Title: RAISLER v BURLINGTON NORTHERN RAIL

State: montana

Issuer: Montana Supreme Court

Document:

No. 8 4 - 3 7 2 I N THE SUPREME COURT OF THE STATE OF MONTANA 1 9 8 5 WARREN LOU RAISLER, P l a i n t i f f and A p p e l l a n t , BURLINGTON NORTHERN RAILROAD CO., a D e l a w a r e C o r p . , and ROSS-KO GRAIN, D e f e n d a n t s , a n d BURLINGTON NORTHERN RAILROAD COMPANY, T h i r d - P a r t y P l a i n t i f f a n d P e t i t i o n e r , FARMERS UNION ELEVATOR COMPANY, T h i r d - P a r t y D e f e n d a n t a n d R e s p o n d e n t . ORIGINAL PROCEEDING: COUNSEL OF RECORD: Thomas W. Spence a r g u e d f o r B u r l i n g t o n N o r t h e r n , B i l l i n g s , M o n t a n a F o r D e f e n d a n t / R e s p o n d e n t : A n d e r s o n , B r o w n , G e r b a s e , C e b u l l & Jones; S t e v e n J. H a r m a n & C y n t h i a R. Woods a r g u e d for F a r m e r s U n i o n E l e v a t o r , B i l l i n g s , M o n t a n a H e r n d o n , H a r p e r & M u n r o ; R o d n e y T . H a r t m a n , B i l l i n g s , M o n t a n a (F?.oss-KO G r a i n ) T o w e , B a l l , E n r i g h t & M a c k e y ; T h o m a s E. T o w e , B i l l i n g s , M o n t a n a ( R a i s l e r ) S u b m i t t e d : F e b r u a r y 2 1 , 1 9 8 5 D e c i d e d : D e c e m b e r 3 1 , 1 9 8 5 * 4 C l e r k M r . J u s t i c e Fred J. Weber d e l i v e r e d t h e Opinion o f t h e Court. The United S t a t e s D i s t r i c t Court f o r t h e S t a t e o f Montana h a s c e r t i f i e d two q u e s t i o n s t o t h i s Court from a f e d e r a l a c t i o n f o r personal i n j u r i e s and a d e r i v a t i v e t h i r d p a r t y s u i t f o r c o n t r i b u t i o n o r indemnity. The q u e s t i o n s , a s c e r t i f i e d t o u s by t h e f e d e r a l c o u r t , a r e : I . When an i n j u r e d employee s u e s a t h i r d p a r t y f o r damages and t h e t h i r d p a r t y j o i n s t h e employer a s a t h i r d p a r t y defendant seeking c o n t r i b u t i o n o r indemnity, i s t h e a s s e r t i o n of § 39-71-411, MCA, by t h e t h i r d p a r t y defendant employer a s a defense, u n c o n s t i t u t i o n a l a s it i s a p p l i e d t o t h e t h i r d p a r t y p l a i n t i f f ? Our answer i s no. 2. When an i n j u r e d employee s u e s a t h i r d p a r t y f o r damages, and t h e t h i r d p a r t y j o i n s t h e employer a s a t h i r d p a r t y defendant seeking c o n t r i b u t i o n o r indemnity, and t h e employer h a s signed a w r i t t e n agreement w i t h t h e p r o v i s i o n s o u t l i n e d i n t h i s c e r t i f i c a t i o n , can t h e employer a s s e r t 5 39-71-411, MCA, a s a complete defense t o t h e t h i r d p a r t y a c t i o n ? Our answer i s yes. The c e r t i f i c a t i o n o r d e r o f t h e United S t a t e s D i s t r i c t Court sets f o r t h t h e following a l l e g a t i o n s o f f a c t : Warren R a i s l e r was employed a s a l a b o r e r by Farmers Union E l e v a t o r Company (Farmers). While loading g r a i n c a r s a t Farmers' f a c i l i t y , he f e l l from t h e t o p o f a g r a i n c a r t h a t was being moved by a co-employee. M r . R a i s l e r s u s t a i n e d severe i n j u - ries, i n c l u d i n g a p a r t i a l amputation o f h i s f o o t . H e h a s received workers' compensation b e n e f i t s from Farmers f o r h i s i n j u r i e s . M r . R a i s l e r i n i t i a t e d a personal i n j u r y a c t i o n i n Yellowstone County D i s t r i c t Court. H e named Ross-Ko Grain (Ross-KO) and Burlington Northern Rail road Company (Burlington Northern) a s defendants. H e a l l e g e d t h a t Ross-KO, a Minnesota c o r p o r a t i o n , owned t h e r a i l r o a d c a r s i n t o which he was loading g r a i n a t t h e t i m e of t h e a c c i d e n t . Burlington Northern, a Delaware c o r p o r a t i o n , a1 l e g e d l y owned t h e t r a c k s and t h e land where t h e a c c i d e n t occurred. Farm- ers' g r a i n handling f a c i l i t y i s s i t u a t e d on land l e a s e d from Burlington Northern. The s u i t was removed t o f e d e r a l c o u r t based on t h e p a r t i e s ' d i v e r s i t y o f c i t i z e n s h i p . Rurlington Northern joined Farmers a s a t h i r d p a r t y defendant and sought c o n t r i b u t i o n and/or indemnity from Farmers, should Burlington Northern u l t i m a t e l y be found l i a b l e t o Farmers ' employee, R a i s l e r . Farmers moved f o r summary judgment on t h e ground t h a t S 39-71-411, MCA, l i m i t e d i t s l i a b i l i t y t o t h e payment o f workers' compensation b e n e f i t s . Section 39-71-411, MCA, provides: Provisions o f c h a p t e r e x c l u s i v e remedy - n ~ n l i a b i l i t ~ o f insured employer. For a l l employments covered under t h e Work- ers' Compensation A c t o r f o r which an e l e c t i o n has been made f o r coverage under t h i s c h a p t e r , t h e p r o v i s i o n s o f t h i s c h a p t e r a r e e x c l u s i v e . Except a s provid- ed i n p a r t 5 o f t h i s c h a p t e r f o r unin- sured employers and except a s otherwise provided i n t h e Workers' Compensation A c t , an employer i s n o t s u b j e c t t o any l i a b i l i t y whatever f o r t h e d e a t h o f o r personal i n j u r y t o an employee