Guy F. Atkinson Co. v. Schatz

• Decision Date: 17 January 1980
• Citation: 102 Cal.App.3d 351,161 Cal.Rptr. 436
• Court: California Court of Appeals Court of Appeals
• Parties: GUY F. ATKINSON COMPANY, Cross-Complainant and Appellant, v. Gerald SCHATZ, dba Southern Oregon Rebar, Cross-Defendant and Respondent. Civ. 43400.

Page 436

161 Cal.Rptr. 436

102 Cal.App.3d 351

GUY F. ATKINSON COMPANY, Cross-Complainant and Appellant, v. Gerald SCHATZ, dba Southern Oregon Rebar, Cross-Defendant and Respondent.

Civ. 43400.

Court of Appeal, First District, Division 1, California.

Jan. 17, 1980.

Hall, Henry, Oliver & McReavy, Lee H. Cliff, San Francisco, for cross-complainant and appellant.

Mitchell, Dedekam & Angell, Clifford B. Mitchell, Michael J. Murray, Eureka, for cross-defendant and respondent.

GRODIN, Associate Justice.

This case involves the interpretation and application of an indemnity agreement between appellant, Guy F. Atkinson Company and respondent, Gerald Schatz, dba Southern Oregon Rebar. Appellant served as general contractor in the construction of a highway bridge over Humboldt Bay between Eureka and the Town of Samoa. Respondent was third-tier subcontractor performing iron work on the job, and their agreement contained the following clause: "Subcontractor shall indemnify Contractor against any claim, loss, damage, expense or liability arising out of acts or omissions of Subcontractor in any way connected with the performance of this Subcontract unless due solely to Contractor's negligence. The foregoing shall include indemnity for property damage and for injury or death of any person, including employees of Contractor or Subcontractor. Subcontractor shall, on Contractor's request, but at his own expense, defend any suit asserting a claim covered by this indemnity. Subcontractor shall pay all costs, including attorney's fees, incurred in enforcing this indemnity. 'Acts or omissions of subcontractor' shall include acts or omissions of lower tier subcontractors, suppliers, or others operating within the scope of authorization of Subcontractor." (Emphasis added.) The agreement required respondent to obtain insurance in specified amounts to cover the indemnity obligation.

The bridge project involved the construction of three coffer dams, which are watertight, temporary enclosures from which water is pumped to expose the bottom of a river or bay. On May 7, 1970, respondent's two employees, Walker and Hanson, were working on the floor of one of the dams when a 3,600-pound water pump fell from its position on top of the dam and injured them. An employee of appellant named Enright went to rescue them and he, too, was injured. Walker and Hanson filed suits against the State of California and appellant. Enright sued only the state but appellant, under its agreement with the state, was required to defend and indemnify. The Walker and Enright suits were settled, and the Hanson suit went to trial, resulting in a jury verdict and judgment in favor of Hanson. The jury made a special finding that Hanson was not contributorily negligent. By stipulation between appellant and respondent the indemnity issue, raised by cross-complaint, was then submitted to the judge who presided over the Hanson trial, based on the testimony in that trial and certain discovery products.

The pertinent trial court findings may be briefly summarized. Appellant was guilty of active negligence. It was appellant who placed the water pump in the location from which it fell, on top of two beams athwart the coffer dam. The pump was not secured to the beams, and the beams were not secured to the dam. The pump fell as a result of waves created by appellant's operation of a barge in the water above the dam, and it was the "surging movements" created by the barge which constituted the proximate cause of the injuries. Hanson and Walker had walked across the area where the pump was located earlier on the morning of the accident, but the pump was not running at the time, and therefore not vibrating. Hanson saw that the pump was not secured but Walker, the foreman, did not notice one way or the other and, because the pump was not running, "figured it was safe." This pump, or some other pump, had fallen on a previous occasion but no one had ever warned Walker or Hanson of that prior incident. Walker acted "reasonably and prudently" in entering and working in the coffer dam. The court declined to make findings, requested by appellant, related to appellant's contention that respondent was at least passively negligent for failing to provide its employees with a safe place to work. ¹ Rather, it concluded that "Based upon the evidence in this case, the agreement, the law and public policy, the Court finds this is not a case which calls for the shifting of the burden of liability from one who was clearly and actively negligent, to one who was at most passively negligent." Appellant contends respondent was negligent as a matter of law and that appellant is therefore entitled to indemnification under the agreement.

