intelligence the right to offset the amount paid in workers' compensation against any payment made to Hoffman as a result of this case. The underlying duty to defend and indemnify ARCO against Hoffman's suit is simply not implicated by Internal Intelligence's subrogation rights.
VII. Timing of Indemnification
Finally, Internal Intelligence argues in the alternative that ARCO's request for indemnification is premature, as ARCO has yet to suffer a judgment obligating it to compensate Hoffman for her injury. This argument misconstrues the nature of the obligation Internal Intelligence has undertaken in paragraph 20.0 of the subcontract. That provision obligates Internal Intelligence to defend as well as indemnify ARCO, and Pennsylvania law clearly states that if a complaint alleges a cause of action which implicates the duty to defend, the obligor must assume the defense of the obligee. Unionamerica Ins. Co., Ltd. v. Johnson, 806 A.2d 431, 433 (Pa.Super. 2002). In making this determination, the factual allegations of the complaint are taken to be true and the complaint is to be liberally construed with all doubts as to whether the claim may fall within the coverage of the provision to be resolved in favor of the insured. Id. at 434. Here, it is abundantly clear that Hoffman's complaint alleges precisely the sort of workplace injury caused by the negligence of ARCO that is covered by paragraph 20.0 of the subcontract.
VII. Conclusion
The indemnification provision which imposes upon Internal Intelligence a duty to defend ARCO in any suits involving injuries to its employees caused by ARCO's negligence is enforceable under Pennsylvania law. Accordingly, Internal Intelligence is contractually obligated to defend ARCO in this case and to indemnify it from any damages Hoffman may be awarded. ARCO is therefore entitled to judgment as a matter of law, and its motion for judgment on the pleadings will be granted.
An appropriate order follows.