covered by t h e Workers' Compensation Act o r f o r any claims f o r c o n t r i b u t i o n o r indemnity a s s e r t e d by a t h i r d person from whom damages a r e sought on account of such i n j u r i e s o r death. . . . The f e d e r a l c o u r t r e q u e s t s t h i s C o u r t ' s i n t e r p r e t a t i o n of S39-71-411, MCA, a s it r e l a t e s t o t h e Montana C o n s t i t u t i o n . Montana enacted t h e Workmen 's Compensation A c t i n 1915. Sec. 1, Chap. 9 6 , Laws 1915. Under t h e s t a t u t o r y compensa- t i o n scheme, employees r e l i n q u i s h e d t h e i r common law remedies against employers in exchange for employers' guarantee to pay compensation for work-related injuries regardless of fault. The Act limited employers' liability to workers' compensation benefits and provided that a claim under the Act was an injured worker's exclusive remedy against an employer that was covered by the Act. Section 92-204, R.C.M. (1947). Because the common law at that time left many work-related injuries uncompensated, Montana's transition to a statutory remedy was advantageous to workers. However, in light of improved prospects for recovery under modern tort theories, workers and third parties are turning increasingly to the courts for exemption from the exclusive remedy rule. "Continuing challenges to the exclusive remedy rule reveal an underlying tension between the workers' compens5tion system and the tort system.'' Note, Exceptions - - to the Exclusive Remedy Requirements - of Workers' Compensation Statutes, 96 Harv. L. Rev. 1641 (1983). The creation of common law exceptions to the exclusive remedy rule reflects a judicial attempt to reconcile the workers' compensation scheme with modern tort theories, such as strict liability and comparative negligence. Courts have sought by various means to reconcile the relatively modest awards given to injured workers with larger monetary recoveries allowed in modern tort cases. I1 Burlington Northern here asserts its right to collect from Farmers on the grounds of contribution or, in the alternative, on the express indemnity provisions in the lease agreement between Burlington Northern and Farmers. With regard to the theory of contribution, Burlington Northern claims that it was Farmers' act of negligence that caused the accident and affords the basis for contribution. Burlington Northern contends t h a t it was only p a s s i v e l y n e g l i g e n t , i f a t a l l . The indemnity a l l e g a t i o n i s based upon t h e e x p r e s s indemnity p r o v i s i o n s contained i n t h e l e a s e agreement. Contribution d i s t r i b u t e s l o s s among j o i n t t o r t f e a s o r s by r e q u i r i n g each t o pay h i s p r o p o r t i o n a t e s h a r e based upon h i s p r o p o r t i o n o f t h e negligence which proximately caused t h e i n j u r i e s . Section 27-1-703(1), MCA, a u t h o r i z e s c o n t r i b u t i o n between t o r t f e a s o r s . Indemnity, on t h e o t h e r hand, s h i f t s t h e e n t i r e l o s s from t h e one who has been r e q u i r e d t o pay it t o t h e one who should b e a r t h e l o s s . W. P r o s s e r , Law o f T o r t s , 5 51 a t 310 -- ( 4 t h ed. 1971). "The r i g h t o f indemnity i s based upon an independent duty o r o b l i g a t i o n owed by t h e employer t o t h e v t h i r d p a r t y , e i t h e r a s t h e r e s u l t o f e x p r e s s c o n t r a c t o r a s t h e r e s u l t o f an i m p l i c a t i o n r a i s e d by law." 2A Larson, Workmen's Compensation Law, 5 76.13 a t 14-571 (1983). I n 1977, S 39-71-411, MCA, provided t h a t an insured employer "is n o t s u b j e c t t o any l i a b i l i t y whatever f o r t h e d e a t h o f o r personal i n j u r y t o an employee" who i s covered by t h e A c t . The 1977 s t a t u t e d i d n o t mention c o n t r i b u t i o n o r indemnity. This Court i n t e r p r e t e d t h a t s t a t u t e i n Cordier v. Stetson-Ross, Inc. (1979), 184 Mont. 502, 604 P.2d 86. W e concluded t h a t t h e s t a t u t e p r o t e c t e d employers from damages sought by t h i r d p a r t i e s under a t h e o r y o f c o n t r i b u t i o n . That conclusion i s i n accord w i t h t h e c u r r e n t m a j o r i t y r u l e t h a t a t h i r d p a r t y cannot s u e o r j o i n a n e g l i g e n t employer a s a j o i n t t o r t f e a s o r under c o n t r i b u t i o n s t a t u t e s o r a t common law. 2 A Larson, Workmen's Compensation - Law, S 76.20 a t 14-597 (1983). I n Cordier. t h e Court a l s o concluded t h a t t h e e x c l u s i v e remedy provision o f t h e Workers' Compensation A c t barred a c l a i m f o r n o n c o n t r a c t u a l i n d e m n i t y . No e x p r e s s i n d e m n i t y c o n t r a c t was i n v o l v e d i n C o r d i e r , and t h e C o u r t r e s e r v e d any r u l i n g on such i n d e m n i t y . C o r d i e r , 184 Mont. a t 513, 604 P.2d a t 92. While t h e a p p e a l i n C o r d i e r was p e n d i n g , t h e 1979 Montana L e g i s l a t u r e amended § 39-71-411, MCA. I n a d d i t i o n t o t h e p r o v i s o t h a t t h e employer i s n o t l i a b l e f o r d e a t h or i n j u r y t o an employee c o v e r e d by t h e A c t , t h e amendment p r o v i d e d t h a t e m p l o y e r s s h a l