UNIQUE EQUIPMENT v. TRW VEHICLE SAFETY SYSTEMS

• Decision Date: 31 August 1999
• Docket Number: No. 1 CA-CV 98-0164.,1 CA-CV 98-0164.
• Citation: 3 P.3d 970,197 Ariz. 50
• Parties: UNIQUE EQUIPMENT CO., INC., an Arizona corporation, Third Party Plaintiff-Appellant, v. TRW VEHICLE SAFETY SYSTEMS, INC., a foreign corporation, Third Party Defendant-Appellee.
• Court: Arizona Court of Appeals

3 P.3d 970

197 Ariz. 50

UNIQUE EQUIPMENT CO., INC., an Arizona corporation, Third Party Plaintiff-Appellant, v. TRW VEHICLE SAFETY SYSTEMS, INC., a foreign corporation, Third Party Defendant-Appellee.

No. -0164.

Court of Appeals of Arizona, Division 1, Department E.

August 31, 1999.

As Corrected September 17, 1999.

Review Denied April 18, 2000.

Bess Kunz, A Professional Corporation by Donald R. Kunz and Donald J. Sapala, Phoenix, for Appellant.

Squire, Sanders & Dempsey, L.L.P. by Donald A. Wall, Julie A. Inderlied and Kevin J. Bonner, Phoenix, for Appellee.

OPINION

FIDEL, Presiding Judge.

¶ 1 In this appeal from the trial court's dismissal of Unique Equipment Co., Inc.'s third-party complaint against TRW Vehicle Safety Systems, Inc., we resolve two questions of first impression. When an employer has provided design specifications for the manufacture of equipment to be used exclusively by its employees, and an employee covered by workers' compensation brings a products liability suit against the manufacturer for damages attributed to a design defect in the equipment,

(1) Do the exclusive remedy provisions of Arizona's Workers' Compensation Act bar the manufacturer from seeking common-law indemnification from the employer?

(2) Is the manufacturer entitled to statutory indemnification from the employer pursuant to Arizona Revised Statutes Annotated ("A.R.S.") § 12-684?

BACKGROUND

¶ 2 Freda Dyse, an employee of TRW, was injured while working with an API inflator test cell that Unique manufactured in accordance with plans and specifications TRW provided. Ms. Dyse accepted workers' compensation benefits from TRW and brought a products liability action against Unique.

¶ 3 Unique filed a third-party complaint against TRW, alleging that, because any defect in the cell design arose from TRW's plans and specifications, TRW must indemnify Unique for any damages it might owe to Dyse. TRW moved to dismiss Unique's complaint on the ground that the exclusive remedy provisions of the Workers' Compensation Act bar Unique's indemnity claim.

¶ 4 From the trial court's judgment of dismissal, Unique timely appeals. Although the trial court styled its judgment a dismissal for failure to state a claim pursuant to Rule 12(b)(6), Arizona Rules of Civil Procedure, both parties submitted documents and argued facts outside the pleadings, and the record indicates that the trial court considered them.¹ Under these circumstances, TRW's motion should have been treated as one for summary judgment, and we review the trial court's order of dismissal as if it were a summary judgment. See Ariz. R. Civ. P. 12(b); Franzi v. Koedyker, 157 Ariz. 401, 407-08, 758 P.2d 1303, 1309-10 (App.1985).

¶ 5 On appeal from summary judgment, we view the evidence in the light most favorable to the party against whom judgment was entered, and determine de novo whether there are any genuine issues of material fact and whether the trial court erred in its application of the law. See Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App.1993). The essential facts are not disputed; the questions presented are purely ones of law.

COMMON LAW INDEMNITY

¶ 6 With exceptions not pertinent here, Arizona's Workers' Compensation Act provides that employers who comply with its provisions

shall not be liable for damages at common law or by statute, ... for injury or death of an employee ... but it shall be optional with employees to accept compensation as provided by this chapter or to reject the provisions of this chapter and retain the right to sue the employer as provided by law.

A.R.S. § 23-906 (1995); see also A.R.S. § 23-1022(A) (1995) (workers' compensation is the exclusive remedy for injury or death to a covered employee, subject to an exception for death or injury caused by the wilful misconduct of the employer or a co-employee); A.R.S. § 23-1024(A) (1995) (by accepting workers' compensation coverage, an employee waives the option of direct suit against the employer). The parties do not dispute that TRW complied with the provisions of the Act, that Freda Dyse accepted compensation under the Act, and that the Act bars Ms. Dyse from suing TRW for damages arising from her work-related injury. The parties debate whether the Act also precludes Unique's third-party claims against TRW.

¶ 7 Although A.R.S. § 23-906 provides that a compliant employer "shall not be liable for damages at common law," Unique argues that these words are limited by context to claims by employees who have accepted workers' compensation; according to Unique, a worker who elects workers' compensation coverage forfeits his or her own right to sue the employer, not the right of someone else to do so.

