Opinion
No. 62269-2-I.
September 21, 2009.
Appeal from the Superior Court, Snohomish County, No. 07-2-02976-0, Kenneth L. Cowsert, J., entered August 15, 2008.
Affirmed by unpublished opinion per Lau, J., concurred in by Schindler, C.J., and Grosse, J.
In this appeal, the parties dispute the meaning of an indemnity provision in the Service Agreement for Commuter Bus Service. Community Transit argues that the plain language of the agreement requires First Transit to indemnify it for tort claims caused by the combined negligence of Community Transit and third parties. But because the agreement does not clearly and unequivocally state this intention, we affirm the trial court's summary judgment dismissing Community Transit's indemnify claims against First Transit.
FACTS
The facts are undisputed. Coach USA Transit contracted with Community Transit to provide commuter transit service between King and Snohomish counties.
The contract contained the following indemnity provision:
3.54 HOLD HARMLESS AND INDEMNIFICATION
The Contractor shall defend, indemnify and save harmless Community Transit, its officers, employees and agents from any and every claim and risk, including, but not limited to, suits or proceedings for bodily injuries (including death and emotional claims), patent, trademark, copyright or franchise infringement, and all losses, damages, demands, suits, judgments and attorney fees, and other expenses of any kind, on account of all personal bodily injuries (including death and emotional claims), property damages of any kind, whether tangible or intangible, including loss of use resulting therefrom, in connection with the work performed under this contract, or caused or occasioned in whole or in part by reason of the presence of the Contractor or its subcontractors, or their property, employees or agents, upon or in proximity to the property of Community Transit, or any other property upon which the Contractor is performing any work called for or in connection with this contract, except only for those losses resulting solely from the negligence of Community Transit, its officers, employees and agents.
Clerk's Papers (CP) at 152 (emphasis added). Later, Coach USA Transit assigned its interests, rights, obligations, and duties under the contract to First Transit. The contract also required First Transit buses to bear Community Transit's color scheme and logo.
At the beginning of the afternoon rush hour on February 24, 2004, a five-vehicle accident occurred on Interstate 5. When the driver of a Toyota Corolla braked abruptly in response to heavy traffic, the driver of a Jeep, behind the Corolla, braked in response to the Corolla's sudden deceleration. The driver of a Honda Accord, struck the rear end of the Jeep, causing the Jeep to strike the Corolla and push it into the adjacent HOV (high-occupancy vehicle) lane, in front of a First Transit bus. The First Transit bus driver quickly braked, but could not avoid hitting the rear of the Corolla. A Community Transit bus, following in the HOV lane, immediately rear-ended the First Transit bus.
As a result, Community Transit settled 42 claims from passengers on both buses and from the First Transit bus driver. It then tendered the claims to First Transit pursuant to their contract's indemnity provision. But First Transit rejected the tender and refused to defend or indemnify Community Transit from the claims. Community Transit incurred $1,250,950.19 to investigate, adjust, defend, and ultimately settle the claims. In response, Community Transit filed suit against First Transit for breach of contract and specific performance, seeking to enforce the indemnity provision. The parties filed cross-motions for summary judgment. For purposes of these motions, the parties stipulated that the First Transit driver was not negligent and that the shared negligence of the Honda Accord driver and the Community Transit bus driver (and Community Transit under respondeat superior) caused the accident. The trial court granted summary judgment dismissal to First Transit. This appeal followed.
ANALYSIS
Community Transit contends the trial court erred in granting summary judgment to First Transit because the settled claims fall within the scope of the indemnity provision. The court reviews a summary judgment order de novo. Nunez v. Am. Bldg. Maint. Co. West, 144 Wn. App. 345, 350, 190 P.3d 56 (2008). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Interpretation of a contractual indemnity clause is a question of law. Nunez, 144 Wn. App. at 350.