l n o t b e l i a b l e " f o r a n y c l a i m s f o r c o n t r i b u t i o n o r i n d e m n i t y a s s e r t e d by a t h i r d p e r s o n from whom damages are s o u g h t on a c c o u n t o f s u c h i n j u r i e s o r d e a t h . " 1 1 1 The f i r s t c e r t i f i e d q u e s t i o n is: Where an i n j u r e d employee s u e s a t h i r d p a r t y f o r damages and t h e t h i r d p a r t y j o i n s t h e employer a s a t h i r d p a r t y d e f e n d a n t s e e k i n g c o n t r i b u t i o n or i n d e m n i t y , is t h e a s s e r t i o n o f § 39-71-411, MCA, by t h e t h i r d p a r t y d e f e n d a n t employer a s a d e f e n s e , c o n s t i t u t i o n a l a s it i s a p p l i e d t o t h e t h i r d p a r t y p l a i n t i f f ? P h r a s e d more s u c c i n c t l y : Is it c o n s t i t u t i o n a l f o r an employer t o u s e $ 39-71-411, MCA, a s a c o m p l e t e d e f e n s e t o a t h i r d p a r t y c l a i m f o r c o n t r i b u t i o n o r i n d e m n i t y ? B u r l i n g t o n N o r t h e r n a r g u e s t h a t t h e l i m i t a t i o n c o n t a i n e d i n S 39-71-411, MCA, v i o l a t e s A r t . 11, §§ 16 and 17 o f t h e Montana C o n s t i t u t i o n . A r t . 11, § 1 6 , Mont. C o n s t . 1972 p r o v i d e s i n p a r t t h a t c o u r t s o f j u s t i c e s h a l l b e open t o e v e r y p e r s o n and s p e e d y remedy a f f o r d e d f o r e v e r y i n j u r y . B u r l i n g t o n N o r t h e r n a r g u e s t h a t S 39-71-411, MCA, d e p r i v e s B u r l i n g t o n N o r t h e r n o f i t s c o n s t i t u t i o n a l r i g h t t o a remedy f o r e v e r y i n j u r y and f u l l l e g a l r e d r e s s . The 1889 C o n s t i t u t i o n had a comparable p r o v i s i o n . A r t . 111, § 6 , Mont. Const. 1889 s t a t e s : Courts o f j u s t i c e s h a l l be open t o every person, and a speedy remedy a f f o r d e d f o r every i n j u r y o f person, p r o p e r t y , o r c h a r a c t e r ; and t h a t r i g h t and j u s t i c e sha 11 b e administered b ~ i t h o u t s a l e , d e n i a l , o r delay. This p r o v i s i o n was i n t e r p r e t e d i n Shea v. North-Butte Mining Co. (1919), 55 Mont. 522, 179 P. 499, a personal i n j u r y a c t i o n by a miner a g a i n s t h i s employer. Shea ' s counsel argued t h a t t h e Workmen's Compensation A c t o f 1915 was repugnant t o t h e c o n s t i t u t i o n a l guarantee t h a t c o u r t s o f j u s t i c e s h a l l be open t o every person and a speedy remedy a f f o r d e d f o r every i n j u r y . Shea i n s i s t e d t h a t t h e l e g i s l a t u r e could n o t a b o l i s h an i n j u r e d worker's r i g h t t o sue i n t o r t . This Court discussed t h e b a s i s f o r t h e l e g i s l a t u r e ' s adoption o f t h e A c t : [Tlhe o b j e c t sought was t o s u b s t i t u t e f o r t h e imperfect and economically w a s t e f u l common-law system by p r i v a t e a c t i o n by t h e i n j u r e d employee f o r damages f o r n e g l i g e n t f a u l t on t h e p a r t o f t h e em- p l o y e r , which, w h i l e attended w i t h g r e a t d e l a y and waste, compensated t h o s e em- ployees only who w e r e a b l e t o e s t a b l i s h t h e proximate connection between t h e f a u l t and t h e i n j u r y , a system by which every employee i n a hazardous i n d u s t r y might r e c e i v e compensation f o r any i n j u r y s u f f e r e d by him a r i s i n g o u t o f and during t h e course o f t h e employment . . . I n o t h e r words, t h e t h e o r y o f such l e g i s l a - t i o n is t h a t l o s s occasioned by reason o f i n j u r y t o t h e employee s h a l l n o t be borne by t h e employee a l o n e a s it was under t h e common-law system, but d i r e c t l y by t h e i n d u s t r y i t s e l f , and i n d i r e c t l y by t h e p u b l i c . . . Shea, 55 Mont. 528-29, 179 P. a t 500. The Shea r a t i o n a l e with regard t o t h e t h e o r y o f workers' compensation was reaffirmed a number o f times a f t e r i t s i n i t i a l d e c l a r a t i o n i n 1919. F i n a l l y , t h e r a t i o n a l e was recognized in the 1.972 Montana Constitution. Art. 11, § 16, tlont. Const. 1972 states: Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character. No serson shall be desrived of this full legal redress for injury - - - incurred in employment for which another serson marbe YiaLle excest as to fellow L A - L - - employees -- and his immediate employer who hired him if such immediate employer - - - srovides coveraae under the Workmen's L - I - Compensation Laws of this state. Right - - - and justice shall be administered without sale, denial, or delay. (Emphasis supplied.) The underscored sentence was added to the original provisions of Art. 111, § 6, Mont. Const. 