Barsness v. General Diesel & Equipment Co., Inc., 870155

Decision Date18 April 1988
Docket NumberNo. 870155,870155
Citation422 N.W.2d 819
PartiesRaymond BARSNESS, an individual, Plaintiff, v. GENERAL DIESEL & EQUIPMENT CO., INC., a North Dakota corporation, Defendant, Third-Party Plaintiff, Appellee and Cross-Appellant, v. FIRST ASSEMBLY OF GOD CHURCH, Third-Party Defendant, Appellant and Cross- Appellee, and Northern Improvement Company, Third-Party Defendant. Civ.
CourtNorth Dakota Supreme Court

Cahill & Maring, P.A., Moorhead, for defendant, third-party plaintiff, appellee and cross-appellant; argued by David S. Maring. Appearance by Daniel Schwandt, Senior Law Student.

Nilles, Hansen & Davies, Ltd., Fargo, for third-party defendant, appellant and cross-appellee; argued by William P. Harrie.

GIERKE, Justice.

First Assembly of God Church (First Assembly) appeals from a district court judgment requiring it to indemnify General Diesel & Equipment Co., Inc. (General Diesel) for damages sustained by Raymond Barsness and for attorney's fees and costs incurred by General Diesel in defending against Barsness' action, and General Diesel cross-appeals from that part of the judgment denying its attorney's fees and costs incurred in bringing a motion for indemnity from First Assembly. We affirm in part, reverse in part, and remand for entry of judgment consistent with this opinion.

In 1980 First Assembly began construction of a new sanctuary in Fargo. First Assembly leased a crane from General Diesel and obtained a manbasket from Northern Improvement Company for use with the crane. On August 24, 1981, Barsness and another employee of First Assembly were lifted in the manbasket to check spacing between four arches. While suspended above ground, the chain connecting the manbasket to the crane became disconnected, causing the manbasket to fall to the ground. This resulted in serious injury to Barsness.

First Assembly was a complying employer under the North Dakota Workers Compensation Act, and Barsness recovered workers compensation benefits as a result of the accident. Barsness then commenced an action against General Diesel, alleging negligent entrustment of the crane to an inexperienced operator and negligent failure to warn. 1 General Diesel denied that it was negligent and brought a third-party action for indemnity against First Assembly based upon language in the written lease agreement between General Diesel and First Assembly.

A jury returned a special verdict finding that Barsness sustained injuries resulting in damages of $95,000 and apportioning negligence as follows: one percent to Barsness, two percent to General Diesel, and ninety-seven percent to First Assembly. Pursuant to the special verdict, judgment was entered in favor of Barsness and against General Diesel for $98,050. That amount was arrived at by reducing the $95,000 verdict by $950 for Barsness' one percent negligence and adding $4,000 for costs.

General Diesel then sought indemnification from First Assembly pursuant to terms of the written lease. After briefing and oral argument, the trial court concluded that First Assembly waived its right to the exclusive remedy provisions of the Workers Compensation Act by entering into the written lease agreement and determined that General Diesel was entitled to indemnity from First Assembly for $98,050 plus $22,942.10 for attorney's fees and expenses incurred by General Diesel in defending the action brought by Barsness. However, the trial court refused to grant General Diesel indemnification for $2,010 in attorney's fees and expenses incurred by General Diesel in bringing a motion for indemnity from First Assembly, holding that recovery for that amount went beyond the scope of the written lease. First Assembly has appealed from that part of the judgment granting indemnification and awarding attorney's fees and expenses, and General Diesel has cross-appealed from that part of the judgment denying recovery of attorney's fees and expenses incurred in seeking indemnity from First Assembly.

First Assembly contends that the trial court erred in determining that General Diesel was entitled to contractual indemnity from First Assembly under the terms of the written lease. First Assembly asserts that because it is an immune employer under the exclusive remedy provisions of the North Dakota Workers Compensation Act, General Diesel is precluded from obtaining indemnity under the terms of the lease. First Assembly argues that to allow a third-party tortfeasor to obtain indemnification from a statutorily immune employer would circumvent the Workers Compensation Act. General Diesel responds that it is entitled to indemnity from First Assembly because of the contractual duty to indemnify in the written lease.

