Transcript MY FAULT, YOUR PROBLEM: RISK TRANSFER, INDEMNIFICATION

MY FAULT, YOUR PROBLEM:
RISK TRANSFER,
INDEMNIFICATION AGREEMENTS, AND
ADDITIONAL INSURED PROVISIONS
Brigid Q. Alford, Esquire
Marshall Dennehey Warner Coleman & Goggin
Shareholder
100 Corporate Center Drive
Suite 201
Camp Hill, PA 17011
(717) 651-3710
(717) 651-3707 - Fax
[email protected]
Christopher M. Reeser, Esquire
Marshall Dennehey Warner Coleman & Goggin
Shareholder
100 Corporate Center Drive
Suite 201
Camp Hill, PA 17011
(717) 651-3509
(717) 651-3707 – Fax
[email protected]
Molettier v. CVS,
Unreported Superior Court Decision
 Slip and fall on ice in a CVS parking lot
 CVS had a contract with Campenelli Landscaping for snow and
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ice removal
Campenelli had a subcontract with Cenova
Cenova had a subcontract with George Allen & Sons
Case went to verdict – Plaintiff awarded $250,000
85% attributable to CVS
15% attributable to Cenova
CVS Filed Post-Trial Motions
 CVS cited its subcontract with Campenelli and Cenova
 Cenova agrees to indemnify, hold harmless and defend CVS
and Campenelli against all liability arising from the acts or
omissions of Cenova, its agents or snow plow and/or ice
removal contractors engaged to remove snow and ice from the
properties owned or leased by CVS
 On post-trial motions, the court agrees that Cenova has to
indemnify CVS and pay the entire verdict, plus $89,000 of
attorney's costs and fees
Superior Court On Appeal
 Evaluates under the Perry-Ruzzi Rule
 Perry v. Payne, 66 A.2d 553 (Pa. 1907)
 Ruzzi v. Butler Petroleum, 588 A.2d 1 (Pa. 1991)
 Critical of the words "any and all liability" - words of general
import
 "Any and all liability" - not clear enough
Superior Court Analysis
 CVS argued it should be indemnified even if 99% at fault
 Cenova said clause protects CVS to be indemnified for
comparative fault of another party
 Superior Court said clause not clear enough
 CVS is the drafter so it is construed against them
 Clause is not clear and unequivocal that the intent was to
require Cenova to indemnify CVS and therefore, trial court was
reversed
Lesson
 Language of indemnification clauses must be specific
 If a party is seeking indemnification for its own negligence, the
agreement must specifically say that
 If your insured is in the position of CVS – do not expect to close
your file
 If your insured is in the position of Cenova – you have a basis to
deny the tender
 Solution – educate insureds on the front-end about proper
indemnification language
Sufficiently Specific Indemnification Clauses
 Woodburn v. Consolidation Coal Co., 590 A.2d 1273 (Pa. Super.
1991)
 Agreement to indemnify a party as to all claims except those in
which the indemnified party is "solely negligent" is sufficiently
specific
 If CVS' contract called for indemnification unless it was 100%
liable, then Cenova would have had to fully indemnify CVS
Hershey Foods Corp. v. General Electric
Service Co., 619 A.2d 285 (Pa. Super 1992)
 Party seeking indemnification indemnified for any claim
"regardless of whether or not it is caused in part by a party
indemnified hereunder."
Pass Through Indemnification Provisions Bernados v. SuperFresh, 863 A.2d 478 (Pa. 2004)
 Common in construction cases
 Mrs. Bernados injured at a construction site inside of a
SuperFresh
 General contractor for the project is Acciavati Associates
 Goldsmith Associates is the subcontractor
 SuperFresh had a contract with the general contractor to
indemnify SuperFresh for all incidents except where SuperFresh
was solely negligent – valid provision
Pass Through Indemnification Provisions Bernados v. SuperFresh, 863 A.2d 478 (Pa. 2004)
 General Contractor (Acciavati) Had "Pass-Through"
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Indemnification Agreement
The parties settled with the Plaintiff for $200,000 and agreed to
each pay a third
The parties agreed to litigate who was responsible under the
indemnification agreements
Trial Court held SuperFresh was not solely negligent
General contractor had to indemnify SuperFresh
Subcontractor had to pay remaining one-third
Superior Court Appeal
 The Superior Court decided that the language of the pass-
through provision between the general contractor and the
subcontractor applied
 General contractor was required to indemnify SuperFresh under
their agreement
 General contractor's liability passed through to subcontractor
who was responsible for the entire $200,000
 Subcontractor appeals to the Supreme Court
Supreme Court Analysis
 Subcontractor (Goldsmith) agrees to perform and assume all
obligations and liabilities of general contractor (Acciavati) under the
general contract for the work
 Subcontractor hereby releases general contractor and SuperFresh
from any and all claims . . . for personal injury. . . arising out of any
matter occurring at location of the work . . . and further, subcontractor
agrees to indemnify and hold harmless general contractor and
SuperFresh . . . from and against any claim, loss, damage, liability or
expense . . . occurring to any property or for personal injury . . . as
may result or arise from the performance, lack of performance, or
improper performance of the work whether such matter may arise or
occur on the location of the work . . .
Supreme Court Holding
 The Supreme Court held the agreement did not clearly express
the parties' intentions regarding the issue of indemnification
 "Pass-through provisions" involve indemnification for acts of
another party's negligence
 Contract language must be clear and specific
Supreme Court Holding
 The Supreme Court held that the agreement could mean
subcontractor would indemnify general contractor only in the
event of Goldsmith's negligence
 Since the agreement was not clear, it was not entered
Indemnification for Non-Negligent Parties - Mace v.
Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001)
 Case arises out of an incident at an A-Plus convenience store in
Philadelphia
 A-Plus franchise had an agreement with Atlantic Refining that it
would defend Atlantic from all claims arising out of the operation
of the store except any damage or loss caused solely by Atlantic
Indemnification for Non-Negligent Parties - Mace v.
Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001)
 Incident on the property results in a customer lawsuit
 Atlantic tendered to the franchisee
 Franchisee denies the tender on the basis that there may be
independent negligence
 Atlantic files a Motion for Summary Judgment which is granted
Indemnification for Non-Negligent Parties - Mace v.
Atlantic Refining & Marketing Corp., 785 A.2d 491 (Pa. 2001)
 Perry-Ruzzi Rule found to be inapplicable to post-trial claim for
indemnification for defense costs
 Party seeking indemnification had been adjudicated a nonnegligent party
Lesson from the Case
 Even if a defense tender can be rejected early in the case, tendering
party may be in a position to seek reimbursement of fees and costs if
it is found not have been negligent
Workers' Compensation Indemnification
Agreements
 The Worker's Compensation Act provides that an employee
cannot sue an employer for injuries within the scope of
employment
 Employer also cannot be joined as an Additional Defendant in
absence of a written indemnification agreement entered into by
employer before date of injury 77 P.S. §481(b)
Workers' Compensation Indemnification
Agreements
 An indemnification agreement must be in effect on date of
lawsuit
 Indemnification agreement must use specific language indicating
employer intends to waive worker's compensation immunity
 General language not sufficient
 Language calling for indemnification for "any and all claims" not
good enough
Concluding Thoughts on Indemnification
 Almost every tender can be denied as premature
 Some tenders are clearly going to be invalid
 Violate Perry-Ruzzi rule
 Not much risk of paying attorney's fees to non-negligent party
 If you owe a defense – why not pick it up
 Tendering party become as much of an adversary
 Ultimately may be paying for a second attorney's fees
The Additional Insured
 AI becomes a party to another's liability insurance policy
 AI has direct & independent rights against another's insurance
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company
Contractual Indemnity Rights
Created by a clause in an agreement or contract
An Indemnitee is not an Insured
AI Rights
Created by language of the insurance policy
AI Endorsement or "blanket" coverage
The Practical Difference
Between Indemnitee and Additional Insured
 Indemnitee can't sue insurance company directly for breach of
insurance policy
 Indemnitee can't sue insurance company for bad faith
Where Are AI Provisions Found?
 Policies insuring building contractors
 AI = property owner
 Policies insuring entities working for govt. entity
 AI = "the man"
 Policies insuring commercial real estate tenants
 AI = lessor
 Policies insuring sub-contractors
 AI = the general
The AI's BIG Question:
What Am I Insured Against?
 It depends - Read the policy - It's not "always the same"
 Insured against vicarious liability for acts of the Named Insured
 Everyone's a party-defendant
 Jury finds Named Insured wasn't negligent
 Jury finds that AI was negligent
 No coverage for damages due to AI's independent negligence
Coverage for AI's Own Negligence
 Insured for "any work" performed Named Insured on AI's behalf
 Court: All liability arising in connection with the Named Insured's
"work" includes liability arising from the negligence of AI
 Insured for liability "arising out of" Named Insured's operations
 Court: Coverage for AI's own negligence included
"Standard" ISO AI Endorsement
 Which one?
 Don't assume it's the latest version
 PA: 4-year SOL for contract actions
 AI Endorsement may be older than you think
 Generally, AI only needs to show:
 Broad causal relationship
 "Arising out of" = "but for"
 Newer versions of CG 20 10 ISO form
 Coverage for damage caused, in whole or in part, by the acts or
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omissions of NI in performance of ongoing or completed
operations for AI
No duty to defend AI if complaint fails to allege injuries were
caused in whole or in part by NI's negligence
2013 amendments to CG 20 10
Limit scope to only that required by underlying contract between
NI & AI
No appellate decisions yet
Additional Considerations
("other things to worry about")
 If contract requires NI to "name" the other party as AI,
 AI will likely be presumed insured on the policy
 AI coverage in contract + "causal link" = Full 'dollar one' defense
for AI in underlying action - from day one
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Different from party seeking defense as contractual indemnitee - may be no
duty to defend until liability proven in underlying action
 If AI under policy, what other policy definitions, terms, conditions,
exclusions apply?
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Injury during ongoing or completed operations
Priority of policies -- NI policy v. AI's own CGL policy
The Papers You Still Need
in a Paperless World
 NI's CGL policy
 AI's CGL policy
 ALL contracts between NI & AI
 Exhibits
 Addendums
 ALL pleadings among parties to litigation
 Usually more than Joe v. Sam
 PA still a "4 corners" state
Conclusion
 Case Law - always subject to change or interpretation
 Changing ISO forms
 Facts unique to claim in question
 PA's appellate judiciary
 When in doubt…
 Acknowledge tender promptly
 Gather documents
 Dial 1-800-who's-our-coverage-attorney
Thank you!
Questions?
Brigid Q. Alford, Esquire
Marshall Dennehey Warner Coleman & Goggin
Shareholder
100 Corporate Center Drive
Suite 201
Camp Hill, PA 17011
(717) 651-3710
(717) 651-3707 - Fax
[email protected]
Christopher M. Reeser, Esquire
Marshall Dennehey Warner Coleman & Goggin
Shareholder
100 Corporate Center Drive
Suite 201
Camp Hill, PA 17011
(717) 651-3509
(717) 651-3707 – Fax
[email protected]