1-889. An explanation of the amendment is set forth in a Committee Report to the Constitutional Convention: The committee voted unanimously to retain this section with one addition. The provision as it stands in the present Constitution guarantees justice and a speedy remedy for all without sale, denial or delay. The committee felt, in light of a recent interpretation of the Workmen's compensation Law, that this remedy needed to be explicitly guaranteed to persons who may be employed by one covered by Workmen's Compensation to work on the facilities of another. Under Montana law, as announced in the recent deci Co., - thir sion of Ashcraft v. Montana Power the employee has no redress against . d parties for injuries caused by them if his immediate employer is covered under the Workmen's Compensation Law. The committee feels that this violates the spirit of the quarantee of a speedy - - - remedy for - all injuries of person, property or character. It is this specific denia 1--and this one only--that the committee intends to alter with the following additional wording: "no person shall be deprived of this full legal redress for injury incurred in employment for which another person may be liable except as to fellow employees and his immediate employer who hired him if such immediate employer provides coverage under the Workmen's Compensation Laws of this state." In other words the committee wants to insure that the Workmen's Compensation Laws of the state will be used for their original purpose--to provide compensation to i n j u r e d workmen--rather than t o d e p r i v e an i n j u r e d worker o f r e d r e s s a g a i n s t n e g l i g e n t t h i r d p a r t i e s (beyond h i s employer and f e l l o w employees) because h i s immediate employer i s covered by Workmen's Compensation. Montana C o n s t i t u t i o n a l Convention, Committee Report a t 636 (1972). There i s no i n d i c a t i o n o f i n t e n t t o modify o r change an employer's l i a b i l i t y t o an i n j u r e d worker. The change was s p e c i f i c a l l y aimed a t allowing recovery by a worker a g a i n s t a r e s p o n s i b l e t h i r d p a r t y . For t h e f i r s t t i m e , t h e Montana C o n s t i t u t i o n provided t h a t t h e S t a t e could d e p r i v e an employee o f f u l l l e g a l r e d r e s s a g a i n s t h i s employer f o r i n j u r y i n c u r r e d d u r i n g employment. That i s a e x p r e s s c o n s t i t u t i o n a l r e c o g n i t i o n o f t h e r a t i o n a l e o r i g i n a l l y s t a t e d i n Shea. Burlington Northern's challenge t o § 39-71-411, MCA, i s based p r i m a r i l y on t h e f i r s t sentence o f A r t . 11, § 16, which provides t h a t c o u r t s o f j u s t i c e s h a l l be open t o a l l and a speedy remedy a f f o r d e d f o r every i n j u r y . T h i s contention t e n d s t o d i s r e g a r d t h e next sentence i n 5 16, which s p e c i f i c a l l y l i m i t s recovery f o r work-related i n j u r i e s . W e conclude t h a t A r t . 11, § 16 must be considered i n its e n t i r e t y , i n c l u d i n g t h e second sentence which l i m i t s t h e broad guarantees contained i n t h e f i r s t sentence. The p e r t i n e n t p a r t o f t h e second sentence s t a t e s : N o person [ R a i s l e r ] s h a l l be deprived o f t h i s f u l l l e g a l r e d r e s s f o r i n j u r y i n - curred i n employment f o r which a n o t h e r person [Burl ington Northern] may be l i a b l e e x c e p t a s t o . . . h i s immediate employer [Farmers] . . . The sentence makes c e r t a i n t h a t no employee i s deprived o f r e d r e s s a g a i n s t a t h i r d p a r t y . However, it allows an employee t o be deprived o f f u l l l e g a l r e d r e s s a g a i n s t h i s employer. I n s u b s t a n c e , 5 39-71-411, MCA, p r o v i d e s t h a t Farmers is n o t l i a b l e f o r a c l a i m f o r c o n t r i b u t i o n o r indemnity a s s e r t e d by B u r l i n g t o n Northern, a t h i r d p a r t y . I f t h i s l i m i t a t i o n can b e i n t e r p r e t e d a s an e x t e n s i o n o f t h e l i m i t a t i o n on t h e w o r k e r ' s r i g h t t o c l a i m a g a i n s t h i s employer, t h e n t h e l i m i t a t i o n would b e e x p r e s s l y a u t h o r i z e d by A r t . 11, S 1 6 , B'Iont. Const. 1972. Is t h e r e a r e a s o n t o d i s t i n g u i s h between a c l a i m by a t h i r d p a r t y f o r c o n t r i b u t i o n o r indemnity and a c l a i m a s s e r t e d d i r e c t l y by t h e employee? T h i s q u e s t i o n was answered i n C o r d i e r , where t h i s C o u r t s t a t e d : I t i s o u r o p i n i o n t h a t t h e broad p r o v i - s i o n s o f s e c t i o n 92-204.1, R.C.M. 1947, now s e c t i o n 39-71-411, MCA, r e q u i r e u s t o hold t h a t t h e p r o v i s i o n s o f t h e Workers' Compensation A c t a r e e x c l u s i v e a s t o t h e l i a b i l i t y o f t h e employer f o r damages s u s t a i n e d by t h e i n j u r e d employee whether t h e y a r e sought by t h e employee d i r e c t l y , o r by a t h i r d p a r t y under c o n t r i b u t i o n . Our s t a t u t e r u l e s o u t "any l i a b i l i t y whatever" even b e f o r e it goes on t o s t a t e t h a t t h e employee and t h o s e under him a r e l i m i t e d t o such r e c o v e r y a s t h e A c t a l l o w s a g a i n s t t h e employer. The lan- guage "any l i a b i l i t y whatever" would be s u r p l u s a g e u n l e s s it i s r e a d t o mean l i a b i l i t y n o t o n l y t o t h e employee and t h o s e c l a i m i n g under him, b u t a l s o any o t h e r p a r t y a t t e m p t i n g t o c l a i m l i a b i l i t y a g a i n s t t h e employer f o r t h e same i n c i d e n t . C o r d i e r , 184 