Generally, when an employer complies with the workers compensation statutes, the employee's exclusive remedy against the employer is limited to recovery under the workers compensation statutes. Gernand v. Ost Services, Inc., 298 N.W.2d 500 (N.D.1980); see Sections 65-01-01, 65-01-08, 65-04-28, and 65-05-06, N.D.C.C. 2 Although Section 65-01-09, N.D.C.C., authorizes an injured employee to recover damages from a third-party tortfeasor when the injuries result from the negligence of that third party, in Gernand v. Ost Services, Inc., supra, we held that the exclusive remedy provisions of the workers compensation statutes prevent the third-party tortfeasor from obtaining contribution from the employer, irrespective of the joint tortfeasor contribution act, Chapter 32-38, N.D.C.C. In Layman v. Braunschweigische Maschinenbauanstalt, 343 N.W.2d 334 (N.D.1983), we held that the reduction of a plaintiff-employee's recovery against a third-party tortfeasor by the percentage of negligence attributable to the plaintiff's employer was contrary to the doctrine of joint and several liability of Section 9-10-07, N.D.C.C. 3 In situations where an employer and a third-party tortfeasor both negligently cause an employee's injuries, Layman, supra, and Gernand, supra, impose liability on the third-party tortfeasor for the negligence of the third party and the employer without permitting the third-party tortfeasor to get contribution from the employer.

Although we have addressed issues of contribution and joint and several liability within the context of the exclusive remedy rule, we have not heretofore specifically addressed whether a third-party tortfeasor may obtain indemnification from a statutorily immune employer pursuant to a contract of indemnification. However, we have recognized that there are exceptions to the exclusive remedy rule [Gernand v. Ost Services, Inc., supra ], and we have said that in the absence of an explicitly contractual duty to indemnify, an independent duty to indemnify will not be inferred unless the party seeking indemnity clearly shows a well-settled duty between the employer and a third party. Sayler v. Holstrom, 239 N.W.2d 276 (N.D.1976); see United Pacific Insurance Co. v. Aetna Insurance Co., 311 N.W.2d 170 (N.D.1981); see also, Sorensen v. Tenneco Oil Co., 609 F.Supp. 838 (D.N.D.1985); White v. McKenzie Electric Cooperative, Inc., 225 F.Supp. 940 (D.N.D.1964).

A vast majority of jurisdictions have recognized that an express contract of indemnification is an exception to the exclusive remedy rule. Annot., 100 A.L.R.3d p. 380 Sec. 8(b) (1980); 2A Larson, Workmen's Compensation Law, Secs. 76.42, 76.43 (1983). The frequently-stated rationale for this exception is that the indemnity claim is not an action for damages but is a separate legal claim against an employer based upon a contractual relationship between the employer and third-party tortfeasor. 2A Larson, Workmen's Compensation Law, p 76.42 (1983).

First Assembly asserts that we should not follow the majority rule because the better reasoned rule is that a third-party tortfeasor is not entitled to contractual indemnification from an employer who has complied with the provisions of the Workers Compensation Act, citing Paul Krebs & Associates v. Matthews & Fritts Construction Co., Inc., 356 So.2d 638 (Ala.1978); Raisler v. Burlington Northern Railroad Co., 717 P.2d 535 (Mont.1985); and Roberts v. Gray's Crane & Rigging, Inc., 73 Or.App. 29, 697 P.2d 985 (1985). We decline to follow those cases.

Roberts, supra, and Raisler, supra, involved specific statutory language precluding a third-party tortfeasor from obtaining indemnity from an employer. 4 Our statutes do not include a similar provision [see fn. 2], and we decline to follow the rationale of Roberts or Raisler in the absence of such a provision.

In Paul Krebs, supra, the Alabama Supreme Court construed its workers compensation provisions 5 to preclude a third-party tortfeasor from recovery for indemnity from an employer:

"The statute says that no employer shall be held civilly liable for injuries to workmen injured in the course of his employment. To allow a third-party tort-feasor to recover over against the employer for injury to an employee would be to allow indirectly what is prohibited directly.

* * *

* * *

"Sec. 25-5-53 says that no employer (under the Workmen's Compensation Act) 'shall be held civilly liable ' for personal injuries to workmen. Krebs would have us engraft an exception to this language which would permit a civil suit against the employer where the employer agrees to indemnify a third-party tort-feasor sued for causing the injury to the employee. This writes into the legislation an exception which is not there." Paul Krebs, supra, 356 So.2d at 639-640. [Emphasis in original.]

Professor Larson has criticized Paul Krebs as a "departure from the mainstream of workmen's compensation decisions" and "aberrational." 2A Larson, Workmen's Compensation Law p 76.43. We decline to follow the literal statutory interpretation adopted in Alabama, and instead align ourselves with the majority rule that a contract of indemnification is an exception to the exclusive remedy rule because it is an action on a separate legal claim based upon a contractual...

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