Tag Archives: common law indemnity

CONTRACTOR PREVAILING AGAINST SUBCONTRACTOR ON COMMON LAW INDEMNITY CLAIM

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Common law indemnity is not an easy claim to prove as the one seeking common law indemnity MUST be without fault:

Indemnity is a right which inures to one who discharges a duty owed by him, but which, as between himself and another, should have been discharged by the other and is allowable only where the whole fault is in the one against whom indemnity is sought. It shifts the entire loss from one who, although without active negligence or fault, has been obligated to pay, because of some vicarious, constructive, derivative, or technical liability, to another who should bear the costs because it was the latter’s wrongdoing for which the former is held liable.

Brother’s Painting & Pressure Cleaning Corp. v. Curry-Dixon Construction, LLC, 45 Fla. L. Weekly D259b (Fla. 3d DCA 2020) quoting Houdaille Industries, Inc. v. Edwards, 374 So.2d 490, 492-93 (Fla. 1979).

Not only must the one seeking common law indemnity be without fault, but there also needs to be a special relationship between the parties (indemnitee and common law indemnitor) for common law indemnification to exist.  Brother’s Painting & Pressure Cleaning Corp., supra (citation omitted).  A special relationship has been found to exist between a general contractor and its subcontractors.  Id. at n.2.

Brother’s Painting & Pressure Cleaning Corp. exemplifies the rare application of a common law indemnity scenario.

In this case, a fire occurred in a renovated condominium unit.  The evidence revealed that that painters left rags with an oil-based product in a plastic bin overnight in the living room. The oil-based rags were not supposed to be left in the unit.  The next morning it was discovered a fire started in the plastic bin where the painters left the oil-based rags. The determination was that the oil-based rags spontaneously ignited.

The unit owner sued the contractor and the painter and the contractor asserted a cross-claim against the painter for common law indemnity.  The painter settled with the owner and, subsequently, the contractor settled with the owner. The contractor then pursued its common law indemnity claim against the painter seeking to recover the amount of its settlement against the painter. The trial court granted summary judgment in favor of the contractor for common law indemnity against the painter (that included the amount of the contractor’s settlement with the owner) and the painter appealed.  The appellate court affirmed.

The evidence revealed that the fire and corresponding damages “were caused by [the painter’s] sole negligent act of leaving an oil-soaked rag in the plastic garbage bin that was in the condominium unit.”  Brothers Painting & Pressure Cleaning Corp., supra.   The painter argued that common law indemnity should not apply because the operative complaint alleged that the contractor was also at fault for its failure to supervise.  The appellate court dismissed this argument explaining that allegations in a complaint do not control over the actual facts and “[t]he undisputed facts demonstrate that the fire was caused solely because [a painter’s] employee left a rag soaked in an oil-based stain in the condominium.” Brother’s Painting & Pressure Cleaning Corp., supra.

Lastly, the painter argued that the contractor’s settlement with the owner should preclude the common law indemnity claim.  This argument was also dismissed by the appellate court.  The settlement does not prevent the contractor from prevailing on a common law indemnity claim.  Moreover, the painter was on notice of the claim and of the settlement amount prior to the settlement being formalized.  Brother’s Painting & Pressure Cleaning Corp., supra,  (“Once a legal obligation has been established in the underlying action on the part of the indemnitee, the indemnitor will become bound by a settlement agreement in a suit against the indemnitee if the indemnitor was given notice of the claim and was afforded an opportunity to appear and defend the claim, as long as the settlement was not the result of fraud or collusion.”) (quoting Heapy Eng’g, LLP v. Pure Lodging, Ltd., 849 So.2d 424, 425 (Fla. 1st DCA 2003)).

While the contractor was able to prevail on a common law indemnity claim, a better claim would have been a contractual indemnification claim.  However, while not discussed, the subcontract evidently did not contain an indemnification provision.  This should serve as a reminder that all subcontracts should include a contractual indemnification provision.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

UNDERSTANDING COMMON LAW INDEMNITY

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Common law indemnification is a “common” third party claim in multi-party litigation, particularly construction defect litigation. For instance, if a general contractor is sued by an owner for defects, the contractor may third party in the applicable subcontractors and assert a common law indemnification theory against the subcontractors to flow through liability. However, common law indemnity does not have to be asserted as a third party claim, but can be asserted as an affirmative claim after a judgment is entered against a party.

 

For example, in Diplomat Resorts Limited Partnership v. Tecnoglass, LLC, 38 Fla. L. Weekly D1126a (Fla. 4th DCA 2013), a hotel owner hired a contractor to furnish and install glass shower doors in hotel rooms. The subcontractor, naturally, purchased the glass doors from a fabricator / manufacturer and then installed the doors at the hotel. Unfortunately, many of the glass shower doors spontaneously fractured. The hotel owner obtained a judgment against the contractor in arbitration for the damages it incurred in replacing the doors. However, because the contractor was likely not collectible, the hotel owner took an assignment of the contractor’s claims against the fabricator / manufacturer because the thought was the glass fractured due to a defect in the fabrication process.

 

The hotel owner, standing in the shoes of its contractor through the assignment, sued the fabricator / manufacturer and asserted a common law indemnification claim which was dismissed with prejudice by the trial court. On appeal, the Fourth District reversed finding that the hotel owner (standing in the shoes as the contractor) properly asserted the following elements of common law indemnification: 1) that the contractor is wholly without fault, 2) the fabricator / manufacturer is at fault, and 3) the fabricator / manufacturer is liable to the contractor because the contractor was vicariously, constructively, derivatively, or technically liable to the hotel owner for the wrongful acts of the fabricator / manufacturer.

 

One of the challenges with common law indemnification is that there are court decisions that require the party seeking indemnification to be in a “special relationship” with the party it is seeking indemnification from. The Fourth District, however, maintained that a party does not need to specifically plead the existence of a special relationship because this “merely describes a relationship which makes a faultless party ‘only vicariously, constructively, derivatively, or technically liable for the wrongful acts” of the party at fault.”  Diplomat Resorts Limited Partnership.

 

Although the Fourth District’s decision in Diplomat Resorts appears to make a common law indemnification claim easier to prevail on a motion to dismiss, it is still a challenging claim to prove because it requires the party seeking indemnity to be wholly without fault. In other words, if that party is slightly at fault, there is no common law indemnity. Putting this in context, if the contractor is slightly at fault regarding installing the shower doors, it will not prevail on its common law indemnification claim.

 

In fact, the fabricator / installer in Diplomat Resorts argued that the contractor failed to properly install the glass doors for this very reason; however, there was no finding by the arbitrator that the contractor improperly installed the glass doors. Had there been a specific finding, there likely would be no common law indemnification claim because “a former adjudication against an indemnitee [e.g., contractor], finding the indemnitee’s acts to be wrongful, is binding against the indemnitee and precludes indemnification.” Diplomat Resorts Limited Partnership.

 

Notably, there are times in arbitration or litigation where parties do not want specific findings of fact. One of those is in a situation where a defendant may look to another for a common law indemnification claim (such as against a manufacturer) because that party does not want a finding that it did anything wrong that would be contradictory to its position that its liability flows 100% from the party it is pursuing the common law indemnification claim against.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.