Great American Insurance Company v. Evans

• Decision Date: 01 June 1967
• Docket Number: Civ. No. 8313.
• Citation: 269 F. Supp. 151
• Court: U.S. District Court — Northern District of California
• Parties: GREAT AMERICAN INSURANCE COMPANY, a corporation, Plaintiff, v. H. C. EVANS, doing business as Evans Van & Storage Company, and Lloyd E. Hildebrand, doing business as Valley Elevator Company, Defendants.

269 F. Supp. 151

GREAT AMERICAN INSURANCE COMPANY, a corporation, Plaintiff, v. H. C. EVANS, doing business as Evans Van & Storage Company, and Lloyd E. Hildebrand, doing business as Valley Elevator Company, Defendants.

Civ. No. 8313.

United States District Court N. D. California, N. D.

June 1, 1967.

COPYRIGHT MATERIAL OMITTED

Paul A. Renne, San Francisco, Cal., for plaintiff.

Joseph P. Van Den Berg, M. H. Pothoven, Sacramento, Cal., for defendants.

MEMORANDUM FOR JUDGMENT

OLIVER J. CARTER, District Judge.

This case presents a question concerning the scope of the doctrine of implied indemnification between joint tortfeasors under California law. Briefly stated, the stipulated facts are these:

Plaintiff Great American Insurance Company, hereinafter "Great American", prior to October 1, 1956, insured Erickson Brothers, Inc., hereinafter "Erickson", and Emmanuel Schwaub, hereinafter "Schwaub", who were the owners of a warehouse building which was leased by them to H. C. Evans Van & Storage Company, hereinafter "Evans". This lease was an oral agreement giving Evans sole possession of the premises on a monthly basis and was made with the express understanding that the lessee, Evans, was to be responsible for the use, maintenance, and inspection of the freight elevator located in the warehouse.

On October 1, 1956, Evans employed defendant Valley Elevator Company, hereinafter "Valley", to place the elevator in working condition, and thereupon entered into a separate inspection service contract with Valley in connection with the use of the elevator, which provided in part that Valley "would assume no liability for injuries or damage to persons or property except those directly due to Valley's acts or omissions." (Emphasis added.)

Almost one year later on September 7, 1957, Kasper Hardmeyer, an employee of Evans, was injured while using the freight elevator and died as a result of those injuries. His heirs brought a wrongful death action in the Superior Court of the State of California in and for the County of Sacramento against the owners of the warehouse, the lessee, and Valley among others, alleging that the death was due to the negligent operation, maintenance, and control of the elevator. A jury verdict for the amount of $112,500 plus $918.03 costs was returned against the defendants.

Great American, acting on behalf of Erickson and Schwaub, paid $40,000 to the heirs of the deceased in return for a partial satisfaction of judgment, and a full release and satisfaction of judgment against its insureds, and took an assignment and subrogation from them of all their rights for indemnification.

Next, Great American, as assignee and subrogee of Erickson and Schwaub, instituted this present action against Evans and Valley seeking indemnification for the $40,000 it had paid to the heirs of the deceased. The reason that Valley is the sole defendant in this action is that subsequent to the inception of the action plaintiff, Great American, executed a release of its claims against Evans and entered into an "Assignment and Covenant Not to Execute" in which Great American agreed not to look to any personal assets of Evans in satisfaction of said settlement in return for an assignment by Evans of any rights which it might have against any insurance company insuring Evans. To this date the plaintiff has received no payment under the terms of this release and assignment.

The central question which is before this Court is whether the plaintiff, Great American, as assignee and subrogee of its insureds, is entitled to indemnification from defendant Valley for the amount it has paid on the judgment to the heirs of Kasper Hardmeyer, the deceased, in the absence of an agreement between these parties providing for a right of indemnification. Specifically we are concerned with the problem of whether indemnity should be implied from the particular factual context of this case which admits of no explicit contractual relationship between plaintiff's insureds and the defendant.

Certainly there is no dispute that the right to implied indemnity is now well established under California law. Cahill Brothers, Inc. v. Clementina Co., 208 Cal.App.2d 367, 375, 25 Cal.Rptr. 301 (1962). Both parties concede in their arguments that under the stipulated facts the plaintiff's insureds and defendant were joint tortfeasors, but they disagree as to whether or not the facts of this case come within the exception to the general rule of non-contribution which allows a right to indemnity as between joint tortfeasors.

