Title: Walsh Construction Co. v. Mutual of Enumclaw

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED:  January 27, 2005
IN THE SUPREME COURT OF THE STATE OF OREGON
WALSH CONSTRUCTION CO.,
Petitioner on Review,
v.
MUTUAL OF ENUMCLAW,
Respondent on Review.
(CC 0104-03398; CA A117368; SC S51104)
En Banc
On review from the Court of Appeals.*
Argued and submitted November 4, 2004.
James C. Chaney, of The Chaney Firm LLC, Eugene, argued the
cause and filed the briefs for petitioner on review. 
Thomas M. Christ, of Cosgrave Vergeer Kester LLP, Portland,
argued the cause and filed the brief for respondent on review. 
With him on the brief was Thomas W. Brown.
William H. Walters, of Miller Nash LLP, Portland, argued the
cause and filed the briefs on behalf of amici curiae Oregon-Columbia Chapter of Associated General Contractors, Associated
Oregon Industries, Pacific Northwest Regional Council of
Carpenters, Oregon Building Industry Association, Columbia
Corridor Association, Hoffman Construction Company, Senator Frank
Morse, Oregon Remodelers Association, Howard S. Wright
Construction Co., and Skanska USA Building, Inc.  With him on the
briefs was D. Gary Christensen.
Christopher A. Rycewicz, of Rycewicz & Chenoweth, Portland,
filed the brief on behalf of amicus curiae American
Subcontractors Association.
CARSON, C.J.
The decision of the Court of Appeals and the judgment of the
circuit court are affirmed.
*Appeal from Multnomah County Circuit Court, Jeffrey M. Kilmer, Judge pro tempore. 189 Or App 400, 76 P3d 164 (2003).
CARSON, C.J.
This action for breach of an insurance contract
involves the meaning of ORS 30.140(1).  That statute prohibits
construction agreements from requiring a person or that person's
insurer to indemnify another party against liability caused in
whole or in part by the indemnitee's negligence.  The question on
review is whether that prohibition extends to an additional
insured endorsement that plaintiff Walsh Construction Co. (Walsh)
obtained from a subcontractor on a policy that defendant Mutual
of Enumclaw (Enumclaw) had issued to the subcontractor.  Both the
trial court and the Court of Appeals concluded that the
prohibition applies.  We agree and affirm the decision of the
Court of Appeals and the judgment of the trial court.
The facts are straightforward.  Walsh, a general
contractor, entered into a subcontract with Ron Rust Drywall,
Inc. (Rust) to perform work on a Walsh project.  The subcontract
required Rust to procure liability insurance coverage naming
Walsh and its agents as additional insureds on Rust's liability
policy.  Rust's policy, which Enumclaw earlier had issued,
already contained a blanket additional insured endorsement that
automatically extended the coverage that the subcontract
required.
Later, a Rust employee was injured on the job and made
a claim against Walsh; Walsh tendered the claim to Enumclaw. 
Enumclaw, however, refused the tender, arguing, in part, that the
additional insured provision of the subcontract violated ORS
30.140.  Walsh then settled the case with the employee and
brought this breach of contract action against Enumclaw as an
additional insured under Rust's policy.
Both parties moved for summary judgment.  Enumclaw
argued that, because the additional insured provision of the
subcontract was void under ORS 30.140, Walsh was not a legally
cognizable additional insured and, therefore, was not entitled to
defense or indemnity from Enumclaw.  Walsh countered by arguing
that ORS 30.140 applies to only agreements to indemnify and that
an agreement to procure insurance is something different.  The
trial court rejected that argument, as did the Court of Appeals. 
Walsh Construction Co. v. Mutual of Enumclaw, 189 Or App 400, 76
P3d 164 (2003). (1)  We allowed Walsh's petition for review.
ORS 30.140(1) provides:
"Except to the extent provided under subsection
(2) of this section, any provision in a construction
agreement that requires a person or that person's
surety or insurer to indemnify another against
liability for damage arising out of death or bodily
injury to persons or damage to property caused in whole
or in part by the negligence of the indemnitee is
void."