Mont. a t 508-09, 604 P.2d a t 89-90. Under t h e C o r d i e r h o l d i n g , t h e employer was l i a b l e t o t h e emplcyee f o r workers' compensation b e n e f i t s , b u t t h e employer was found t o he f r e e o f any o t h e r l i a b i l i t y t o t h e employee or t o any o t h e r p a r t y a t t e m p t i n g t o c l a i m l i a b i l i t y a g a i n s t t h e employer a s a r e s u l t o f t h e same i n j u r y . I n Montana, t h e r e i s no d i s t i n c t i o n between a t h i r d p a r t y c l a i m f o r c o n t r i b u t i o n o r indemnity a g a i n s t an employer and a c l a i m by a n employee a s s e r t e d d i r e c t l y a g a i n s t t h e employer. In White v. State (Mont. 1983), 661 P.2d 1272, 40 St.Rep. 507 and in Pfost v. State of Montana, Supreme Court Cause No. 85-007, decided December 31, 1985, this Court struck down two Montana statutes as unconstitutional, on the grounds that the right to bring an action for personal injuries was a fundamental right and that any statutory abridgment of that fundamental right must pass the test of strict scrutiny. Those holdings are not applicable in the present case. Because an employer's immunity from tort liability in a workers' compensation case is constitutionally recognized in Art. 11, (5 16, Mont . Const. , we conclude no analysis of § 39-71-411, MCA, on a strict scrutiny theory is required. In a similar manner, in Hall v. State Comp. Ins. Fund (Mont. 1985), 708 P.2d 234, 42 St.Rep. 1502, the Court disallowed subrogation by an insurance company against an employee. The Court concluded that it would be an unconstitutional application of an otherwise constitutions-l statute if the State Fund were granted suhrogation against a claimant employee who had not achieved full legal redress. Here we are not concerned with an employee as in Hall, but rather the third party who has been sued by the employee. The third party claims that its constitutional right of full legal redress against the employer has been eliminated. We have already concluded that an employee, may be constitutionally deprived of full legal redress against his employer, both directly and indirectly. We conclude that there is no distinction between a direct claim by Raisler, the employee, against Farmers, the employer, or an indirect claim by Burlington Northern, third party, against Farmers, the employer. Hall does not conflict with our holding here. In our analysis of Art. 11, S 16, Mont. Const., we conclude that, in workers' compensation cases, the second sentence affords a limitation upon the broad provisions in the first sentence. We conclude that where an employer has provided workers' compensation coverage, an employee constitutionally may be deprived of full legal redress for injury against his employer, both directly and indirectly. We hold that in denying liability for any claims for contribution or indemnity by a third party, S 39-71-411, MCA, does not violate Art. 11, § 16, Mont. Const. Burlington Northern also argues that $ 39-71-411, MCA, violates Art. 11, 1 7 Mont. Const. which provides that: "No person shall be deprived of life, libertv, or property without due process of law." Burlington Northern argues that the statute deprives a third party plaintiff of its substantive right to contribution. Because no reasonable substitute has been provided, Burlington Northern contends it has been unlawfullv deprived of a due process right. We disagree. Substantive due process analysis requires a test of the reasonableness of a statute in relation to the State's power to enact such legislation. "The essence of substantive due process is that the State cannot use its police power to take unreasonable, arbitrary or capricious action against an individual." Matter of C.H. (Mont. 1984), 683 P.2d 931, 936, 41 St.Rep. 997, 1002. In order to satisfy substantive due process guarantees, a statute enacted under a state's police power must he reasonably related to a permissible legislative objective. State v. Turk (1982), 197 Mont. 311, 314-15, 643 P.2d 224, 226. The 1979 legislature amended § 39-71-411, MCA, specifi- cally to preclude liability on the part of an insured employer for contribution or indemnity to third parties. The legislative objective was to protect employers from "the great potential liability" that could result if employers were required to pay the amount collected by an employee in his action against a third party in addition to payment of the compensation benefits. Memorandum, Senate Judiciary Committee, February 7, 1979. Section 39-71-411, MCA, was amended to ensure that the scope of liability of employers would continue to be limited by the Workers' Compensation Act in spite of developing tort theories. The effect of the amendment to S 39-71-411, MCA, was to promote the continued economic welfare of employers who pay into the State Fund and the welfare of employees who receive compensation benefits. We therefore conclude that the limitations contained in S 39-71-411, MCA, are reasonably related to the permissible legislative objective of protect- ing the public welfare. We hold that assertion of S 39-71-411, MCA, as a defense to liability of an employer covered by the Act, does not violate Art. 11, S 17, Mont. Const. 