In resolving this dispute one must first look to the stipulations which form the factual basis of this suit. They provide in part that in the wrongful death action the liability of plaintiff's insureds "was predicated solely on their non-delegable duties as owners of the premises and was not predicated on any affirmative acts taken by them" and that the liability of defendant, Valley, in that suit "was predicated on a finding of negligence in the performance of their contract with Evans Van & Storage Company and such negligence was a proximate cause of the death of Kasper Hardmeyer."

Whether these findings by the jury in the wrongful death action, when considered along with the nature of the relationship between the plaintiff's insureds and the defendant, place the parties within the exception to the non-contribution rule depends upon an understanding of the fundamental difference between contribution and indemnity. The right of contribution, where it exists, presupposes a common liability which is shared by the joint tortfeasors on a pro-rata basis. The right of indemnity, on the other hand, because of some special relationship existing between two tortfeasors shifts the entire loss upon the real wrongdoer. See Alisal Sanitary Dist. v. Kennedy, 180 Cal.App. 2d 69, 75, 4 Cal.Rptr. 379 (1960).

California has recognized two distinct lines of cases in which this special relationship exists. The first is where there is a contractual relationship between the parties which by implication gives rise to a right of indemnity. See Cahill Brothers, Inc. v. Clementina Co., supra; Alisal Sanitary Dist. v. Kennedy, supra; San Francisco Unified School Dist. v. California Bldg. etc. Co., 162 Cal.App.2d 434, 328 P.2d 785 (1958). The second concerns the area of non-contractual indemnity where the real wrongdoer's negligent conduct has been imputed to or constructively fastened upon the one who seeks indemnity. See City and County of San Francisco v. Ho Sing, 51 Cal.2d 127, 330 P.2d 802 (1958); De La Forest v. Yandle, 171 Cal.App.2d 59, 340 P.2d 52 (1959); Herrero v. Atkinson, 227 Cal.App.2d 69, 38 Cal.Rptr. 490, 8 A.L.R.3d 629 (1964). This Court believes that plaintiff is entitled to indemnification under either line of cases.

I. Implied right of indemnification where a contractual relationship exists.

The right of implied indemnity in contractual cases is based upon a breach of contract by the person against whom indemnity is sought. In the United States Supreme Court cases of Ryan Stevedoring Co. v. Pan-Atlantic Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956), and Weyerhaeuser S.S. Co. v. Nacirema Co., 355 U.S. 563, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958), it was held that a shipowner could claim indemnity against a stevedoring company whose employee had recovered a judgment against the shipowner for injuries sustained in the course of his employment connected with the unloading of a vessel. These cases held that notwithstanding the absence of an express agreement of indemnity, the stevedoring company could be held liable for reimbursement to the shipowner for the amount of the judgment against the latter where the injuries to the longshoremen resulted from the unsafe stowage of cargo in Ryan and an unsafe winch shelter erected by the stevedoring company in Weyerhaeuser. Liability was there predicated upon breach of the stevedoring contract, the rationale being that such contract necessarily implied an obligation to perform the stevedoring services contracted for with reasonable safety, and to be responsible for foreseeable damages resulting to the shipowner from the contractor's wrongful performance and not flowing from the shipowner's negligence.

The San Francisco Unified School District case relied upon the reasoning of Ryan and Weyerhaeuser and held that a prima facie case for indemnity had been made by the school district plaintiff against the defendant maintenance company for damages which the district was compelled to pay an employee of the maintenance company who had been injured while washing the windows of a high school. There the company contracted and agreed to wash the windows from the inside from stepladders, but failed to furnish such ladders to its employees. The court held that the contract was breached, and that the damages flowing to the district from such breach were subject to indemnification under a warranty or agreement to indemnify necessarily implied from the contract. Subsequent cases have followed the same reasoning. See Cahill Brothers, Inc. v. Clementina Co., supra and Alisal Sanitary Dist. v. Kennedy, supra.

In this action before us there is no contract between plaintiff's insureds and defendant Valley. This is not the case of Evans suing Valley for breach of contract, nor is it one in which the plaintiff has become a subrogee of Evans' rights against Valley. Therefore we must ask the question whether the fact that the plaintiff's insureds were not contracting parties with the defendant should be the distinction upon which their right to indemnification turns. The logic of this line of cases requires the existence of a contractual relationship in some form in order for the aggrieved party to imply the warranty or agreement to indemnify which has been breached.

In this case this requirement is satisfactorily met by recognizing that the plaintiff's insureds are third party beneficiaries of the contract...