Rossmoor Sanitation, Inc. v. Pylon, Inc.

• Decision Date: 28 February 1975
• Citation: 119 Cal.Rptr. 449,532 P.2d 97,13 Cal.3d 622
• Parties: , 532 P.2d 97 ROSSMOOR SANITATION, INC., Plaintiff and Respondent, v. PYLON, INC., Defendant and Appellant, United States Fire Insurance Company, Defendant, Cross-Complainant and Appellant, Insurance Company of North America, Cross-Defendant and Respondent. L.A. 30356. In Bank
• Court: California Supreme Court

Page 449

119 Cal.Rptr. 449

13 Cal.3d 622, 532 P.2d 97

ROSSMOOR SANITATION, INC., Plaintiff and Respondent, v. PYLON, INC., Defendant and Appellant United States Fire Insurance Company, Defendant, Cross-Complainant and Appellant Insurance Company of North America, Cross-Defendant and Respondent.

L.A. 30356.

Supreme Court of California,

In Bank.

Feb. 28, 1975.

Jarrett, Woodhead & Brandt, Frank W. Woodhead and Ellis J. Horvitz, Los Angeles, for defendant and appellant and for defendant, cross-complainant and appellant.

W. Mike McCray, Tustin, for plaintiff and respondent and for cross-defendant and respondent.

MOSK, Justice.

Pylon, Inc., (Pylon) and its insurance carrier, United States Fire Insurance Company (U.S. Fire), appeal from a judgment indemnifying Rossmoor Sanitation, Inc., (Rossmoor) for certain sums expended in satisfying a prior tort judgment, and finding Rossmoor's carrier, Insurance Company of North America (INA), not liable under an insurance policy. Appellants contend that Rossmoor was actively negligent as a matter of law, thus barring its recovery under an indemnity provision of a contract, and that INA should be liable for a portion of the loss. In addition they urge that the active-passive negligence test used in indemnification cases be modified. We conclude that the judgment was correct and should be affirmed.

Rossmoor employed Pylon to construct a sewage pump station and certain sewer lines at a cost of $88,000. The station was to be constructed in conformity with plans prepared by an engineering firm which Rossmoor retained. In the employment contract Pylon agreed to indemnify Rossmoor against all claims for damages arising out of the work and for attorney's fees and costs which might be incurred in the event of a damage suit. Pylon also agreed to obtain insurance for itself and to name Rossmoor in the policy as an additional insured. ¹

Pylon named Rossmoor as an additional insured under a policy issued by U.S. Fire. Rossmoor also had independent coverage under a policy previously issued by its own insurer, INA. Both policies contain 'other insurance' clauses; each such clause states that an apportionment shall be made if the insured has other insurance against a loss covered by the policy. ²

According to the construction plan, two parallel trenches were to be dug for the installation of sewer pipes. The day before the accident the first trench was excavated, a pipe was installed, and the trench was filled and compacted. The second trench was dug on the morning of the accident 18 inches from the original excavation. Two Pylon employees, Widman and Cagigas, entered the trench to work. Although shoring material was available, they proceeded into the trench without shoring it because doing so was easier and faster than waiting for supports to be put in place. A cave-in occurred, killing Cagigas and injuring Widman. In a tort action against Rossmoor prior to the case at bar, Widman and Cagigas' heirs recovered a judgment of approximately $267,000 after certain setoffs. The judgment, legal expenses, and court costs were satisfied by Rossmoor through its insurance carrier, INA. ³

Rossmoor then brought this declaratory action against both Pylon and U.S. Fire, seeking indemnity for the sums thus paid U.S. Fire cross-complained against INA, seeking an apportionment of the sums between the carriers pursuant to the 'other insurance' clauses. The case was tried before the same judge who had presided in the original tort suit, and transcripts from the prior action, the construction contract, and the applicable policies were admitted in evidence.

After reviewing the record, the court reasoned that inasmuch as the U.S. Fire policy was part of the consideration for the job, it provided primary coverage to Rossmoor; that the INA policy was merely excess; and that neither Pylon nor U.S. Fire was entitled to any benefits or setoffs by reason of the INA coverage. It further declared that the indemnity agreement was sufficiently explicit to cover the accident, and found that any negligence by Rossmoor in the events that led to the cave-in was merely of a 'passive' nature, i.e., in failing to discover that Pylon employees intended to enter an unshored trench. The court was also of the opinion that both INA and U.S. Fire were subrogated to the rights of their respective insureds, implying INA could benefit from Rossmoor's indemnity agreement. As a result, judgment was rendered in favor of Rossmoor and INA. Pylon and U.S. Fire now appeal.

