Snohomish Cnty. Pub. Transp. Benefit Area Corp. v. FirstGroup Am., Inc.

• Decision Date: 23 February 2012
• Docket Number: No. 83795–3.,83795–3.
• Court: Washington Supreme Court
• Parties: SNOHOMISH COUNTY PUBLIC TRANSPORTATION BENEFIT AREA CORPORATION, dba Community Transit, Petitioner, v. FIRSTGROUP AMERICA, INC., dba First Transit, a foreign corporation, Respondent.

173 Wash.2d 829

271 P.3d 850

SNOHOMISH COUNTY PUBLIC TRANSPORTATION BENEFIT AREA CORPORATION, dba Community Transit, Petitioner,

v.FIRSTGROUP AMERICA, INC., dba First Transit, a foreign corporation, Respondent.

No. 83795–3.

Supreme Court of Washington, En Banc.

Argued Nov. 9, 2010.

Decided Feb. 23, 2012.

Joseph Patrick Bennett, Matthew R. Hendricks, Hendricks Bennett PLLC, Edmonds, WA, for Petitioner.

John Woodruff Rankin Jr., Pamela A. Okano, Reed McClure, Seattle, WA, for Respondent.

MADSEN, C.J.

¶ 1 We are asked to determine whether the parties' indemnity agreement clearly and unequivocally indemnifies the Snohomish County Public Transportation Benefit Area Corporation, doing business as Community Transit (Community Transit), for losses resulting from its own negligence. We conclude that the language of the agreement, and in particular language providing that indemnity would not be triggered if losses resulted from the sole negligence of Community Transit, clearly and unequivocally evidences the parties' intent that the indemnitor, FirstGroup America, Inc., doing business as First Transit (First Transit), indemnify Community Transit for losses that resulted from Community Transit's own, but less than sole, negligence. We thus join the majority of courts deciding this issue.

¶ 2 We reverse the Court of Appeals' decision to the contrary and remand this matter to the trial court for further proceedings.

FACTS

¶ 3 In 2002, Community Transit entered into a service contract with Coach USA Transit to provide commuter bus service for Community Transit. The contract incorporated an indemnity provision stating:

"The Contractor shall defend, indemnify and save harmless Community Transit ... from any and every claim and risk, including, but not limited to, suits or proceedings for bodily injuries ..., and all losses, damages, demands, suits, judgments and attorney fees, and other expenses of any kind, on account of all personal bodily injuries ..., property damages of any kind, ... in connection with the work performed under this contract, or caused or occasioned in whole or in part by reason of the presence of the Contractor or its subcontractors, or their property, employees or agents, upon or in proximity to the property of Community Transit, ... except only for those losses resulting solely from the negligence of Community Transit, its officers, employees and agents. "

Clerk's Papers (CP) at 14, 152 (emphasis added) (quoting Request for Proposal # 19–01 § 3.54 (Sept. 13, 2001)). Coach USA Transit later assigned its interests, rights, obligations, and duties under the contract to First Transit.

¶ 4 Pursuant to the parties' contract, First Transit provided commuter services between Snohomish County and parts of King County. On February 24, 2004, during afternoon rush hour, a multiple vehicle accident occurred on Interstate 5 when a driver of a Toyota Corolla braked quickly and the driver of the second car behind it, a Honda Accord, was unable to stop in time and struck the car immediately behind the Corolla, pushing the Corolla into the oncoming high occupancy vehicle lane where it was struck by a First Transit bus. A Community Transit bus traveling immediately behind the First Transit bus then rear-ended the First Transit bus.

¶ 5 Community Transit tendered 42 claims for damages resulting from the accident to First Transit, which refused to defend, indemnify, or hold Community Transit harmless from the claims. Community Transit settled the claims and sued First Transit for indemnification.

¶ 6 Both parties moved for summary judgment. The parties stipulated to facts for purposes of their cross motions for summary judgment, including the facts above. In addition, the parties stipulated that the accident was caused by the shared negligence of the driver of the Honda Accord and the driver of the Community Transit bus and Community Transit is responsible for the negligence of its driver under respondeat superior, that neither First Transit nor the driver of the First Transit bus was negligent, and that the accident did not result from the sole negligence of Community Transit. The trial court granted summary judgment in favor of First Transit. In an unpublished opinion, the Court of Appeals affirmed summary judgment. Snohomish County Pub. Transp. Benefit Area Corp. v. FirstGroup Am., Inc., noted at 152 Wash.App. 1021, 2009 WL 3018749, review granted, 168 Wash.2d 1011, 227 P.3d 852 (2010). We granted First Transit's petition for discretionary review and now reverse.

ANALYSIS

¶ 7 The central issue in this case is whether the indemnity agreement between Community Transit and First Transit clearly and unequivocally shows the parties' intent that First Transit would be required to indemnify Community Transit for losses resulting from Community Transit's own negligence. Although we have not previously encountered the specific language of the present contract, we have established the governing principles.