(Emphasis added.)
Walsh focuses on the emphasized part of the statutory
wording set out above and argues that its subcontract with Rust
did not require either Rust or Rust's insurer, Enumclaw, to
indemnify Walsh.  Instead, in Walsh's view, the subcontract
required only that Rust procure insurance for Walsh's benefit.
Walsh continues by arguing that the term "indemnity" connotes
unlimited liability exposure, whereas insurance limits the
insurer's liability to the amount of coverage purchased.  As
support for its argument that the distinction makes a difference,
Walsh relies primarily upon Montgomery Elevator Co. v. Tuality
Community Hosp., 101 Or App 299, 790 P2d 1148, rev den, 310 Or
243 (1990), a split, en banc Court of Appeals decision
interpreting a workers' compensation statute, along with the
decisions from other jurisdictions upon which the majority
opinion in that case relied.
Enumclaw argues that Montogmery Elevator Co. is
inapposite and otherwise disagrees with Walsh's analysis,
asserting:
"Walsh's argument overlooks the statute's
reference to insurance.  ORS 30.140(1) doesn't just
invalidate any requirement that one person * * *
indemnify another.  It also invalidates any requirement
that that person's insurer * * * indemnify the other. 
* * * [T]hat language can refer only to a provision
that one party add the other to its insurance policy,
thus obligating its insurer to indemnify the other."
(Emphasis omitted.)
Our evaluation of the interpretive question that this
case presents leads us to conclude that, with respect to the text
and context of the wording at issue, the Court of Appeals'
discussion in this case correctly assessed the statute's meaning. 
Further, we perceive no benefit in attempting to reshape that
analysis for purposes of our own disposition.  Accordingly, we
adopt the following excerpt from the Court of Appeals' decision,
which Presiding Judge Haselton authored:
"We agree with [Enumclaw] that Montgomery Elevator Co. is, ultimately, inapposite.  That case involved an
entirely different statutory scheme, with materially
different statutory language. (3)  Rather, in construing
ORS 30.140, we must begin at the beginning –- with that
statute's text and context.  PGE v. Bureau of Labor and
Industries, 317 Or 606, 610-12, 859 P2d 1143 (1993).
"ORS 30.140 provides, in part:
"'(1) Except to the extent provided
under subsection (2) of this section, any
provision in a construction agreement that
requires a person or that person's surety or
insurer to indemnify another against
liability for damages arising out of death or
bodily injury to persons or damage to
property caused in whole or in part by the
negligence of the indemnitee is void.
"'(2) This section does not affect any
provision in a construction agreement that
requires a person or that person's surety or
insurer to indemnify another against
liability for damage arising out of death or
bodily injury to persons or damage to
property to the extent that the death or
bodily injury to persons or damage to
property arises out of the fault of the
indemnitor, or the fault of the indemnitor's
agents, representatives or subcontractors.'
"It is undisputed that the exception described in
subsection (2) does not apply in this case.  We are
concerned solely with the construction and application
of subsection (1).
"Neither ORS 30.140 itself nor any other
contextually pertinent Oregon statute defines
'indemnify.'  However, in standard usage, 'indemnify'
means
"'[t]o restore the victim of a loss, in whole
or in part, by payment, repair, or
replacement.  To save harmless; to secure
against loss or damage; to give security for
the reimbursement of a person in case of an
anticipated loss falling upon him.  To make
good; to compensate; to make reimbursement to
one of a loss already incurred by him.'
"Black's Law Dictionary 692 (5th ed 1979) (emphasis
added).  Thus, ORS 30.140(1) encompasses agreements by
which one party (or that party's insurer) is obligated
to assume at least partial financial responsibility for
the other party's liability.
"That understanding is corroborated by the
evolution of ORS 30.140(1).  As originally enacted in
1973, the statute provided, in part:
"'(1) Any provision in a construction
agreement which requires a person to
indemnify another against liability for
damage arising out of death or bodily injury
to persons or damage to property caused or
contributed to by the negligence of the
indemnitee in the design or by the sole
negligence of the indemnitee in the
inspection of the work that is the subject of
the construction agreement is enforceable
only if the indemnitee secures or maintains
insurance covering such risks for the
protection of the indemnitor.