¶ 8 Unique correctly points out, for example, that an employer's contractual obligation to indemnify a third party sued by an injured employee is not abrogated by the exclusive remedy provisions of the Act. See Superior Cos. v. Kaiser Cement Corp., 152 Ariz. 575, 580, 733 P.2d 1158, 1163 (App.1986); Lechuga, Inc. v. Montgomery, 12 Ariz.App. 32, 36, 467 P.2d 256, 260 (1970). To be enforceable, however, a contract's indemnification provision must be express. See Superior, 152 Ariz. at 577, 733 P.2d at 1160. It is undisputed that the contract between TRW and Unique did not contain such a provision.

¶ 9 Unique argues, however, that implied contractual indemnity is no less compatible than express contractual indemnity with the exclusivity provisions of the Act. Because TRW provided the design plans and specifications and contractually obliged Unique to meet them, Unique argues that TRW should be subject to implied contractual indemnity for any damages resulting from a defect in its design.

¶ 10 Arizona courts have recognized various forms of common law indemnity, including implied contractual indemnity. See, e.g., INA Ins. Co. v. Valley Forge Ins. Co., 150 Ariz. 248, 722 P.2d 975 (App.1986); First Nat'l Bank v. Otis Elevator Co., 2 Ariz.App. 596, 411 P.2d 34 (1966). No Arizona appellate court, however, has yet decided whether an implied obligation to indemnify can survive the exclusivity provisions of the Workers' Compensation Act.

¶ 11 According to Professor Larson, most jurisdictions reject the implication of indemnity against an employer covered by the exclusivity provisions of a workers' compensation act. See 7 Larson's Workers' Compensation Law, ch. 14 § 76.71. But Unique responds that many such cases are distinguishable by reference to explicitly comprehensive statutory language. For example, in the District of Columbia, the relevant section of the D.C.Code provides that "the liability of an employer prescribed in § 36-303 shall be exclusive and in place of all liability of such employer to the employee, his legal representative, husband or wife, parents, dependents, next-of-kin, and anyone otherwise entitled to recover damages from such employer-at-law on account of such injury or death." D.C.Code Ann. § 36-304(a) (1997), construed in Myco, Inc. v. Super Concrete Co., 565 A.2d 293, 296 (D.C.App.1989) (emphasis added). Similarly, the New Mexico Supreme Court, in adopting the majority rule, construed a provision of the New Mexico Code providing that "any employer who has elected to and has complied with the provisions of this act, including the provisions relating to insurance, shall not be subject to any other liability whatsoever for the death of or personal injury to any employee, except as in this act provided." N.M. Stat. Ann. § 59-10-5 (1960) (current version at N.M. Stat. Ann. § 52-1-8 (1991)), construed in Royal Indemnity Co. v. Southern California Petroleum Corp., 67 N.M. 137, 353 P.2d 358, 360-61 (1960) (emphasis added). Unique argues that by comparison, the language of A.R.S. § 23-906 is far less comprehensive.

¶ 12 Our supreme court has recently rejected the assertion that Arizona's exclusivity provisions "encompass[] all common law remedies against the employer." Stoecker v. Brush Wellman, Inc., 194 Ariz. 448, 451, 984 P.2d 534, 537 (1999). Even tort claims "that do not fall within the scope of the workers' compensation act are not barred by its exclusivity provision[s]." Id. (citing Ford v. Revlon, Inc., 153 Ariz. 38, 734 P.2d 580 (1987) (action against employer for intentional infliction of emotional distress not barred), and Franks v. United States Fidelity & Guar. Co., 149 Ariz. 291, 718 P.2d 193 (App.1985) (action for bad faith against employer's compensation carrier not barred)). In our opinion, however, the present action does fall within the scope of the Act, for, even though it constitutes a third-party implied contractual indemnity claim against the employer, it arises from an accidental injury to a covered employee who was injured in the course and scope of her employment.

¶ 13 We are assisted in reaching our conclusion by a basic rule of statutory construction:

If ... statutes relate to the same subject or have the same general purpose-that is, statutes which are in pari materia-they should be read in connection with, or should be construed together with other related statutes, as though they constituted one law. As they must be construed as one system governed by one spirit and policy, the legislative intent therefor must be ascertained not alone from the literal meaning of the wording of the statutes but also from the view of the whole system of related statutes. This rule of construction applies even where the statutes were enacted at different times, and contain no reference one to the other, and it is immaterial that they are found in different chapters of the revised statutes.

State ex rel. Larson v. Farley, 106 Ariz. 119, 122, 471 P.2d 731, 734 (1970).

¶ 14 Applying the Larson v. Farley rule of harmonious construction, we find guidance for our decision in a portion of the Uniform Contribution Among Tortfeasors Act (UCATA), A.R.S. § 12-2501 et seq. (1994 & Supp.1998), that addresses claims against covered employers. Section 12-2501(F)(3...