Public Service Co. of Colorado v. United Cable Television of Jeffco, Inc., 89CA1254

• Decision Date: 14 February 1991
• Docket Number: No. 89CA1254,89CA1254
• Citation: 816 P.2d 289
• Parties: PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation, Plaintiff-Appellant and Cross-Appellee, v. UNITED CABLE TELEVISION OF JEFFCO, INC., a Colorado corporation, Defendant-Appellee and Cross-Appellant. . II
• Court: Colorado Court of Appeals

Page 289

816 P.2d 289

PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation, Plaintiff-Appellant and Cross-Appellee, v. UNITED CABLE TELEVISION OF JEFFCO, INC., a Colorado

corporation, Defendant-Appellee and Cross-Appellant.

No. 89CA1254.

Colorado Court of Appeals,

Div. II.

Feb. 14, 1991.

As Modified on Denial of Rehearing March 28, 1991.

Cross Petition for Certiorari Granted Sept. 3, 1991.

Petition for Writ of Certiorari Denied Sept. 3, 1991.

Kelly, Stansfield & O'Donnell, Timothy J. Flanagan, Brent L. Backes, Denver, James R. McCotter, Sr. Vice-President and General Counsel, Denver, for plaintiff-appellant and cross-appellee.

Greengard Senter Goldfarb & Rice, William L. Senter, Floyd M. Youngblood, Denver, for defendant-appellee and cross-appellant.

Opinion by Judge DUBOFSKY.

In this action for indemnification, plaintiff, Public Service Co. (PSC), appeals the trial court's dismissal of its indemnity claim against defendants, United Cable Television of Jeffco, Inc. (United) and Community TCI of Colorado, Inc. (TCI) (collectively licensees). Licensees cross-appeal the trial court's determination that the Workers' Compensation Act (Act), particularly the provision now codified as § 8-42-102, C.R.S. (1990 Cum.Supp.), does not preclude this indemnification action. We affirm in part and reverse in part.

PSC entered into a pole license agreement with TCI in 1982, which was later assigned to United, permitting licensees to place their television cables on PSC's utility poles. The agreement contained an indemnity provision which states:

"Licensee shall indemnify and save and hold harmless Electric Company [PSC] and third parties using electric company poles from and against all claims, liabilities, causes of action, or other legal proceedings by third parties for damage to property, violation of occupancy agreements or conditions, or injury or death of any person or persons in any way arising out of, connected with or resulting from the exercise by licensee of the rights granted to it hereunder, the existence or operation of Licensee's facilities and any other use of Electric Company's poles or facilities by Licensee, its employees, agents or contractors, including, but not limited to, any claims by Licensee's subscribers for lack of or interruption of service. Indemnity shall include Licensee's obligation to defend any and all such actions, claims or other legal proceedings and to reimburse Electric Company and third parties using Electric Company poles for all expenses, including attorney fees, incurred in connection therewith." (emphasis added)

In 1984, United hired Montgomery Line Construction Company (Montgomery) to remove television cables attached to PSC poles. Montgomery's employee, Lawrence Rose, was injured when he cut a cable and the pole on which he was standing broke and fell to the ground. He subsequently sued PSC claiming that the pole had not been properly maintained. Although PSC had a nondelegable duty of care with regard to its utility poles, it had entered into a contract with Osmose Wood Preserving, Inc. (Osmose) for Osmose to maintain and inspect its poles. PSC claimed at trial that Rose's injuries were not caused by its failure properly to inspect or maintain the pole, but were the direct result of Rose's unsafe practices when removing the television cables.

The jury returned a verdict for Rose, attributing 15 percent negligence to him and 85 percent negligence to PSC. Six days after the jury verdict, PSC sought to be indemnified by United under the above-quoted provision for the amount of the judgment plus attorney fees. PSC later settled with Rose for a lesser amount and paid the claim.

At the trial for indemnification, the court concluded that PSC was bound by the jury's finding of negligence in the Rose litigation and further ruled that PSC could not recover for its own negligence under the indemnity provision. The court also concluded that PSC would be entitled to indemnification by United for Rose's negligence, but that PSC had waived its right to do so by intentionally failing to notify United of the pending Rose litigation. Furthermore, the court found that an action for indemnification by PSC was not precluded by § 8-42-102 of the Act.

I.

We initially address United's cross-appeal, in which it claims the trial court erred in determining that the Workers' Compensation Act, § 8-40-101, et seq., C.R.S. (1990 Cum.Supp.), does not preclude PSC from seeking indemnification from United. We perceive no error in the court's ruling.