Count I of Rossmoor's complaint seeking indemnification is based on the indemnity agreement with Pylon. Count II is based on the insurance policies. Rossmoor contends that because of the indemnity agreement and the U.S. Fire insurance policy Pylon is obligated to pay the entire damage judgment through its insurer, U.S. Fire. Appellants, on the other hand, contend that Rossmoor was actively negligent as a matter of law in the events that led to the cave-in and thus is barred from recovery under the indemnity agreement. They urge that liability be apportioned between U.S. Fire and INA. We proceed first to an examination of the indemnity agreement and then to a discussion fo the liability of the two insurance companies.

I

Indemnity may be defined as the obligation resting on one party to make good a loss or damage another party has incurred. (Sammer v. Ball (1970) 12 Cal.App.3d 607, 610, 91 Cal.Rptr. 121.) This obligation may be expressly provided for by contract (e.g., Markley v. Beagle (1967) 66 Cal.2d 951, 961, 59 Cal.Rptr. 809, 429 P.2d 129), it may be implied from a contract not specifically mentioning indemnity (see Cahill Bros., Inc. v. Clementina (1962) 208 Cal.App.2d 367, 375--379, 25 Cal.Rptr. 301), or it may arise from the equities of particular circumstances (S.F. Examiner Division v. Sweat (1967) 248 Cal.App.2d 493, 497, 56 Cal.Rptr. 711; see Note, Contribution and Indemnity in California (1969) 57 Cal.L.Rev. 490, 492--493). Where, as here, the parties have expressly contracted with respect to the duty to indemnify, the extent of that duty must be determined from the contract and not by reliance on the independent doctrine of equitable indemnity. (Markley v. Beagle, supra, 66 Cal.2d at p. 961, 59 Cal.Rptr. 809, 429 P.2d 129.)

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 CalRptr. 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 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 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.)

Provisions purporting to hold an owner harmless 'in any suit at law' (Markley v. Beagle, supra, 66 Cal.2d 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. at p. 15, 493 P.2d at p. 479), 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.

In the case at bar there is an express contractual agreement requiring Pylon to indemnify Rossmoor against 'all claims for damages' arising out of Pylon's work; Rossmoor is not to be held accountable 'for any loss . . . or for injury to any person . . ..' Since the agreement does not state what effect Rossmoor's negligence will have on Pylon's obligation to indemnify, the clause is a 'general' indemnity provision, and under existing case law Rossmoor may not benefit from the agreement if it is deemed actively negligent as Pylon and U.S. Fire claim. The trial court has found, however, that Rossmoor was at most passively negligent. We are not persuaded that this determination was erroneous.

Passive negligence is found in mere nonfeasance, such as the failure to discover a dangerous condition or to perform a duty imposed by law. (Markley v. Beagle, supra, 66 Cal.2d at p. 962, 59 Cal.Rptr. 809, 429 P.2d 129; Morgan v. Stubblefield, supra, 6 Cal.3d at pp. 624--625, 100 Cal.Rptr. 1, 493 P.2d 465; see also Cahill Bros., Inc. v. Clementina, supra, 208 Cal.App.2d at p. 382, 25 Cal.Rptr. 301.) Active negligence, on the other hand, is found if an indemnitee has personally participated in an affirmative act of negligence, was connected with negligent acts or omissions by knowledge or acquiescence, or has failed to perform a precise duty which the indemnitee had agreed to perform. (See Morgan v. Stubblefield, supra, 6 Cal.3d at p. 625, 100 Cal.Rptr. 1, 493 P.2d 465, and Cahill Bros., Inc. v. Clementina, supra, 208 Cal.App.2d at p. 382, 25 Cal,. rptr. 301.) 'The crux of the inquiry is to determine whether there is participation in some manner by the person seeking indemnity in the conduct or omission which caused the injury beyond the mere failure to perform a duty imposed upon him by law.' (Morgan v. Stubblefield, supra, 6 Cal.3d at p. 625, 100 Cal.Rptr. at p. 14, 493 P.2d at p. 478.)

Whether conduct constitutes active or passive negligence depends upon the circumstances of a given case and is ordinarily a question for...