MWL Successfully Defends Employer Against Third-Party Contribution And Indemnification Litigation In Hawai’i

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Matthiesen, Wickert & Lehrer, S.C.’s (“MWL”) team of seasoned litigators continue to assist employers to defy arduous hurdles presented by third-party contribution suits.

When faced with a personal injury claim from an injured employee, defendant-tortfeasors can sometimes go on the offensive. Depending on the circumstances, defendants often use third-party complaints to drag employers and their insurers into litigation via contribution and indemnification claims. It is done to either dissuade employers and insurers from asserting their workers’ compensation or group health insurance subrogation lien or to place the ultimate burden of payment on the employer.

Recently, MWL attorneys, Ryan Woody and Emil Ovbiagele, successfully defended an employer against a third-party action for contribution and indemnification in Hawai’i. The case, BG, Inc. v. Ledcor Construction Hawaii, LLC, 2015 No. 13-1-0389(2) (Haw. Cir. Ct.), originally began as a workers’ compensation claim brought by an employee against Ledcor Construction Hawaii, LLC (“Ledcor”). The employee then brought a tort action against BG, Inc. (“BG”), the lessor of the truck that caused his injuries. In a desperate attempt to avoid any potential liability, BG brought a third-party suit against the employer, Ledcor, seeking common law indemnification and contractual indemnification.

Refusing to lie docile, MWL’s team quickly went on the offensive and filed motions to dismiss the entire action against Ledcor. The first motion yielded instant results as the court dismissed BG’s common law contribution and indemnification count with prejudice and dismissed the “breach of contract” indemnification count, but without prejudice.

First, MWL argued that BG’s common law indemnification claim was barred by Hawai’i’s Workers’ Compensation Act exclusivity provision. The Hawai’i legislature specifically enacted Haw. Rev. Stat. § 386-5 with the intention “that the workers’ compensation system be the exclusive remedy for work-related injuries and deaths.” Estate of Coates v. Pacific Eng’g, 71 Haw. 358, 362, 791 P.2d 1257 (Haw. 1990). The statute operates to also preclude third-party claims against employers for contribution on the theory that the employer was a joint tortfeasor. See Kamali v. Hawaiian Electric Co., 54 Haw. 153, 159, 504 P.2d 861 (Haw. 1972). MWL was successfully able to convince the court that to allow BG’s common law contribution/indemnification claim to go forward in the face of Hawai’i’s clear Workers’ Compensation Act exclusivity provision would amount to stripping away the intended protection of the statute.

Next, MWL maintained that BG’s breach of contract claim must also be dismissed, as the specific indemnity provision that BG relied upon was unclear and ambiguous. Hanging its hat on an illegible and ink smudged indemnity provision, BG took the position that Ledcor had a contractual duty to indemnify it for the alleged inherent defects in BG’s truck that led to the employee’s accident and injury.

Hawai’i’s common law requires that an indemnity provision cannot be used to indemnify the indemnitee for its own negligence unless the indemnity provision clearly and unequivocally provides for the assumption of liability by the indemnitor for the indemnitee’s negligence. See Ruth v. Fleming, 2 Haw. App. 585, 586, 637 P.2d 784 (Haw. App. 1981). However, the contractual language that BG relied upon was virtually unreadable.

Additionally, MWL argued that the court dismiss the contractual indemnity claim as it was void under Hawai’i’s “anti-indemnity” statute. The entire action arose out of BG’s leased commercial grade, articulated rock truck, which was used in connection with moving materials connected to a construction project. Hawai’i, like 46 other states, forbids indemnity contracts that seek to indemnify parties for their sole negligence in the construction context. Haw. Rev. Stat. § 431:10-222 provides:

Any covenant, promise, agreement or understanding in, or in connection with or collateral to, a contract or agreement relative to the construction, alteration, repair or maintenance of a building, structure, appurtenance or appliance, including moving, demolition or excavation connected therewith, purporting to indemnify the promisee against liability for bodily injury to persons or damage to property caused by or resulting from the sole negligence or willful misconduct of the promisee, the promisee’s agents or employees, or indemnitee, is invalid as against public policy, and is void and unenforceable…

After the dismissal with prejudice of its common law indemnity claim, BG filed an amended complaint in an effort to rescue the breach of contract claim. This time, in addition to attaching the same illegible contractual indemnity provision (the contract actually signed by the parties), BG attached a legible unsigned example of the general terms it sought to enforce.

Seeing an opportunity to get rid of the entire action once and for all, in a cost-effective manner, MWL’s team moved for a second dismissal arguing that attaching an unsigned example of the contract did not cure the inherent defects of BG’s claims. The team argued that since the “specific” signed contractual provision that BG sought to enforce was illegible, it was unclear and ambiguous. Therefore, attaching a general unsigned example of a contract that had no bearing to the action was of no consequence and, even if it was, BG’s action was still barred under Hawai’i’s anti-indemnity statute. Persuaded by MWL’s arguments, the court dismissed the entire action against Ledcor.

All too common, we find situations where defendants use third-party pleading practice to drag in employers via contribution claims. The goal is usually to get the employers to drop any potential subrogation lien or actually pay for any tort damages. The indemnity hurdle often presents complex issues involving various intersections of tort and contract law and specific state statutes that may operate to further obfuscate matters.

These indemnity suits undermine the employer’s protection against unlimited liability provided under the workers’ compensation system of most states. It could effectively make the employer liable in tort to its own employee for damages sustained as a result of a tortfeasor.

Given how high the stakes could potentially be, employers and insurers must refuse to lie docile in the face of such third-party actions. MWL’s dynamic team of litigators should be the first line of defense for employers faced with such hurdles. MWL is well-positioned to defend these contribution actions across the country. Should you or your client be faced in a similar situation or have any questions pertaining to defending third-party contribution and indemnity suits, please contact Ryan Woody at [email protected] or Emil Ovbiagele at [email protected].