United is a statutory employer under the statute now codified as § 8-48-101, C.R.S. (1990 Cum.Supp.). The Act specifically precludes a tortfeasor from maintaining a third-party action for indemnity against a statutory employer. Here, however, PSC and United entered into an express contractual agreement for indemnification. Thus, the question becomes whether such a contract remains valid in light of the statutory provision.

The Act was passed to provide a speedy and just method of compensating employees for job related injuries without regard to the fault of either the employee or the employer. Section 8-40-102, C.R.S. (1990 Cum.Supp.); Frohlick Crane Service, Inc. v. Mack, 182 Colo. 34, 510 P.2d 891 (1973). Employers who participate in the Workers' Compensation Program gain immunity from lawsuits by injured employees and, in most instances, from third-parties who are liable to the employee but also claim a right of indemnity against the employer. Hilzer v. MacDonald, 169 Colo. 230, 454 P.2d 928 (1969).

Further, the immunity of employers under the Act extends to actions based on common law indemnity claims. Public Service Co. v. District Court, 638 P.2d 772 (Colo.1981). A common law indemnity claim is one without an express contractual provision and typically is based on concepts of active/passive negligence. Vickery v. Reliable Electric Co., 703 F.2d 488 (10th Cir.1983). However, the employer immunity provisions of §§ 8-42-101 and 8-42-102, C.R.S. (1990 Cum.Supp.) have not yet been construed in relationship to an express contractual agreement for indemnity.

A majority of jurisdictions have decided an express contractual agreement is valid between a third-party and an employer who would otherwise be immune under a workers' compensation statute. See Rucker Co. v. M & P Drilling Co., 653 P.2d 1239 (Okla.1982); City of Artesia v. Carter, 94 N.M. 311, 610 P.2d 198 (1980); Olsen v. Shell Oil Co., 595 F.2d 1099 (5th Cir.1979); DeShaw v. Johnson, 155 Mont. 355, 472 P.2d 298 (1970); Titan Steel Corp. v. Walton, 365 F.2d 542 (10th Cir.1966); but see Young v. Mobil Oil Corp., 85 Or.App. 64, 735 P.2d 654 (1987); Paul Krebs & Associates v. Matthews & Fritts Construction Co., 356 So.2d 638 (Ala.1978) (allowing contractual indemnity recovery "would be to allow indirectly what is prohibited directly").

2B A. Larson, Workmen's Compensation Law § 76.42 (1989) states:

"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."

The decisions upholding express indemnity agreements rely, in part, on the employer's freedom of contract rights and his right to waive statutory protections. In City of Artesia v. Carter, supra, the court stated:

"Enforcing express contracts of indemnity is no more than enforcing the loss distribution agreed to by the contracting parties.... This arrangement to distribute the loss does not offend any policy concerned with securing the payment of workmen's compensation; the compensation payable is not affected by the indemnity agreement. This arrangement does not depart from the policy of limiting the employer's liability; that policy remains intact. All that is involved is the employer's departure from the policy. If the employer desires to voluntarily relinquish his statutory protection, he may do so .... [S]uch a relinquishment is consistent with the policy favoring the right to contract." (emphasis added)

The language limiting claims against employers under the Colorado Act is similar to the language found in the statutes in other jurisdictions which validate express indemnity agreements between an employer and third-parties. See DeShaw v. Johnson, supra; Holly Sugar Corp. v. Union Supply Co., 194 Colo. 316, 572 P.2d 148 (1977) (Colorado Workers' Compensation Act is "nearly identical to the Montana Act"); City of Artesia v. Carter, supra.

We, therefore, agree with the majority rule and conclude that the trial court was correct in determining that the Act did not immunize United from a claim based on an express indemnity agreement.

II.

In its appeal, PSC argues that the trial court erred in concluding that, under Williams v. White Mountain Construction, Co., 749 P.2d 423 (Colo.1988), the indemnity agreement between PSC and United is ambiguous and unenforceable. Since we also conclude that the agreement is unenforceable on its face, we agree with the conclusion of the trial court.

In Williams, a subcontractor dug a trench according to express directions from the contractor's superintendent. The subcontractor advised the superintendent of the hazards of digging the trench in accordance with his instructions and the superintendent replied, "Don't worry about it--we will take care of it if anything happens." Williams, an employee of the contractor, was seriously injured when the trench collapsed. Williams received workers' compensation benefits which precluded a tort action by him against his employer. He did, however, file suit against the subcontractor alleging that his injuries were caused by its negligence.

The subcontractor, relying on the oral statement of the contractor's superintendent, filed a third-party complaint against the contractor for indemnification. The Williams court ruled that no indemnification contract had been...