"Indemnity agreements are essentially agreements for contractual contribution, whereby one tortfeasor, against whom damages in favor of an injured party have been assessed, may look to another for reimbursement." Stocker v. Shell Oil Co., 105 Wn.2d 546, 549, 716 P.2d 306 (1986). Washington courts generally enforce such agreements. Nw. Airlines v. Hughes Air Corp., 104 Wn.2d 152, 154, 702 P.2d 1192 (1985). However, "a contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from his own negligence unless this intention is expressed in clear and unequivocal terms." Nw. Airlines, 104 Wn.2d at 154-55. Indemnity clauses that purport to exculpate an indemnitee from liability for losses flowing solely from the indemnitee's own acts or omissions are disfavored and must be clearly drawn and strictly construed, with any doubts resolved in favor of the indemnitor. Scruggs v. Jefferson County, 18 Wn. App. 240, 243, 567 P.2d 257 (1977). The purpose of these rules is to ensure that the indemnitor has fair notice that a large and potentially ruinous award can be assessed against it based solely on negligence attributable to the indemnitee. McDowell v. Austin Co., 105 Wn.2d 48, 53, 710 P.2d 192 (1985).
Historically, Washington courts construed an unequivocal intention to indemnify for an indemnitee's own negligence from "all-encompassing language," even if the agreement contained no specific reference to the indemnitee's negligence. See Nw. Airlines, 104 Wn.2d at 155 (citing Griffiths v. Henry Broderick, Inc., 27 Wn.2d 901, 182 P.2d 18 (1947)). For example, in Tucci Sons, Inc. v. Carl T. Madsen, Inc., 1 Wn. App. 1035, 1036, 467 P.2d 386 (1970), the court concluded that a construction subcontractor's promise to indemnify the general contractor from all claims "`arising out of, in connection with, or incident to'" the subcontractor's performance included claims that were caused solely by the general contractor's own negligence. The court reasoned that so long as the claim fell within this broad language, no explicit statement of intent to indemnify the general contractor for its own negligence was required. Tucci, 1 Wn. App. at 1038. Therefore, the court concluded that the claim at issue "arose out of, in connection with, or [was] incidental to" the subcontractor's performance because the injured employee who filed the claim would not have been injured but for the fact that he was performing work under the subcontract. Tucci, 1 Wn. App. at 1038.
Since Tucci, however, Washington courts now require more specific language to show a clear and unequivocal intent to indemnify for the indemnitee's own negligence. See Nw. Airlines, 104 Wn.2d at 155 (citing Dirk v. Amerco Mktg. Co., 88 Wn.2d 607, 612-13, 565 P.2d 90 (1977); Scruggs, 18 Wn. App. at 244 (and other cases)). For example, in Jones v. Strom Construction Co., 84 Wn.2d 518, 521, 527 P.2d 1115 (1974), which expressly overruled Tucci, the court held that the construction subcontractor's promise to indemnify Strom for all claims "`arising out of, in connection with, or incident to'" its performance of the contract was insufficient to trigger indemnification when the claim did not result from an "overt act or omission" by the subcontractor. Thus, an accident that would not have occurred but for the subcontractor's presence at the scene "inculpably performing its specified contractual obligations" did not fall within the scope of the indemnity agreement, despite the agreement's broad and sweeping language. Jones, 84 Wn.2d at 522. Either the subcontractor's overt act or omission must cause or "concur[] in causing" the loss or more specific indemnity language is required. Jones, 84 Wn.2d at 521.
Subsequent cases reinforced this strict-construction approach to broadly worded indemnity clauses. For instance, in Northern Pacific Railway v. Sunnyside Valley Irrigation District, 85 Wn.2d 920, 540 P.2d 1387 (1975), the court held that the indemnitee railroad company was not entitled to recover for property damage under an indemnification theory. In 1913, the railroad company had agreed to permit Yakima County to construct a culvert under its tracks. The county agreed to indemnify the company from all losses "occasioned by" the culverts. When an irrigation canal broke, water flooded through the culverts, damaging the railroad company's property. N. Pac., 85 Wn.2d at 921-23. The court held that the loss was not "occasioned by" the culverts because they did not proximately cause the damage.
The washout of plaintiff's roadbed occurred independent of the culvert. The deluge resulted from a source only indirectly related to the culvert, and the washout of the roadbed was clearly not `occasioned' by the culvert. To extend this hold-harmless provision so far would be unreasonable. The culvert itself did not fail to operate effectively as a culvert; it only failed to transform itself into a tunnel at the crucial moment.