1972. IV The second certified question is: Where an injured employee sues a third party for damages, and the third party joins the employer as a third party defendant seeking contribution or indemnity, and the employer has signed a written agreement with the provisions outlined in this certification, can the employer assert S 39-71-411, MCA, as a complete defense to the third party action? As previously discussed, indemnity is an all or nothing proposition. It shifts the entire loss from the one who has been required to pay it to the one who should bear it. In C o r d i e r , t h i s Court held t h a t an employer who has p a i d work- ers' compensation b e n e f i t s t o an employee i s n o t s u b j e c t t o indemnity based on a noncontractual claim by a t h i r d p a r t y . The Cordier Court d i d n o t r u l e on c o n t r a c t u a l indemnity. C o n t r a c t u a l indemnity was considered i n Howard S. Wright Const. v. F.E. DeBeer Mech. (1979), 185 Mont. 47, 604 ~ . 2 d 323. Wright Const. allowed recovery by t h e p l a i n t i f f under a c o n t r a c t u a l indemnification p r o v i s i o n executed by D e B e e r , a s u b c o n t r a c t o r t o Wright, t h e primary c o n t r a c t o r . W e d i s t i n g u i s h t h a t c a s e from t h e p r e s e n t c a s e , where Farmers a s s e r t s immunity under 5 39-71-411, MCA. I n Wright Const., t h e s u b c o n t r a c t o r d i d n o t a s s e r t a defense a g a i n s t l i a b i l i t y nor claim immunity a s an insured employer under S 39-71-411, MCA . A s a r e s u l t , t h e holding i n Wright Const. is n o t c o n t r o l l i n g i n t h e p r e s e n t case. I n t h i s c a s e , Farmers, a s lessee, agreed i n w r i t i n g t o indemnify and hold Burlington Northern harmless f o r any l o s s , damage, i n j u r y o r d e a t h from any a c t o r omission o f Farmers, i t s employees o r a g e n t , t o t h e person o r p r o p e r t y o f t h e p a r t i e s t o t h e l e a s e and t h e i r employees. I n form, t h e indemnity p r o v i s i o n i n t h e l e a s e agreement i s broad enough t o allow recovery a s a m a t t e r o f c o n t r a c t i n t e r p r e t a t i o n . Our q u e s t i o n i s whether Farmers can now a s s e r t 5 39-71-411, MCA, a s a complete defense t o t h e a c t i o n f o r c o n t r a c t u a l indemnity. A m a j o r i t y o f c o u r t s has recognized e x p r e s s c o n t r a c t u a l indemnity a s an exception t o t h e e x c l u s i v e remedy r u l e . See, Annot., 100 A.L.R.3d 5 8[b] a t 380 (1980). The f r e q u e n t l y - s t a t e d r a t i o n a l e i s t h a t t h e indemnity claim i s by d e f i n i t i o n a s e p a r a t e l e g a l cause based upon a c o n t r a c t u a l r e l a t i o n s h i p and a c o n t r a c t u a l o b l i g a t i o n . 2 A Larson, Workmen's Compensation Law, 5 76.42 a t 14-630 (1983). The increased exposure of the employer is bargained for and serves as consideration or at least partial consideration for whatever is received from the third party. Robinson, Workmen's Compensation: The Third Party Dilemma, 19 Idaho L. Rev. 259, 268 (1983) . Courts in three jurisdictions have concluded that their statutory language specifically precludes third party suits for contractual indemnity, and such contractual obligations are therefore void. Roberts v . Gray's Crane & Rigging (0r.Ct.App. 1985), 697 P.2d 985; Paul Krebs & Assoc. T T . Fritts Const. (Ala. 1978), 356 So.2d 638; Gulf Oil Corp. v. Rota-Cone Field Operating Co. (N.M.Ct.App. 1972), 505 P.2d 78. The stated rationale in these cases is that if the employee is allowed to recover from a third party and then the third party is allowed to recover from the employer, the employer is subjected to double liability. In view of these contradictions in legal theories, we find it important to review our Montana cases and Constitution. Shea construed Montana's Act in relation to the 1889 Constitution and set forth reasons why the legislature adopted the workers' compensation system as a substitute for common law tort suits by an employee against his employer. We concluded in Shea that the Act was a per- missible exercise of legislative power, based on sound social policy of protecting injured workers. The Constitutional Convention Committee which considered Art. 11, § 16, Mont. Const. 1972, was keenly aware of a need to protect the interests of injured employees. As previously discussed, it was that awareness that resulted in the addition of the second sentence in Art. 11, § 16. Indemnification of third parties was a commonly recog- nized theory of recovery at the time of the 1972 C o n s t i t u t i o n a l Convention. The above-quoted Committee Report i n d i c a t e s t h a t t h e Convention had i n mind t h e 1889 C o n s t i t u t i o n and a t l e a s t one j u d i c i a l i n t e r p r e t a t i o n t h a t 1-imited an employee's r i g h t t o s u e t h i r d p a r t i e s . Had t h e Convention chosen t o do s o , it could have amended A r t . 