Manson-Osberg Co. v. State

Citation552 P.2d 654
Decision Date19 July 1976
Docket NumberMANSON-OSBERG,No. 1839,1839
PartiesCOMPANY, Appellant, v. STATE of Alaska, Appellee.
CourtSupreme Court of Alaska (US)

Robert L. Eastaugh, of Delaney, Wiles, Moore, Hayes & Reitman, Inc., Anchorage, for appellant.

Sanford M. Gibbs, of Hagans, Smith & Brown, Anchorage, for appellee.

Before RABINOWITZ, C. J., and CONNOR, ERWIN, BOOCHEVER and BURKE, JJ.

CONNOR, Justice.

OPINION

This case concerns the effectiveness of express indemnity clauses in construction contracts.

On March 28, 1967, ironworker Steven G. Weber was operating a jack from a small, unrailed scaffold suspended below the Tanana Bridge project about 40 feet above the Tanana River. His employer, Manson-Osberg Company was constructing the bridge as contractor for the State of Alaska. Manson-Osberg did not provide safety nets, tie lines or other safety equipment. Weber's improvised, non-locking jack handle extension suddenly came loose as he worked, pitching him over the edge of the unrailed scaffold to his death below.

Manson-Osberg was required under its construction contract with the state to provide all safety devices necessary on the job. The State Department of Highways had assigned an engineering inspection party to live at the project to ensure that the bridge was built to specifications, but the details of the work were directed and controlled by Manson-Osberg employees. 1

Weber's estate sued the State of Alaska for wrongful death, based on theories of both vicarious and independent liability for negligence. The state claimed indemnity from Manson-Osberg under the construction contract 'save harmless' provision, and tendered the defense to Manson-Osberg. Manson-Osberg denied liability under the indemnity clause and rejected the tendered defense.

On a motion for summary judgment, the state was held not to be vicariously liable to Weber's estate for the acts of Manson-Osberg. One question of direct liability was preserved for trial: Whether the state's retained control of the work was sufficient to impose on it a duty to supervise Manson-Osberg's activities. 2 By applying this theory of liability for independent negligence, the trial court found the state liable in damages to Weber's estate in the sum of $202,714.69, including interest and attorney fees. The validity of that judgment is before this court in two other appeals.

On a motion for summary judgment on the third-party complaint, the trial court found Manson-Osberg liable to the state under the indemnity clause for the judgment rendered in favor of Weber's estate and against the state, together with costs and attorney's fees in that action. The indemnity provision provides:

'Responsibility for Damage Claims. The contractor shall save harmless the government and all of its representatives from all suits, actions, or claims of any character brought on account of any injuries or damages sustained by any person or property in consequence of any neglect in safeguarding the work, or through the use of unacceptable materials in the construction of the improvement, or on account of any act or omission by the said contractor or his employees, or from any claims or amounts arising or recovered under the workmen's compensation laws or any other law, bylaw, ordinance, regulation, order, or decree. During the prosecution of the work the contractor shall be responsible for all damage or injury to any person or property of any character resulting from any act, omission, neglect or misconduct in the manner or method of executing said work satisfactorily, or due to the non-execution of said work at any time, or due to defective work or materials, and said responsibility shall continue until the date of final inspection provided in Art. 5.6'

The court reasoned that Weber's death arose because of 'neglect in safeguarding the work.'

'Specifically, the State's duty, which I found to have been breached, was a duty to discover Manson-Osberg's failure to carry out its contractual provision to safeguard the work and to exercise reasonable care to compel Manson-Osberg to carry out its contractual responsibilities. It is undisputed that as between the State and Manson-Osberg, Manson-Osberg had the sole responsibility for safeguarding the work. Thus, Morris' claim clearly was one within the indemnity provision. . . .' 3

The court further awarded the state 'actual attorney's fees' of $3,636.50 as the prevailing party in the third-party indemnity claim against Manson-Osberg.

Both the indemnity award and the award of 'actual attorney's fees' are on appeal in the case at bar.

Effect of the Workmen's Compensation Act

We must first consider Manson-Osberg's contention that the exclusive liability provision of the Alaska Workmen's Compensation Act renders the indemnity contract invalid. AS 23.30.055 provides in part:

'The liability of an employer (for workmen's compensation) is exclusive and in place of all other liability of the employer . . . to the employee . . . and anyone otherwise entitled to recover damages from the employer . . . at law or in admiralty on account of the injury or death.' (Emphasis added.)

