Opinion ID: 1436216
Heading Depth: 1
Heading Rank: 2

Heading: liability to original plaintiff

Text: Maddux, citing 41 Am.Jur.2d, Indemnity, § 33, correctly points out that Pan American cannot recover its prejudgment settlement payment if it had no liability to the original plaintiff. Maddux further insists that to prevail, Pan American must prove actual and not merely potential liability to the original plaintiff. The trial court concluded that, were it not for the Worker's Compensation provisions, Pan American had sufficiently shown the potential liability to the original plaintiff so as to justify a right of recovery in the event that a claim for indemnification was established. Since this case is in a summary judgment posture, the first duty of this court is to review the record to determine if there are genuine issues of material fact with respect to Pan American's liability to the original plaintiff. The reason for this inquiry is that Maddux would be entitled to summary judgment if the record discloses no issue of material fact upon the question of Pan American's liability to the original plaintiff. The record is silent as to whether Pan American requested Maddux to defend the original action. During the course of settlement negotiations, Pan American did offer Maddux the opportunity to participate in the settlement. Maddux did not join in the settlement, and Pan American settled the original action for $72,000.00. The original plaintiff had initially sought a recovery of $751,500.00. There is no dispute as to these facts. There is a dispute, however, as to whether an independent-contractor defense could have been effectively urged. Maddux points to the well and lease service contract which provides that Maddux shall be an independent contractor. Maddux then asserts an absence of any evidence to indicate that Pan American assumed control over the work so as to destroy that status. On the basis of these considerations, and with the support of case law indicating that an owner's liability for the negligence of his independent contractor does not extend to allow a recovery by the contractor's employees, Maddux urges that Pan American was not liable. In order to determine whether there is a genuine issue of material fact as to Pan American's liability to the original plaintiff, we find it necessary to consider the applicable rules of law. In essence, Maddux contends that Pan American has the burden of proving its actual liability to the original plaintiff. We find the better-reasoned rule to be that if an indemnitor declines to approve a proposed settlement or to assume the burden of the defense, then the indemnitee is only required to prove a potential liability to the original plaintiff in order to support a claim against the indemnitor. Parfait v. Jahncke Service, Inc., 5 Cir., 484 F.2d 296, 305 (1973); and Morrissette v. Sears, Roebuck & Company, 114 N.H. 384, 322 A.2d 7 (1974). See, Chicago, R.I. & P.R. Co. v. Dobry Flour Mills, Inc., 10 Cir., 211 F.2d 785 (1954), cert. den. 348 U.S. 832, 75 S.Ct. 55, 99 L.Ed. 656. If there is no opportunity to either approve or defend, then the indemnitee must show actual liability to the original plaintiff. Morrissette v. Sears, Roebuck & Company, supra. In either event, the reasonableness of the settlement amount must be shown by the indemnitee. Parfait v. Jahncke Service, Inc., supra. We note that a request to defend is not a prerequisite to fix liability, Miller v. New York Oil Co., 34 Wyo. 272, 243 P. 118, 122 (1926), but it or a request to approve a settlement may be determinative of the indemnitee's burden of proof as to original liability. Any other rule would make the right to settle meaningless in cases where the indemnitor denies liability. Chicago, R.I. & P.R. Co. v. Dobry Flour Mills, supra. Nevertheless, the third-party defendant (indemnitor) must have the opportunity to show that the third-party plaintiff (indemnitee) was not liable to the plaintiff. Under these guidelines, and since Maddux refused to approve a proposed settlement, it was Maddux's burden to show an absence of questions of fact as to Pan American's potential liability to the original plaintiff. Although there is a good deal of evidence to the contrary, the record reveals evidence that Pan American retained authority to direct Maddux as to substances used in a workover operation, and that the rig operator for Maddux had no question but that he had authority to use the condensate placed at the well-site by Pan American in the workover operation. These matters structure a jury question as to whether Pan American made a reasonable, prudent and good-faith settlement. At a trial on the merits, the jury should be instructed to consider the likelihood of a recovery against Pan American, as well as the reasonableness of the settlement amount. See, Chicago, R.I. & P.R. Co. v. Dobry Flour Mills, supra. Finally, Maddux attempts to set up a dilemma by contending that if there was potential liability in the face of an independent-contractor defense, then Pan American would have been liable, at most, for its own negligence, thereby destroying any possibility of a breach of an independent duty by Maddux. This position tends to confuse the law of torts with the law of indemnification. Maddux's liability to Pan American, if any, is not to be determined by reference to Pan American's liability to the original plaintiff, but rather by reference to the independent obligations alleged to be owed by Maddux to Pan American. See, Chicago, R.I. & P.R. Co. v. Dobry Flour Mills, supra. We hold that Maddux was not entitled to a summary judgment on the issue of Pan American's liability to the original plaintiff.