N. Pac., 85 Wn.2d at 923.
And in Dirk, the court narrowly interpreted the scope of an indemnity provision in a U-Haul dealership contract. Amerco agreed to hold Dirk harmless from "`any and all liability . . . arising out of accidents occasioned by the negligence of Marketing Co. or by defects in U-Haul equipment. . . .'" Dirk, 88 Wn.2d at 609. After an equipment defect disabled a U-Haul van, Dirk negligently towed the vehicle to his service station and an accident occurred. Dirk settled the injury claims and then sought indemnification from Amerco. Dirk, 88 Wn.2d at 609. The court concluded that the indemnity provision was not triggered even though the accident would not have occurred "but for" the defective equipment. And because this was a remote and indirect cause, the accident was not "occasioned by" the defect. Dirk, 88 Wn.2d at 612. The court also reasoned that the indemnity clause lacked specific language indicating Amerco agreed to indemnify Dirk for damage caused by his own negligent acts. Dirk, 88 Wn.2d at 613.
Finally, in Scruggs, the court held that Puget Power was not required to indemnify Jefferson County for settling a personal injury claim involving a Puget Power utility pole. A car passenger was injured when the car went off the county's road and crashed into the utility pole. Scruggs, 18 Wn. App., at 241. The combined negligence of the car driver and the county caused the accident. Puget Power owned and maintained the utility pole under an agreement with the county, in which it promised to indemnify the county for "all costs and expense or damages of any kind whatsoever, experienced or caused by reason of the exercise by [Puget Power] of any of the rights herein granted [which included construction and maintenance of utility poles]." Scruggs, 18 Wn. App. at 242. While the passenger's injury would not have occurred but for the pole (or at least would have been less severe), the court concluded,
[T]he issue is not the direct cause-in-fact of the injuries; rather, it is whether the placement or maintenance of the pole in its location can be said to have been a proximate cause of the accident so that Puget Power must hold Jefferson County harmless for its own negligence.
. . . .
. . . . [T]he accident that produced Keith Scruggs' injuries was not caused by the mere presence of the pole in a place specified by the franchise agreement. At most, the pole was merely a passive, nonculpable cause-in-fact
of the injuries. It was a condition and not a cause of the accident. Consequently, the pole was only indirectly related to the County's loss and was not the type of loss the parties intended to cover in the indemnity clause. . . . [A]n indemnity contract will not be construed to indemnify the indemnitee against losses resulting to him through his own negligent acts where such intention is not expressed in unequivocal terms.
Scruggs, 18 Wn. App. at 243-44.
But in Northwest Airlines, the court enforced the indemnity provision between Hughes (the indemnitor) and Northwest (the indemnitee) because the provision expressed a clear and unequivocal intent to indemnify for losses caused by Northwest's own negligence. There, the indemnity clause explicitly stated, "Lessee [Hughes] shall indemnify the Lessor [Northwest] from and against any and all claims . . . arising out of or in connection with the use and occupancy of the premises . . . whether or not caused by Lessor's negligence." Nw. Airlines, 104 Wn.2d 153 (emphasis omitted). The court noted that by expressly covering injuries "`whether or not caused by Lessor's negligence,'" the parties unambiguously intended to protect Northwest from all liability, even from claims resulting solely from its own negligence. Nw. Airlines, 104 Wn.2d at 156-58 (emphasis omitted). Thus, when contracting parties use specific language showing a clear intent to indemnify for losses caused by the indemnitee's sole negligence, no "overt act or omission" by the indemnitor is necessary to trigger indemnification. Compare Jones, 84 Wn.2d at 521-22 (where there was no specific language referencing the general contractor's negligence, a loss did not unequivocally occur "in connection with" the subcontractor's performance because the subcontractor made no overt act or omission that caused or contributed to the loss).
Here, because Community Transit seeks indemnification against losses resulting to it from its own negligent acts, the intent to cover such losses must be expressed unequivocally in the indemnity agreement. Dirk, 88 Wn.2d at 612. Community Transit first argues that the claims it settled were "in connection with" the work performed under its contract with First Transit because First Transit was providing contracted commuter service at the time of the accident. It emphasizes that the claims were "inextricably connected" to First Transit's performance because First Transit was literally in the middle of a five-vehicle freeway accident. But the essence of this argument is "but for" First Transit's presence in the HOV lane, inculpably performing its contractual duties, the accident would not have happened. Under Jones and its progeny, this is not sufficient to establish that a loss arose "in connection with" First Transit's contractual performance. Similarly, the injury in Jones would not have occurred "but for" the subcontractor's presence on the jobsite. The Jones court nevertheless held the subcontractor's "mere presence on the jobsite inculpably performing its specified contractual obligations," without any "overt act or omission" on its part, did not trigger indemnification. Jones, 84 Wn.2d at 522. While the "in connection with" language is broad and sweeping on its face, it is strictly construed against a negligent indemnitee and this language alone is not sufficient to trigger First Transit's duty to indemnify Community Transit.