'The clearest exception to the exclusive-liability clause is the third party's right to enforce an express contract in which the employer agrees to indemnify the third party for the very kind of loss that the third party has been made to pay to the employee.' 2 A. Larson, Workmen's Compensation Law § 76.40, at 14-324 (1975).

In Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956) (action in admiralty, now abolished by 33 U.S.C. § 905(b) (1972)), the United States Supreme Court implied an indemnity provision in a stevedore's contract. It permitted a third party ship-owner to receive indemnity from a stevedore-employer for damages obtained by the stevedore's employee from the shipowner on a strict liability theory. The stevedore argued that a provision in the Longshoremen's and Harbor Worker's Compensation Act similar in wording to Alaska's exclusive liability section prevented liability, but the Supreme Court disagreed.

'The Act nowhere expressly excludes or limits a shipowner's right, as a third person, to insure itself against such a liability either by a bond of indemnity, or the contractor's own agreement to save the shipowner harmless. . . . In the face of a formal bond of indemnity this statute clearly does not cut off a shipowner's right to recover from a bonding company. . . . Such a liability springs from an independent contractual right. It is not an action . . . to recover damages 'on account of' an employee's 'injury or death." (350 U.S. at 130, 76 S.Ct. at 235.) 4

This policy decision has been widely followed.

'Invariably, when a contractual right of indemnity is the basis of the cause of action, the courts permit recovery by a third party from an injured workman's employer simply because the cause of action arises out of an independently created contractual right which is totally independent of the exclusive jurisdiction provisions of the workmen's compensation act, so long as the compensation act itself does not prohibit such agreements.' (Emphasis in original.) Tucci & Sons, Inc. v. Carl T. Madsen, Inc., 1 Wash.App. 1035, 467 P.2d 386, 389-90 (1970); see generally 2 A. Larson, Workmen's Compensation Law § 76.41 & n. 37 (1975).

Manson-Osberg cites Gulf Oil Corp. v. Rota-Cone Field Operating Co., 84 N.M. 483, 505 P.2d 78 (1972). In light of a strong New Mexico policy, based on statutory language and prior judicial dicta that, besides workmen's compensation, employers 'shall not be subject to any other liability whatsoever for the death of . . . any employee', 5 the court refused to enforce an express indemnity contract clause against an employer.

The Alaska statutory language, '. . . in place of all other liability . . .,' does not seem to evidence as strong a policy as does the New Mexico language quoted above. While we reserved the question of express contract indemnity in Golden Valley Elec. Ass'n v. City Elec. Serv., Inc., 518 P.2d 65 (Alaska 1974), we suggested that an express indemnity provision could survive under AS 23.30.055 (518 P.2d at 67, 69). 6 We now hold that an express indemnity clause will be enforceable, despite workmen's compensation exclusive liability as contained in AS 23.30.055. We adhere, however, to our earlier decision in Golden Valley, supra, that implied contractual indemnity is precluded by AS 23.30.055.

Interpretation of the Indemnity Agreement

We find the language of the indemnity agreement sufficiently broad to cover this situation. We agree with the trial court that 'any neglect in safeguarding the work' indicates a desire on the part of the parties to contract as to the liability involved in this case. The contract unambiguously makes Manson-Osberg responsible for paying any damages resulting from such neglect, via indemnity. 7

The better rule in modern cases is that the unambiguous language of an indemnity clause as 'reasonably construed' should be given effect, even if it does not contain words specifying indemnity for the indemnitee's own negligence. See Northwest Airlines, Inc. v. Alaska Airlines, Inc., 351 F.2d 253, 256 (9th Cir. 1965); see also United States v. Seckinger, 397 U.S. 203, 213 n. 17, 90 S.Ct. 880, 25 L.Ed.2d 224 (1970); Smith v. United States, 497 F.2d 500, 507-09 (5th Cir. 1974); Levine v. Shell Oil Co., 28 N.Y.2d 205, 321 N.Y.S.2d 81, 269 N.E.2d 799 (1971). 8 In modern commerce, indemnity clauses are no longer so unusual as to require such specific mention of the indemnitee's conduct as being within the scope of the indemnifying obligation. Jacksonville Terminal Co. v. Railway Express Agency, Inc., 296 F.2d 256, 262 (5th Cir. 1961). 9

A majority of jurisdictions have rejected the old view that indemnity clauses for an indemnitee's own negligence are unenforceable because they are against public policy. Jacksonville Terminal Co. v. Railway Express Agency,...

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