Brown v. Prime Const. Co., Inc.

• Decision Date: 05 July 1984
• Docket Number: No. 50026-6,50026-6
• Citation: 102 Wn.2d 235,684 P.2d 73
• Court: Washington Supreme Court
• Parties: Steven C. BROWN, a single man, Plaintiff, v. PRIME CONSTRUCTION CO., INC., Appellant, Ace Electric Company Contractors & Engineers, Respondent.

Page 235

102 Wn.2d 235

684 P.2d 73

Steven C. BROWN, a single man, Plaintiff, v. PRIME CONSTRUCTION CO., INC., Appellant Ace Electric Company Contractors & Engineers, Respondent.

No. 50026-6.

Supreme Court of Washington En Banc.

July 5, 1984.

Keller, Rohrback, Waldo, Hiscock, Butterworth & Fardal, Laurence R. Weatherly, Seattle, for appellant.

Carney, Stephenson, Badley, Smith & Mueller, R. Jack Stephenson, A. Richard Maloney, Seattle, for respondent.

BRACHTENBACH, Justice.

This case involves the validity of an indemnity provision in a contract between a general contractor and its subcontractor. Prime Construction Co., Inc. (Prime) was the general contractor for certain construction work at the Seattle Occupational Industrial Center (Owner). Prime subcontracted with Ace Electric Company Contractors & Engineers (Ace) for specified electrical work.

Plaintiff Brown, an employee of Ace, was injured on the job. He sued Prime and Thomas Industries, Inc., the manufacturer of a device being used by Brown at the time of his injury. The claim against Prime was based upon negligence; the claim against Thomas sounded in negligence and strict liability. Neither Brown nor Thomas is a party to this appeal.

Prime joined Ace as a third party defendant, relying on the indemnification provisions in both the Prime/Ace subcontract and the Prime/Owner main contract.

The subcontract contained the following clause:

(L) INDEMNIFICATION

The SUBCONTRACTOR agrees to indemnify and save harmless the CONTRACTOR, its officers, agents and employees, from and against any and all suits, claims, actions, losses, costs, penalties, and damages of whatsoever kind or nature, including attorney fees, arising out of, in connection with, or incident to, the work of this SUBCONTRACT, except that caused by the sole negligence of the CONTRACTOR. In the event of litigation between the parties to enforce the rights under this paragraph, reasonable attorney fees shall be allowed to the prevailing party.

In addition, the subcontract provided that Ace assume "toward the CONTRACTOR [Prime] all obligations and responsibilities which the CONTRACTOR has assumed toward the OWNER under the MAIN CONTRACT ...". ¹ The main contract between Prime and Owner included the following clauses:

24. INDEMNIFICATION

24.1 The CONTRACTOR will indemnify and hold harmless the owner and the ENGINEER and their agents and employees from and against all claims, damages, losses and expenses including attorney's fees arising out of or resulting from the performance of the WORK, provided that any such claims, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property including the loss of use resulting therefrom: and is caused in whole or in part by any negligent or willful act or omission of the CONTRACTOR, and SUBCONTRACTOR, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable.

24.2 In any and all claims against the OWNER or the ENGINEER, or any of their agents or employees, by any employee of the CONTRACTOR, any SUBCONTRACTOR, anyone directly or indirectly employed by any of them, or anyone for whose acts any of them may be liable, the indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the CONTRACTOR or any SUBCONTRACTOR under workmen's compensation acts, disability benefit acts or other employee benefits acts.

Ace and Prime brought cross motions for summary judgment. Ace, relying principally upon Calkins v. Lorain Div. of Koehring Co., 26 Wash.App. 206, 613 P.2d 143 (1980), argued that the indemnity provision of the subcontract did not cover tort actions brought against Prime by Ace's employees because the clause did not specifically cover this contingency. Ace also argued that it was not required to indemnify Prime under the indemnity provision of the main contract between Owner and Prime. Conversely, Prime argued that it was entitled to indemnification under both indemnification clauses.

The trial court denied Prime's motion for summary judgment, granted Ace's motion for summary judgment, and dismissed Prime's third party complaint with prejudice. We affirm.

I

The essential issue is the validity and, therefore, the enforceability of the subcontract indemnification clause which purportedly provides for indemnification of Prime by Ace for damages arising from injuries to Ace's employees when this underlying claim, if brought directly against Ace by its employee, would be barred by RCW 51.04.010 and .060, the Industrial Insurance Act.

The Industrial Insurance Act, RCW Title 51 is a strong public policy statement towards limiting an employer's liability for their employees' job related injuries. In general, RCW 51.04.010 grants tort immunity to employers and, in exchange, gives employees sure and certain relief for any job related injury. Indemnity provisions operate to circumvent the provisions of the act by allowing employers to be ultimately liable for tort damages resulting from an employee's job related injury. Thus, indemnity provisions in effect waive the immunity of the Industrial Insurance Act. RCW 51.04.060, however, voids pro tanto any attempt by an employee or employer to exempt themselves from the benefits or burdens of the act.

While RCW 51.04.060 appears absolute, we have allowed enforcement of a properly worded indemnity agreement. See Redford v. Seattle, 94 Wash.2d 198, 615 P.2d 1285 (1980); see also Seattle-First Nat'l Bank v. Shoreline Concrete Co., 91 Wash.2d 230, 588 P.2d 1308 (1978); Tucci &amp Sons, Inc. v. Carl T. Madsen, Inc., 1 Wash.App. 1035, 467 P.2d 386 (1970). However, we have stated that (1) such agreements are disfavored and (2) any intent to provide indemnification must be clearly expressed in the agreement. Glass v. Stahl Specialty Co., 97 Wash.2d 880, 886, 652 P.2d 948 (1982). While this statement in Glass might be characterized as dicta because there was in fact no contractual indemnity agreement, it is a correct statement of our policy. See Calkins v. Lorain Div. of Koehring Co., 26 Wash.App. 206, 209, 613 P.2d 143 (1980).

Important policy reasons support this insistence upon stringent requirements for a valid waiver of worker's compensation immunity by indemnification agreements. The assumption of a contractual liability to an employer's own employee runs contrary to the foundation of the industrial insurance scheme. We early recognized the compromise inherent in the resolution of adverse interests between employers and employees. It is certainty of compensation, without regard to employer fault, traded for the employer's immunity from employee suits. Stertz v. Industrial Ins. Comm'n, 91 Wash. 588, 158 P. 256 (1916); see also RCW 51.04.010. "[T]hese clauses ... create an additional loss allocation problem, as they result in an employer being responsible for the full tort recovery of its employee: a result in direct conflict with the workers' compensation scheme." Indemnity Clauses and Workers' Compensation: A Proposal for Preserving the Employer's Limited Liability, 70 Calif.L.Rev. 1421 (1982).

The language in Calkins v. Lorain Div. of Koehring Co., 26 Wash.App. 206, 613 P.2d 143 (1980) is a proper statement of the law.

Where employers agree to contract away their immunity under the act and to indemnify third parties for employee injuries, such an intent should be clearly expressed in the agreement.

Calkins, at 209, 613 P.2d 143. We hold that an indemnity clause of this type is enforceable only if it clearly and specifically contains a waiver of the immunity of the workers' compensation act, either by so stating or by specifically stating that the indemnitor assumes potential liability for actions brought by its own employees. The subcontract's clause does not meet this test. ²

Prime argues that decisions by this court and the Court of Appeals support its position that the indemnification clause in the subcontract clearly expresses an intent to indemnify for employees' tort suits. Contrary to Prime's argument,...