111, fj 6 , 1889 Mont. Const. t o diminsh t h e p r o t e c t i o n granted t o employers. The Convention concluded i n s t e a d t h a t t h e continued p r o t e c t i o n o f employers covered by workers' compensation was proper. A s p r e v i o u s l y d i s c u s s e d , t h e l e g i s l a t u r e ' s 1979 amend- ment o f § 39-71-411, MCA, expressed l e g i s l a t i v e i n t e n t t h a t t h e l i a b i l i t y o f an employer should n o t be broadened i n such a manner a s t o allow a t h i r d p a r t y t o recover from an employer. A s t h e b i l l ' s sponsor explained: With developments i n t h e product l i a b i l i - t y law, a r e l a t i v e l y new problem f o r employers has emerged. The i n j u r e d employee c o l l e c t s compensation. H e then sues t h e manufacturer o r seller o f t h e equipment which may have c o n t r i b u t e d t o h i s i n j u r y . The manufacturer o r seller o f t h e equipment then s u e s t h e employer f o r t h e amount sought by t h e employee on t h e t h e o r y o f implied o r e x p r e s s indemni- t y Thus, t h e employer i s confronted w i t h t h e p o s s i b i l i t y o f n o t only paying workers' compensation b e n e f i t s , b u t a l s o t h e amount c o l l e c t e d by t h e employee i n h i s a c t i o n a g a i n s t a t h i r d p a r t y . Oregon was confronted w i t h t h i s same problem and t o p r o t e c t t h e employers i n t h a t s t a t e from t h e g r e a t p o t e n t i a l l i a b i l i t y , it enacted an amendment t o its law t o p r o t e c t i t s employers and i n s u r e r s from such claims by t h e manufacturers o r sellers. Senate B i l l 322 i s designed t o accomplish t h e same r e s u l t i n Montana. Memorandum, Senator John E. Healy, Senate J u d i c i a r y Commit- t e e , February 7, 1979. L e g i s l a t i v e i n t e n t t o p r o t e c t employ- ers from l i a b i l i t y t o t h i r d p a r t i e s is c l e a r . N o d i s t i n c t i o n is made between c o n t r a c t u a l and e q u i t a b l e indemnity i n t h e statute itself or in the legislative history of the amendment. The Montana Legislature chose - not to grant a third party the right to recover on a contractual indemnity theory from an employer carrying workers' compensation insurance. That choice was consistent with the opinion of the people as expressed by their adoption of Art. 11, 1.6, Mont. Const. 1972. We conclude that neither the Convention nor the legislature desired to make a change which would grant a third party the right to recover from an employer on a contractual indemnity theory. Burlington Northern argues that a failure to allow recovery against Farmers impairs the obligation of its indemnification contract. This subject was discussed at length in Neel v. First Federal Sav. and Loan Assoc. (Mont. 19841, 675 P.2d 96, 41 St.Rep. 18. Both Art. 11, § 31, Mont. Const. and Art. 1, § 10, U. S. Const. prohibit the impairment of contracts. This Court pointed out in Neel that the two contract clauses have been construed interchangeably and set forth the test to be applied: The Supreme Court in Energy Reserves, noted that an examination of the legislation for validity under the contract clause requires a three step analysis. The threshold inquiry is "whether the state law has, in fact, operated as a substantial impairment of the contractual relationship." If there is no substantial impairment of the contractual relationship, the inquiry is ended. Second, if the legislation substantially impairs the contractual rights, " [t] he state, in justification, must have a significant and legitimate public purpose behind the regulation." Third, the adjustment of rights and responsibilities of contracting parties must be based " [ulpon reasonable conditions'' and be " [o] f a character appropriate to the public purpose justifying the legislation's adoption." As the opinion notes, unless the State is a party to the contract, courts will p r o p e r l y d e f e r t o 3 e g i s l a t i v e judgment on t h i s t h i r d s t e p . Neel, 675 P.2d a t 104-05, 4 1 St.Rep. 27-28 ( c i t a t i o n s o m i t t e d ) . W e find t h a t t h e s t a t u t o r y p r o h i b i t i o n a g a i n s t enforcement o f an indemnity c o n t r a c t i s a s u b s t a n t i a l impairment o f t h e c o n t r a c t u a 1 r e l a t i o n s h i p t h a t e x i s t s between Burlington Northern and Farmers. Thus, t h e t h r e s h o l d i n q u i r y is met. The second q u e s t i o n i s whether t h e S t a t e had a s i g n i f i c a n t and l e g i t i m a t e p u b l i c purpose i n e n a c t i n g t h e s t a t u t e . A s p r e v i o u s l y pointed o u t i n Shea, t h e aim o f t h e Workers' Compensation Act was t o compensate every employee f o r any i n j u r y s u f f e r e d d u r i n g t h e course o f employment, whether t h e employer was a t f a u l t o r n o t . Employers who p a r t i c i p a t e d i n t h e compensation system were guaranteed l i m i t e d l i a b i l i t y . The system was designed f o r t h e common good s o t h a t i n j u r e d workers would n o t become p u b l i c wards. This purpose i s both s i g n i f i c a n t and l e g i t i m a t e . The l e g i s l a t i v e purpose behind $ 39-71-411, MCA, i s t o continue t o guarantee l i m i t e d l i a b i l i t y t o employers covered by t h e Act. The s t a t u t o r y p r o h i b i t i o n a g a i n s t t h i r d p a r t y claims f o r c o n t r i b u t i o n o r indemnity was enacted w i t h t h e purpose o f p e r p e t u a t i n g Montana's workers' compensation system i n l i g h t o f r e c e n t t o r t law development. W