Opinion ID: 2606174
Heading Depth: 2
Heading Rank: 2

Heading: the indemnity claim

Text: The Borough argues that the superior court erred in instructing the jury that it could recover from Roen only if all of the damages suffered by Kandik were legally caused by Roen's professional negligence. Specifically, the Borough contends that principles of comparative fault apply to common law indemnity claims between parties to a contract. Roen contends that the jury was properly instructed that the Borough was not entitled to indemnity from Roen unless the Borough was free from fault. After Kandik & Associates sued the Borough and Roen, the Borough cross-claimed against Roen. The Borough asserted three separate theories of recovery sounding in tort, contract, and indemnity. The superior court initially ruled that the Borough had no cause of action for indemnity; however, on appeal, we held that the Borough could assert a claim for common law indemnity, even if the claim was not within the contract indemnity provision. Roen, 727 P.2d at 760-62. The Borough proposed an instruction which would permit the jury to return a verdict for the Borough if it found that (1) Roen failed to exercise reasonable care, thereby committing negligence and breaching its contract with the Borough, (2) Roen's negligence caused Kandik & Associates' and Kandik Construction's damages, and (3) Kandik & Associates or Kandik Construction was entitled to recover damages from the Borough. This instruction has elements of all three causes of action asserted in the crossclaim. The court instructed the jury that Roen was liable to the Borough only if (1) Roen was professionally negligent, (2) all of Kandik's damages were legally caused by Roen's negligence, and (3) none of Kandik's damages resulted from the Borough's negligence or breach of contract. The Borough contends that the second prong of this instruction is erroneous, because it misstates the cause of action for implied contractual indemnity. We agree that the instruction is wrong, but for reasons different from those asserted by the Borough. Indemnity is generally defined as the obligation of one party to make good a loss suffered by another. Bear Creek Planning Committee v. Title Ins. & Trust Co., 164 Cal. App.3d 1227, 211 Cal. Rptr. 172, 178 (1985). The obligation may arise from an express contractual indemnity provision, it may be implied from a contract which does not otherwise require indemnity, or it may arise from the equities surrounding a particular claim. Id. To date we have addressed the cause of action for implied indemnity only in the context of allocating liability among joint tortfeasors. E.g., State Mechanical v. Liquid Air, 665 P.2d 15, 17 (Alaska 1983) (special verdict that claimant was actively negligent precluded assertion of indemnity claim); Vertecs Corp. v. Reichhold Chemicals, 661 P.2d 619 (Alaska 1983). In contrast, an innocent party who merely passes on an already defective product in the stream of commerce is entitled to implied noncontractual indemnity from the product producer, provided that the producer had proper notice of the litigation against the innocent party and an opportunity to undertake the defense of the case. Koehring Mfg. v. Earthmovers of Fairbanks, 763 P.2d 499, 503 (Alaska 1988); Ross Laboratories v. Thies, 725 P.2d 1076, 1081 (Alaska 1986); D.G. Shelter Prods. v. Moduline Indus., 684 P.2d 839, 841 (Alaska 1984). Of course, a concurrently negligent tortfeasor may be entitled to indemnity pursuant to an express indemnity agreement. E.g., City of Juneau v. Alaska Elec. Light & Power Co., 622 P.2d 954, 956 & 958 n. 8 (Alaska 1981). In Bear Creek, a homeowners association was held liable for slander of title after it attempted to enforce restrictive covenants which had not been properly recorded against all lots in a subdivision. 211 Cal. Rptr. at 177. The association then sued a title company which had breached its contractual obligation to record the covenants. Id. The court noted that the rationale underlying the cause of action for implied contractual indemnity was that the indemnitor's agreement to perform a contract necessarily implies an obligation to perform in a proper manner and to discharge foreseeable damages resulting to the plaintiff as a result of its breach. Id. at 178. Unlike a claim for implied indemnity among tortfeasors, an implied contractual indemnity claim is grounded upon the indemnitor's breach of duty owing to the indemnitee to properly perform its contractual duties. Id. at 179. The indemnitee's liability to a third party must be a foreseeable result of the indemnitor's breach of contract. Id. The court stated: Implied contractual indemnity is not based upon equitable considerations, but upon a contractual relationship between the indemnitee and indemnitor from which is implied an obligation on the part of the indemnitor to assume and pay any foreseeable damages assessed against the indemnitee as a result of the indemnitor's breach of contract. Id. at 180. Active participation by the indemnitee in the indemnitor's wrong may preclude recovery on an implied contract theory. Id. at 181. See also Zontelli & Sons v. City of Nashwauk, 373 N.W.2d 744 (Minn. 1985) (permitting a project owner to recover partial indemnity from the project engineer, because the owner incurred liability to the contractor as a foreseeable result of the breach of a contract duty owed by the engineer to the owner). We fail to perceive how recovery under a theory of implied contractual indemnity under the circumstances presented here adds anything to the relief available to the Borough under its causes of action for tort and breach of contract. If Roen committed professional malpractice, the Borough is entitled to recover all damages proximately resulting from the tort. If Roen breached the implied warranty of plans and specifications, the Borough could sue Roen for breach of contract and recover all damages that Roen had reason to foresee as a probable result of the breach. Native Alaskan Reclamation & Pest Control v. United Bank Alaska, 685 P.2d 1211, 1219-20 (Alaska 1984); Restatement (Second) of Contracts § 351 (1981). In either case, Roen may defend on the grounds that the damages were not foreseeable, or that they did not proximately result or naturally flow from its conduct. In this case, we believe that the jury verdict in favor of Roen must be reversed. The Borough properly pleaded direct causes of action against Roen sounding in tort and contract. It then submitted a jury instruction which, although not a model of clarity, contained the essential elements of these claims. However, the instruction actually read to the jury permitted the Borough to recover only if it was not responsible for any of the damages to Kandik & Associates or Kandik Construction. This was an erroneous statement of the law which may have affected the jury's verdict; therefore, the Borough is entitled to a new trial on the question whether Roen is liable for any part of the damages assessed against the Borough. Given the availability of damages under these theories, we do not decide whether principles of comparative fault apply to contractual implied indemnity claims. The decision of the superior court is REVERSED in part and REMANDED. The Borough is entitled to a new trial on the issue of the amount of damages, if any, recoverable by Kandik & Associates or Kandik Construction under recognized theories of tort or contract. The Borough is also entitled to a new trial on the question whether Roen is liable to the Borough under a theory of tort or contract.