Commercial Union Assur. Co. v. Brown Co., 79-462

• Decision Date: 17 September 1980
• Docket Number: No. 79-462,79-462
• Citation: 419 A.2d 1111,120 N.H. 620
• Parties: COMMERCIAL UNION ASSURANCE COMPANY v. BROWN COMPANY.
• Court: New Hampshire Supreme Court

Page 1111

419 A.2d 1111

120 N.H. 620

COMMERCIAL UNION ASSURANCE COMPANY v. BROWN COMPANY.

No. 79-462.

Supreme Court of New Hampshire.

Sept. 17, 1980.

Devine, Millimet, Stahl & Branch, Manchester (George R. Moore, Manchester, orally), for plaintiff.

Bergeron & Hanson, Berlin (Alethea L. Froburg orally), for defendant.

BOIS, Justice.

This is an appeal arising from a petition for declaratory judgment. The issue is whether an indemnity clause in a construction contract between the defendant Brown Company and the Paul A. Lawrence Company requires that Lawrence indemnify Brown Company for Brown's acts of negligence. The Superior Court (Temple, J.) held that the indemnity clause did not apply. We disagree.

In April 1974, the Lawrence Company entered into a construction contract with the defendant for work to be performed on the defendant's premises. The contract required the Lawrence Company to purchase and maintain specific insurance coverage, including workmen's compensation and comprehensive general liability. In fulfillment of the contract, the Lawrence Company obtained both types of insurance from the plaintiff. Both policies were in effect at all relevant times. On October 9, 1974, an employee of the Lawrence Company was injured on the defendant's premises. As a result of this accident, the employee received workmen's compensation benefits from the plaintiff as the insurer of the Lawrence Company. The plaintiff seeks to bring a third-party action against the defendant pursuant to RSA 281:14 (Supp.1979) (Workmen's Compensation-Liability of Third Person) to recover the amount it has paid to the injured employee and petitioned for declaratory judgment to determine whether the indemnity clause in the construction contract entitles the defendant to be indemnified by the Lawrence Company if the plaintiff is successful in its third-party suit. If this is the case, then a third-party suit by the insurance carrier would be fruitless because the carrier, as the Lawrence Company's insurer, would itself be liable for whatever amount it could recover from the Brown Company.

The first issue is whether the indemnity clause in the construction contract requires the Lawrence Company to indemnify the Brown Company for injuries caused by the Brown Company's negligence. Paragraph seven of the contract provides as follows:

"(7) Contractor's Indemnity. Contractor (Lawrence Company) shall indemnify and hold Owner (Brown Company) harmless from any and all loss by reason of property damage, bodily injuries, including death resulting therefrom (and all expenses in connection therewith, including attorneys' fees) sustained or alleged to be sustained by any person or persons, whether they be employees of Owner, Contractor, or members of the public, and without regard to whether the person or persons are working within the scope of their employment, resulting from the acts (or failure to act) of Contractor or sub-contractors, or their employees and agents, or from the performance (or failure of performance) of this Contract. Contractor shall effect coverage by Workmen's Compensation Insurance in conformity with the laws of the State in which the work contemplated by this Contract is to be done and shall indemnify and hold by this Contract Owner harmless from any and all loss by reason of the liability imposed by the applicable Workmen's Compensation Laws; will carry public liability insurance and such other insurance as may be necessary to insure against the risks above assumed by Contractor, and will submit evidence of same satisfactory to Owner on or before signing of this Contract."

(Emphasis added).

The plaintiff argues that the majority view requires that an indemnity provision clearly, precisely and unequivocally express that it was the intent of the parties to provide indemnity for the owner's own negligence. See, e. g., Laudano v. General Motors Corp., 34 Conn.Sup. 684, 388 A.2d 842 (1977); Norfolk & W. Ry. Co. v. Hardinger Tr. Co., Inc., 415 F.Supp. 507 (W.D.Pa.1976). We disagree that this is the majority view:

"While it has sometimes been stated, in discussion or dicta at least, that specific language is necessary to obligate the contractor to protect the owner against the latter's own active negligence, and that broad general words are insufficient, it has been ruled or recognized by a majority of the courts that express or explicit reference to the owner's negligence is not requisite if the parties' intention to afford such protection clearly appears from the contract or from the language used, the surrounding circumstances, and the objects of the parties."

(Footnotes omitted.) Annot., 27 A.L.R.3d 663, 678 (1969). Moreover, we find the latter rule to be sounder because it has the effect of upholding the parties' intention. Accordingly, we hold that express language is not necessary to obligate a contractor to protect against injuries resulting from the owner's negligence where the parties' intention to afford such protection is clearly evident. Cf., Laconia Clinic, Inc. v. Cullen, 119 N.H. ---, 408 A.2d 412 (November 14, 1978); Royer Foundry & Mach. Co. v. N.H. Grey Iron, Inc., 118 N.H. 649, 392 A.2d 145 (1978).

In interpreting indemnity provisions the same rules apply as are used to interpret contracts generally. 41 Am.Jur.2d Indemnity § 6 (1968). In this State, the proper interpretation of a contract is that which reflects the intention of the parties at the time it was made. Erin Food Services Inc. v. 688 Properties, 119 N.H. 232, 235, 401 A.2d 201, 203 (1979). In interpreting a contract the court is to consider the written agreement, all its provisions, its subject matter, the situation of the parties at the time it was entered into and the object intended. Thiem v. Thomas, 119 N.H. ---, ---, 406 A.2d 115, 118 (August 17, 1979).

The indemnity clause in question essentially has two parts. It requires the contractor to indemnify the owner from any and all loss resulting from: (1) "the acts of (the) contractor"; and (2) "the performance of this contract." It is the second part of this clause which is at issue, and which cannot be dismissed as mere surplusage. See id.; McGinley v. Insurance Co., 88 N.H. 108, 184 A. 593 (1936). Each part of the indemnity clause serves a different function in the contract. The first part, "losses ... from the acts of (the) Contractor," assigns liability to the contractor from injuries resulting from any acts of the contractor, whether or...