While the negligence of the Honda Accord driver also contributed to the losses here, the "clear and unequivocal" rule still applies. Compare Scruggs, 18 Wn. App at 244 (Where accident was caused by the combined negligence of the indemnitee county and the third party driver, the court held there was no indemnity because "[t]he clause in question does not explicitly require Puget Power to indemnify the County for losses due to the County's negligence.").
Community Transit next argues that the claims it settled were "`caused or occasioned in whole or in part' by First Transit's `presence'" on or near Community Transit's property." Appellant's Br. at 10. It points out that "[t]he claimed injuries either would not have happened or would have been less severe but for the presence of the First Transit bus immediately in front of the Community Transit bus." Appellant's Br. at 13. While this may be true, the accident in Scruggs would not have occurred or would have been less severe but for the presence of the utility pole. And the accident in Dirk would not have occurred but for the equipment defect. Yet the accidents in those cases were not "caused" or "occasioned by" the utility pole or the defective equipment because they were not the proximate causes of the accidents. Likewise here, while the presence of the First Transit bus was a cause-in-fact of the accident, the injuries were proximately caused by the Honda Accord driver and the Community Transit bus driver following other vehicles too closely for heavy traffic conditions. The accident claims here were not "caused" or "occasioned by" the presence of First Transit, which was inculpably performing its contractual obligations when the accident happened. Without some culpable act or omission by First Transit that contributed to the accident, indemnity must be based on more specific language than the broadly phrased "in connection with" or "caused or occasioned by" language used here.
Finally, Community Transit argues that addition of the "sole negligence" clause in the indemnity agreement provides the necessary language. Specifically, it notes that First Transit agreed to indemnify it for all claims "`in connection with the work'" or "`caused or occasioned'" by the parties' proximity, "`except only for those losses resulting solely from the negligence of Community Transit.'" Appellant's Br. at 3, 13. Community Transit infers from this language that First Transit agreed to indemnify it for any claims in which Community Transit was partially but not completely negligent, regardless of any negligence by First Transit. But nothing in the indemnity provision clearly spells out that First Transit would indemnify Community Transit even when First Transit was fault free. We adhere to the general rule that an indemnification agreement will not be construed to indemnify the indemnitee against losses resulting from its own negligence unless this intent is expressed in clear and unequivocal terms. And because such agreements are not favored, they are strictly construed against the indemnitee. Strictly construing indemnity agreements such as this one ensures that the indemnitor has fair notice that it may be required to indemnify the other contracting party for that party's own negligence even though the indemnitor may have been fault free. See McDowell v. Austin Co., 105 Wn.2d 48, 53, 710 P.2d 192 (1985). If Community Transit intended to allocate the risk of a significant loss to First Transit under the circumstances present here, it must say so in clear and unequivocal terms. Because the indemnity provision lacks such language, we affirm.
Community Transit also relies on Northern Pacific Railway Co. v. National Cylinder Gas, 2 Wn. App. 338, 467 P.2d 884 (1970), which involved an indemnity agreement with similar language to the language present here. But the critical language triggering indemnity in that case was the "arising or growing out of" and "caused or occasioned by" language, not the "sole negligence" language. N. Pac., 2 Wn. App. at 343. Northern Pacific is also distinguishable because in that case, there was no finding that the indemnitee's own negligence contributed to the accident whereas here, the parties stipulated that Community Transit's negligence was a partial cause of the accident.
In Hughes, the indemnity agreement clearly stated that the tenant would have to indemnify the landlord for claims in connection with the tenant's use of the premises "whether or not caused by [the landlord's] negligence." Hughes, 104 Wn.2d at 153 (emphasis omitted). This language gave fair notice to the tenant that it would be required to indemnify the landlord even if the claim was caused solely by the landlord's negligence and the tenant was blameless. In contrast, the "sole negligence" clause here expressly rejects indemnification for claims caused solely by the indemnitee's negligence. Thus, it does not provide clear notice that First Transit will be required to indemnify even in the absence of fault on its part.
WE CONCUR.