"'(2) In no event shall the
indemnification obligation under such
provisions be greater than the limits of the
insurance secured by the indemnitee.'
"Or Laws 1973, ch 570, §[]2.  Thus, initially, the
statute permitted indemnification agreements in
construction contracts but, in subsection (2), 'capped'
any such obligation by reference to the indemnitee's
policy limits.
"In 1987, the statute was amended to combine the
original subsections (1) and (2) and to add a new
subsection (2):
"'(1) Any provision in a construction
agreement which requires a person to
indemnify another against liability for
damage arising out of death or bodily injury
to persons or damage to property caused or
contributed to by the negligence of the
indemnitee in the design or by the sole
negligence of the indemnitee in the
inspection of the work that is the subject of
the construction agreement is enforceable
only if the indemnitee secures or maintains
insurance covering such risks for the
protection of the indemnitor.  In no event
shall the indemnification obligation under
such provisions be greater than the limits of
the insurance secured by the indemnitee.
"'(2) Notwithstanding subsection (1) of
this section, any provision in a construction
agreement which requires a person or that
person's surety or insurer to indemnify
another against liability for damage arising
out of death or bodily injury to persons or
damage to property caused by the sole
negligence of the indemnitee is void.'
"Or Laws 1987, ch 774, § 25 (emphasis added).  Thus,
the critical statutory language in this case first
appeared in the 1987 version of the statute –- and
then, as part of an exception to the general principle
that an 'indemnification' obligation was permissible. 
As with the original statute, 'indemnification,' in the
1987 version, was not an absolute and open-ended
concept; rather, again, any 'indemnification'
obligation was necessarily limited by reference to the
extent of the indemnitee's insurance coverage.
"The pertinent portions of the statute underwent a
final change in 1995. (4)  The legislature deleted the
prior subsection (1), altered and renumbered the prior
subsection (2) as subsection (1), and added a new
subsection (2):
"'(1) [Notwithstanding subsection (1) of
this section,] Except to the extent provided
under subsection (2) of this section, any
provision in a construction agreement [which]
that requires a person or that person's
surety or insurer to indemnify another
against liability for damage arising out of
death or bodily injury to persons or damage
to property caused in whole or in part by the
[sole] negligence of the indemnitee is void.
"'(2) This section does not affect any
provision in a construction agreement that
requires a person or that person's surety or
insurer to indemnify another against
liability for damage arising out of death or
bodily injury to persons or damage to
property to the extent that the death or
bodily injury to persons or damage to
property arises out of the fault of the
indemnitor, or the fault of the indemnitor's
agents[,] representatives or subcontractors.'
"Or Laws 1995, ch [704], § 1 (new material in boldface; 
deleted material in italics and brackets).
"Thus, the 1995 amendments essentially inverted
the structure of the 1987 version of the statute. 
Whereas subsection (1) of the 1987 revision of the
statute defined a universe of permissible
indemnification provisions, subject to the
'notwithstanding' exception set out in subsection (2),
subsection (1) of the 1995 statute stated a general
prohibition of indemnification provisions, subject only
to the exception described in subsection (2).  In
addition, the general proscription, now embodied in
subsection (1), was expanded to encompass agreements to
indemnify for damages arising 'in part' from the
indemnitee's negligence.  Notwithstanding that
inversion and expansion, the statute remained constant
in prohibiting agreements by which a party's insurer
would be required to indemnify another party for
damages arising from the latter party's negligence.
"In sum, the text of ORS 30.140, and its historic
evolution, strongly suggests that the statute prohibits
not only 'direct' indemnity arrangements between
parties to construction agreements but also 'additional
insurance' arrangements by which one party is obligated
to procure insurance for losses arising in whole or in
part from the other's fault.