¶ 8 This matter is here following grant of summary judgment. There are no material disputed facts, and accordingly the propriety of the summary judgment is a question of law that we review de novo. Further, where facts are undisputed and there is no extrinsic evidence presented on the issue, the meaning of a contract may be decided as a matter of law. Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash.2d 411, 424, 191 P.3d 866 (2008) ; see also Tanner Elec. Coop. v. Puget Sound Power & Light Co., 128 Wash.2d 656, 674, 911 P.2d 1301 (1996).

¶ 9 A party may contractually indemnify against loss that results from the party's own negligence unless prohibited from doing so by statute or public policy.

Nw. Airlines v. Hughes Air Corp., 104 Wash.2d 152, 155, 702 P.2d 1192 (1985). This is a specific application of the general rule that "[u]nder the principle of freedom to contract, parties are free to enter into, and courts are generally willing to enforce, contracts that do not contravene public policy." Keystone Land & Dev. Co. v. Xerox Corp., 152 Wash.2d 171, 176, 94 P.3d 945 (2004). "[T]he mere existence of an indemnification clause attempting to indemnify the indemnitee from its own negligence" has "never been found to be against public policy." Nw. Airlines, 104 Wash.2d at 156, 702 P.2d 1192. Even when an agreement indemnifies against sole negligence our "rules do not say that indemnification clauses are void as against public policy or that, as a matter of law, an indemnitor cannot be held responsible for an indemnitee's sole negligence." Id. at 158, 702 P.2d 1192. Rather, the only time that public policy has barred indemnification of the indemnitee in this state is when the legislature has declared in specified circumstances that indemnification for the indemnitee's sole negligence is against public policy, as it did in RCW 4.24.115, which does not apply in this case.¹

¶ 10 Generally speaking, indemnity agreements to indemnify against claims and losses resulting from the indemnitee's own negligence are enforceable contracts, and we have "long preferred to enforce indemnity agreements as executed by the parties." McDowell v. Austin Co., 105 Wash.2d 48, 53–54, 710 P.2d 192 (1985).

" ‘Contracts of indemnity ... must receive a reasonable construction so as to carry out, rather than defeat, the purpose for which they were executed. To this end they should neither, on the one hand, be so narrowly or technically interpreted as to frustrate their obvious design, nor, on the other hand, so loosely or inartificially as to relieve the obligor from a liability within the scope or spirit of their terms.’ "

Id. (quoting Union Pac. R.R. v. Ross Transfer Co., 64 Wash.2d 486, 488, 392 P.2d 450 (1964) (quoting 27 AM.JUR. Indemnity § 13, at 462 (1940) )). In short, indemnification agreements are to be interpreted in the same way as other contracts. Jones v. Strom Constr. Co., 84 Wash.2d 518, 520, 527 P.2d 1115 (1974). For example, when we held that an express contractual agreement to indemnify prevails over the " ‘borrowed servant’ " tort defense, we noted that any other result "would frustrate the reasonable expectations of the contracting parties and thus interfere with their freedom to contract." Stocker v. Shell Oil Co., 105 Wash.2d 546, 549–50, 716 P.2d 306 (1986).

¶ 11 We have recognized that "[p]arties rely on indemnity agreements for allocating the responsibility to purchase insurance when a construction project is initiated" and it "is not for this court to frustrate such a planning device." McDowell, 105 Wash.2d at 54, 710 P.2d 192; see also Riggle v. Allied Chem. Corp., 180 W.Va. 561, 568, 378 S.E.2d 282 (1989).

¶ 12 Nevertheless, we have also recognized that agreements that "purport to exculpate an indemnitee from liability for losses flowing solely from his own acts or omissions are not favored and are to be clearly drawn and strictly construed, with any doubts therein to be settled in favor of the indemnitor." Jones, 84 Wash.2d at 520, 527 P.2d 1115. Accordingly, as do many other states, we apply the "general rule that a contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from his own negligence unless this intention is expressed in clear and unequivocal terms." Nw. Airlines, 104 Wash.2d at 154–55, 702 P.2d 1192. The primary purpose of this strict standard is to assure that the parties truly intended to indemnify for the indemnitee's negligence.²

¶ 13 Under this standard, we will not find clear and unequivocal intent in broad and all-encompassing contract language that does not include specific language showing clear and unequivocal intent to indemnify the indemnitee's own negligence. Nw. Airlines, 104 Wash.2d at 155, 702 P.2d 1192. But formulaic language expressly stating that "X indemnifies Y for Y's own negligence" is not mandatory either, and in cases where we have enforced agreements for indemnification in the event of the indemnitee's own negligence, such precise language was not...