e f i n d t h i s t o be a s i g n i f i c a n t and l e g i t i m a t e p u b l i c purpose, which meets t h e second p a r t o f t h e test. The t h i r d requirement i s t h a t t h e s t a t u t o r y adjustment of t h e r i g h t s and r e s p o n s i b i l i t i e s o f t h e c o n t r a c t i n g p a r t i e s must be based upon reasonable c o n d i t i o n s and be o f a c h a r a c t e r a p p r o p r i a t e t o t h e purpose of t h e s t a t u t e . I n N e e l , t h i s Court concluded t h a t where a S t a t e i s a n o t a p a r t y t o t h e c o n t r a c t i n q u e s t i o n , c o u r t s w i l l p r o p e r l y d e f e r t o l e g i s l a t i v e judgment. N e e l , 675 P.2d a t 105, 28 St.Rep. a t 27-28. W e conclude t h a t it i s p r o p e r t o d e f e r t o t h e l e g i s l a t i v e judgment on t h i s t h i r d p o i n t . W e recognize t h a t many c o u r t s have held t h a t an a c t i o n t o enforce an indemnity c o n t r a c t i s an a c t i o n s e p a r a t e from t h e o r i g i n a l claim f o r t h e i n j u r y o f t h e employee, and recovery can t h e r e f o r e be allowed a g a i n s t t h e employer. That i s n o t an a p p r o p r i a t e d i s t i n c t i o n under our Workers' Compensation A c t . A s pointed o u t i n C o r d i e r , a n employer should n o t b e held l i a b l e f o r damages s u s t a i n e d by an i n j u r e d employee, whether such damages a r e sought by t h e employee d i r e c t l y o r i n d i r e c t l y through recovery from a t h i r d p a r t y . I n t h e p r e s e n t c a s e , it i s p o s s i b l e t h a t Rais'l.er could recover a l l o f h i s damages i n t o r t from Burlington Northern i f he could prove t h a t t h e negligence o f Burlivgton Northern was a cause o f h i s i n j u r i e s , even though t h e p r i n c i p a l cause of such i n j u r i e s might have been t h e neg3igence o f h i s employer. I n t h e e v e n t o f such a recovery by t h e employee, Burlington Northern then could claim i t s r i g h t t o recover from Farmers on a c o n t r a c t u a l indemnity b a s i s . The end r e s u l t would b e t h a t t h e employee would recover i n d i r e c t l y from h i s employer a l l o f h i s t o r t damages f o r t h e i n j u r y f o r which he a l s o received compensation b e n e f i t s . That i n d i r e c t recovery i s i n a p p r o p r i a t e . I t would c o n t r a d i c t t h e b a s i c foundation of t h e workers' compensation law i n t h i s s t a t e , which imposes a b s o l u t e l i a b i l i t y upon an employer f o r i n j u r y t o employees and e l i m i n a t e s a l l o t h e r l i a b i l i t y on t h e p a r t of t h e employer. W e conclude t h a t t h e t h r e e - p a r t t e s t i n N e e l h a s been m e t . W e hold t h a t § 39-71-411, MCA, does n o t v i o l a t e t h e c o n s t i t u t i o n a l p r o h i b i t i o n s a g a i n s t impairment o f o b l i g a t i o n of contracts, and that Farmers can assert 5 39-71-All, MCA, as a complete defense to the third party action by Burlington Northern. Shea, Cordier, and the Judiciary Committee Minutes on th.e amendment to 5 39-71-411, MCA, set forth sound reasons for limiting employers' liability in order to protect the workers' compensation system in Montana. We find the l~gislature' s 1imit.ation on employers' liability to be constitutional. We conclude that an insured employer can properly assert 5 39-71-411, MCA, as a complete defense to a third party action for express indemnity. Justices Mr. Justice L. C. Gulbrandson dissenting. I concur with the response to certified question no. 1, but would respond "no" to certified question no. 2. The majority opinion states: The legislative purpose behind - - S 39-71-411, MCA, is to continue to guarantee limited liability to employers covered by the Act. The statutory prohibition against third party claims for constitution or indemnitv was enacted . L with the purpose of perpetuatiny Montana's workers' compensation system in light of recent tort law development. (Emphasis added.) In my view, the majority has done more than "continue" or "perpetuate" what was present at the time the legislature acted. This Court's previous pronouncements in DeShaw v. Johnson (1970), 155 Mont. 355, 472 P.2d 298 and Howard S. Wright Const. v. F. E . DeBeer Mech. (1979), 604 P.2d 323, 185 Mont. 47, were in line with the majority of the states in approving contractual indemnity. I would allow contractual indemnity, where the parties have had the opportunity to negotiate, prior to any claim, the distribution of the loss, as long as the injured employee's right to bring an action against the third party is not prejudiced. Under current law, where an employee recovers from a third party, the employer's insurer can share in the recovery through subrogation. Section 39-71-414, MCA. Where an employee recovers from a passively negligent third party, it may now be possible for the employer's insurer to share under subrogation, no matter how careless the employer has been in preparing the work place, and even though the employer has specifically contra.cted, through liability insurance, or otherwise, to be personally liable to the third party. In my opinion, the legislature never intended, nor considered, such a result. r