In reviewing the trial court's conclusion we confront a lengthy history of California case law dealing with express indemnity agreements. (See Conley and Sayre, Indemnity Revisited: Insurance of the Shifting Risk (1971) 22 Hastings L.J. 1201.) Much of that case law focuses upon the conduct of the indemnitee, and considers whether the indemnitee may recover for damage caused or contributed to by his own negligence. It has been suggested from time to time that it may be contrary to public policy to permit the shifting of responsibility from one person at fault to another, on the theory that such a shifting removes incentives for safety (e. g., Burlingame Motor Co. v. Peninsula Activities, Inc. (1971) 15 Cal.App.3d 656, 93 Cal.Rptr. 376), and the Legislature itself has declared provisions in construction contracts which purport to provide indemnity from the "sole negligence or willful misconduct of the promisee" to be contrary to public policy and void. (Civ.Code, § 2782. See also Civ.Code, §§ 1668, 2773, and 2784.5.) Subject to such statutory limitation, however (cf. Gonzales v. R. J. Novick Constr. Co. (1978) 20 Cal.3d 798, 809, fn. 8, 144 Cal.Rptr. 408, 575 P.2d 1190), California courts have come to regard indemnity provisions in construction agreements as a generally acceptable method of distributing loss among insurance carriers. (Goldman v. Ecco-Phoenix Elec. Corp. (1964) 62 Cal.2d 40, 48-49, 41 Cal.Rptr. 73, 396 P.2d 377.) Such provisions have been distinguished from Exculpatory clauses which seek to relieve a party from liability to the injured person (id., at p. 48, 41 Cal.Rptr. 73, 396 P.2d 377), and it has been observed that indemnity agreements are no more likely to remove incentive for safety than insurance policies. (John E. Branagh & Sons v. Witcosky (1966) 242 Cal.App.2d 835, 841, 51 Cal.Rptr. 844. For a thorough discussion of the function of indemnity agreements, see Sweet, Legal Aspects of Architecture, Engineering and the Construction Process (2d ed. 1977) § 33.05 et seq.) Thus, the legal principles governing express indemnity "reflect its contractual nature, permitting great freedom of action to the parties in the establishment of the indemnity arrangements . . . ." (E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 507, 146 Cal.Rptr. 614, 619, 579 P.2d 505, 510-11.)

Those principles do, however, subject "the resulting contractual language to established rules of construction." (E. L. White, Inc. v. City of Huntington Beach, supra, 21 Cal.3d at p. 507, 146 Cal.Rptr. at p. 620, 579 P.2d at p. 511.) In Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 119 Cal.Rptr. 449, 532 P.2d 97, the Supreme Court summarized the then existing law as follows: "Past cases have held that an indemnity agreement may provide for indemnification against an indemnitee's own negligence, but such an agreement must be clear and explicit and is strictly construed against the indemnitee. (Goldman v. Ecco-Phoenix Elec. Corp. (1964) 62 Cal.2d 40, 44, 41 Cal.Rptr. 73, 396 P.2d 377. . . .) If an indemnity clause does not address itself to the issue of an indemnitee's negligence, it is referred to as a 'general' indemnity clause. (See Markley v. Beagle, supra (66 Cal.2d 951), at p. 962, 59 Cal.Rptr. 809, 429 P.2d 129; Morgan v. Stubblefield (1972) 6 Cal.3d 606, 624, 100 Cal.Rptr. 1, 493 P.2d 465. . . .) While such clauses may be construed to provide indemnity for a loss resulting in part from an indemnitee's Passive negligence, they will not be interpreted to provide indemnity if an indemnitee has been Actively negligent. (Markley v. Beagle, supra (66 Cal.2d 951), at p. 962, 59 Cal.Rptr. 809, 429 P.2d 129; Morgan v. Stubblefield, supra, 6 Cal.3d at p. 624, 100 Cal.Rptr. 1, 493 P.2d 465, see also Burlingame Motor Co. v. Peninsula Activities, Inc. (1971) 15 Cal.App.3d 656, 661, 93 Cal.Rptr. 376 . . . .) (P) Provisions purporting to hold an owner harmless 'in any suit at law' (Markley v. Beagle, supra (66 Cal.2d 951), at p. 961, 59 Cal.Rptr. 809, 429 P.2d 129), 'from all claims for damages to persons' (Morgan v. Stubblefield, supra, 6 Cal.3d at p. 626, 100 Cal.Rptr. 1, 493 P.2d 465), and 'from any cause whatsoever' (MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 422-423, 105 Cal.Rptr. 725 . . .), without expressly mentioning an indemnitee's negligence, have been deemed to be 'general' clauses." (Id., at pp. 628-629, 119 Cal.Rptr., at 452, 532 P.2d, at p. 180.)

Appellant contends that the indemnity clause at issue Does "address itself to the issue of an indemnitee's negligence" through the phrase "unless due solely to Contractor's negligence" and thus constitutes a "specific" clause applicable even in the face of active negligence by the indemnitee. In support of...