Indemnification agreements can be a great way to get a deal done. But parties who enter into those agreements need to pay attention to exactly what is being indemnified.
Indianapolis and Davey Tree entered into a contract for inspecting and maintaining right-of-ways from hazardous trees. The contract also contained the following indemnification clause:
[Davey Tree] agrees to indemnify, defend, and hold harmless the City of Indianapolis, Marion County, and their respective officers, agents, officials and employees for any and all third party claims, actions, causes of action, judgments and liens to the extent they arise out of any negligent or wrongful act or omission or breach of any provision of this Agreement by [Davey Tree] or any of its officers, agents, employees or subcontractors regardless of whether or not it is caused in part by the negligence of a party indemnified hereunder.
Steven was driving along a road in Indianapolis when a decomposing tree fell onto his car. Steven died as a result of his injuries, and his estate filed a wrongful death claim against the City and Davey Tree. The City asked Davey Tree to defend it under the indemnification clause, but Davey Tree refused. The City field a cross-claim to address this dispute and moved for judgment on the pleadings. That motion was granted, and Davey Tree appealed.
On appeal, the parties agreed that Davey Tree was obliged to defend the City only if the City was sued for Davey Tree’s negligence; they simply disagreed over what this meant.
What the parties disagree about is whether the City is being sued in part for Davey Tree’s negligence (which would trigger Davey Tree’s duty to defend) or whether the City is being sued for its negligence only (which would not trigger Davey Tree’s duty to defend).
So the Court looked to the allegations in the complaint, and the allegations in the complaint referred to the City’s duties to “protect passersby” and ensure that events like this did not happen. The Court did not characterize these types of claims as seeking to hold the City liable for Davey Tree’s negligence; rather, “the claims against the City are based entirely on its conduct.”
The City argued that the allegations against it and Davey Tree were “inextricably intertwined,” so Davey Tree should have to indemnify the City. But the Court refused to adopt this test.
We acknowledge that there is a close relationship between the allegations against the City and Davey Tree. This is because the City hired Davey Tree to inventory dangerous trees, and a decomposing tree fell and killed Steven. But the allegations against each party are different. The negligence count against Davey Tree alleges that it had a duty to inventory and assess the risk of trees in the area where the tree fell down—not that it had a duty to cut down any trees—and that Davey Tree breached this duty. The negligence count against the City alleges, among other things, that it had a duty to “ensure the vegetative condition of flora contained within its public right of way,” i.e., a duty to cut down any trees identified by Davey Tree as dangerous, and that the City breached this duty.
One may wonder under what circumstances a clause like the one in this contract may be triggered, and the Court provided an answer in a footnote. It said that the complaint in this case did not raise a negligent hiring or supervision claim. But if it did, then there may be a duty to defend “because a claim of negligent hiring or supervision is ultimately based on the negligence of the party hired or supervised.”
The lesson? Go forth and draft those contracts and complaints carefully and give some consideration to indemnity issues.
Lessons:
1. Indemnity clauses will be read narrowly.
2. A clause in which one party promises to indemnify another for the first party’s negligence does not create a duty to defend if a complaint alleges that the second party was independently negligent.
3. However, a duty to indemnify may be triggered if the plaintiff makes a negligent hiring or supervision claim.