3.  In Montgomery Elevator Co., the issue was 'whether
the exclusive liability provision of the Workers'
Compensation Act, ORS 656.018(1), voids an agreement to
purchase liability insurance.'  100 Or App at 301.  ORS
656.018(1) (1989) provided, in part:
"'(a) The liability of every employer
who satisfies the duty required by ORS
656.017(1) [to provide workers' compensation
insurance for subject workers] is exclusive
and in place of all other liability arising
out of compensable injuries to the subject
workers * * * specifically including claims
for * * * indemnity asserted by third persons
from whom damages are sought on account of
such injuries * * *.  
"'* * * * *
"'(c) * * * [A]ll agreements or
warranties contrary to the provisions of
paragraph (a) of this subsection entered into
after July 19, 1977, are void.'
"In a closely divided en banc decision, [the Court of
Appeals] concluded that that statute did not apply to
'additional insured' agreements.
4. In 1997, the legislature amended subsection (3) of
the statute, defining the term 'construction
agreement.'  Or Laws 1997, ch 858, § 1.  That
subsection in that amendment had no bearing on any
issue presented here."
Walsh Construction Co., 189 Or App at 405-08 (emphasis, ellipses,
and brackets in original).
The Court of Appeals opinion then continues by
discussing the legislative history surrounding the 1995
amendments to ORS 30.140 as further support for its ultimate
conclusion:
"Whether the shifting allocation of risk is
accomplished directly, e.g., by requiring the
subcontractor itself to indemnify the contractor for
damages caused by the contractor's own negligence, or
indirectly, e.g., by requiring the subcontractor to
purchase additional insurance covering the contractor
for the contractor's own negligence, the ultimate –-
and [in this respect] statutorily forbidden –- end is
the same."
Walsh Construction Co., 189 Or App at 410.  As indicated above,
we agree with that conclusion.  However, because we also conclude
that the foregoing textual and contextual analysis of the
statutory wording goes further than "strongly suggest[ing]" the
statute's meaning, id. at 405, and instead demonstrates the
legislature's intent conclusively, we determine that
consideration of legislative history is unnecessary.  See PGE v.
Bureau of Labor and Industries, 317 Or 606, 611, 859 P2d 1143
(1993) ("If the legislature's intent is clear from the * * *
inquiry into text and context, further inquiry is
unnecessary.").\fn,2\
Having resolved the issue that the parties have
presented, we briefly turn to the contention of amici curiae
Oregon-Columbia Chapter of the Associated General Contractors and
others that this court should address a technical matter
pertaining to one aspect of the Court of Appeals' disposition: 
that the additional insured endorsement provision of the
subcontract is "void."  Amici argue that, in light of subsection
(2) of ORS 30.140, the Court of Appeals should have held that the
additional insured provision was void "only to the extent that,
in a given case, it would require a party 'to indemnify another'
for 'the fault of the indemnitor.'"
As noted above, however, Walsh did not contend that its
subcontractor Rust was negligent, either in whole or in part,
with respect to the employee's injury.  Therefore, even assuming
that amici are in a position to raise this issue, see, e.g.,
Finney v. Bransom, 326 Or 472, 481 n 8, 953 P2d 377 (1998)
(declining to consider argument that amicus advanced, "because it
was never presented in any recognizable form to the Court of
Appeals"), the Court of Appeals correctly decided this case
within the scope that the parties chose to litigate it.
The decision of the Court of Appeals and the judgment
of the circuit court are affirmed.
1. Walsh did not argue below, and does not contend here, that
Rust in any way was responsible for the employee's injury.
2. Walsh itself implicitly recognizes the strength of the
contextual evidence set out above by attempting to avoid it
altogether:
"[I]t has never been the case that 'context'
includes additions, deletions, and inversions in a
particular statute occurring years –- or in this case,
decades -– before the statute is interpreted by the
court.  That is legislative history * * *."
(Emphasis in original.)  On that account, Walsh simply is
incorrect.  See, e.g., Krieger v. Just, 319 Or 328, 336, 876 P2d
754 (1994) ("[W]ording changes adopted from session to session
are a part of context of the present version of the statute being
construed.").