Industrial Risk Insurers v. Creole Production Services, Inc.

• Decision Date: 30 October 1984
• Docket Number: No. 83-4011,83-4011
• Citation: 746 F.2d 526
• Parties: INDUSTRIAL RISK INSURERS, et al., Plaintiffs, v. CREOLE PRODUCTION SERVICES, INC., et al., Defendants. HARBOR INSURANCE CO., Third-Party Plaintiff/Appellant. v. FLUOR CORPORATION, a Delaware Corporation; Fluor Alaska, Inc.; and Fluor Engineers and Constructors, Inc., its wholly owned subsidiaries, Third-Party Defendants/Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 526

746 F.2d 526

INDUSTRIAL RISK INSURERS, et al., Plaintiffs, v. CREOLE PRODUCTION SERVICES, INC., et al., Defendants.

HARBOR INSURANCE CO., Third-Party Plaintiff/Appellant. v. FLUOR CORPORATION, a Delaware Corporation; Fluor Alaska,

Inc.; and Fluor Engineers and Constructors, Inc.,

its wholly owned subsidiaries,

Third-Party Defendants/Appellees.

No. 83-4011.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 3, 1984.

Decided Oct. 30, 1984.

Thomas S. Felker, James B. McCabe, Foulds, Felker, Burns & Johnson, Seattle, Wash., for Industrial Risk Insurer.

John A. Treptow, Atkinson, Conway, Bell & Gagnon, Anchorage, Alaska, for Harbor Ins.

Mark A. Sanberg, Henry J. Camarot, Camarot, Sandberg & Hunter, Anchorage, Alaska, for Flouor.

Appeal from the United States District Court for the District of Alaska.

Before BROWNING and CANBY, Circuit Judges, and LYNCH, ^* District Judge.

LYNCH, District Judge:

This matter is before the court on the appeal of the Harbor Insurance Company ("Harbor") from the district court's granting of summary judgment for the third-party defendants. The district court ruled that Harbor could not recover against the third-party defendants in implied indemnity. We agree, and we affirm the judgment for the reasons stated below. The opinion of the district court can be found at 568 F.Supp. 1323 (D.Alaska 1983).

FACTS

The Alyeska Pipeline Service Company ("Alyeska") is the agent for the owners of the Trans-Alaska Pipeline System ("TAPS"). Industrial Risk Insurers is an insurer of the owners of TAPS; all TAPS insurers will be referred to collectively as "IRI." Creole Production Services, Inc. ("Creole") is an oil pipeline consultant that contracted with Alyeska to be in charge of the start-up of Alyeska's pump stations. The Harbor Insurance Company is Creole's insurer. The Fluor Corporation is a construction and engineering firm that contracted with Alyeska to design (and, for purposes of the motion for summary judgment, construct and test) the pump stations and terminal facilities; Fluor and its wholly owned subsidiaries will be referred to collectively as "Fluor."

On July 8, 1977, only six days after the commencement of pumping, an explosion and fire destroyed a pump station on the pipeline. One life was lost. Thereafter, IRI paid Alyeska, its insured, over $5,000,000. IRI then sued Creole in federal court under the court's diversity jurisdiction; IRI did not sue Fluor. IRI's initial complaint was based both on negligence and on an indemnity provision in Creole's contract with Alyeska, but IRI later filed an amended complaint that included only the contract claim. Creole impleaded Fluor. Creole then settled with IRI (for an amount not apparent) and assigned its rights against Fluor to its insurer Harbor.

The third-party complaint alleges that Fluor is liable to indemnify Creole for either the entire amount of Creole's liability or pro rata on the basis of proportionate fault. On a motion for summary judgment, the district court found against Harbor as to each of five broad theories of liability that the court found were suggested by the facts alleged in the third-party complaint. These theories included contribution, breach of warranty, partial indemnity, indemnity, and liability for economic loss due to Fluor's negligence. Only the indemnity claim is before the court on appeal.

DISCUSSION

Harbor's claim for implied indemnity sounds in quasi-contract. Essentially, Harbor asserts that the court should imply a promise by Fluor to indemnify Creole/Harbor because Fluor would otherwise be unjustly enriched. Fluor has raised four arguments, any one of which, if correct, would allow it to prevail. Although all of these arguments were made in the district court, that court reached only the argument that Creole/Harbor has no right to indemnity because it was either a concurrent tortfeasor or a volunteer.

We agree with the district court's holding that persons who volunteer payments are not entitled to indemnification under the general law of indemnity. See Restatement of Restitution Sec. 76 (1937); Fulton Ins. Co. v. White Motor Corp., 261 Or. 206, 208-10, 493 P.2d 138, 140-41 (1972). We also agree with the district court's conclusion that Alaska law prevents concurrent tortfeasors from recovering anything in implied indemnity. Vertecs Corp. v. Reichhold Chemicals, Inc., 661 P.2d 619 (Alaska 1983). Notwithstanding our agreement with these rulings of the district court, we choose to affirm the judgment on another ground. ¹ We hold that Harbor cannot recover from Fluor in implied indemnity because it was either a concurrent tortfeasor or a mere insurer or guarantor. This argument was presented to the district court, and we prefer to rest our affirmance on this ground because it does not involve the difficult issues of contract interpretation comprehended by the argument accepted by the district court.

The court is aware of no Alaska cases on the question of whether an insurer or guarantor may recover in implied indemnity. We believe, however, that, if given the opportunity, the Alaska Supreme Court would follow the general rule that implied indemnity is not available to one "who guarantees or insures another against a payment for which the guarantor or insurer is not himself liable since the duty of indemnity and the right to subrogation of such persons are wholly dependent upon the contract or agreement with the other." Restatement of Restitution Sec. 76 comment b (1937).

A simple illustration of this rule is provided by Great American Ins. Co. v. United States, 575 F.2d 1031 (2d Cir.1978), in which an insurance company sought implied indemnity from the United States for a payment that the company made to an assured building owner. The owner's property was allegedly damaged by the negligence of U.S. marshals. Although the insurer was subrogated to the landlord's straight negligence claim, this cause of action accrued when the damage occurred and was barred by the statute of limitations; thus, it was necessary for the insurer to rely on an implied indemnity theory, which cause of action would have accrued upon payment to the assured. The court held that no claim for implied indemnity existed and that the insurer's only action was the subrogated claim for negligence, which was of course barred. Great American has recently been followed by the Seventh Circuit and by the Supreme Court of Rhode Island. Rock Island Bank v. Aetna Casualty & Surety Co., 692 F.2d 1100 (7th Cir.1982); Silva v. Home Indemnity Co., 416 A.2d 664 (R.I.1980).

The Great American result squares with the authorities, and it is a just result. The entity against whom indemnity is sought should not be stripped of its defenses to the subrogated claim by the unilateral act of the insurer in paying the injured party. In Great American, that defense was the statute of limitations; in this case it is Alyeska's comparative negligence, which Fluor could assert against any subrogated claim acquired by Creole when it settled with IRI, but which Fluor cannot assert in this action by Creole/Harbor for implied indemnity. ² Moreover, since the insurer's obligation to pay is due solely to its contract, it presumably received consideration for agreeing to bear the risk; allowing indemnity gives the insurer a windfall. Implied indemnity is not intended for such persons. As a general rule, "[t]he right to indemnity inures to a person who, without...