Opinion ID: 2566006
Heading Depth: 1
Heading Rank: 6

Heading: The good-faith ruling and TDC's claim of implied indemnity under NRS 17.245

Text: When one party is subject to liability, which, as between that party and another, the other should bear, the first party is entitled to full indemnity. [18] The right of indemnity rests upon a difference between the primary [active] and the secondary [passive] liability of two persons, each of whom is made responsible by the law to an injured party. The difference between primary and secondary liability depends on a difference in the character or kind of wrongs that cause the injury and in the nature of the legal obligation owed by each of the wrongdoers to the injured person. [19] Evidence of only `passive negligence' ... is insufficient to establish `active wrongdoing' by a party seeking indemnity. [20] Additionally, [i]n order for one tortfeasor to be in a position of secondary responsibility vis-a-vis another tortfeasor, and thus be entitled to indemnification, there must be a preexisting legal relation between them, or some duty on the part of the primary tortfeasor to protect the secondary tortfeasor. [21] TDC bases its implied indemnity claim upon the notion that, but for Vincent's conduct, TDC would never have been placed in the coverage dilemma described above. In short, to establish a claim of indemnity against Vincent, TDC must demonstrate that Vincent was primarily liable for the injuries to Woods. [22] We decided in Medallion Development v. Converse Consultants [23] that claims for implied indemnity were not barred by a finding that an indemnity obligor settled in good faith under NRS 17.245. However, following our decision in Medallion, the 1997 Nevada Legislature amended NRS 17.245 to provide that a good-faith settlement insulates the settling party from claims of both contribution and implied indemnity. But, in contrast to TDC's contribution claim, TDC's failure to extinguish Vincent's liability does not bar TDC's claim of implied indemnity. [24] Because the district court did not hold an evidentiary hearing and made no findings of fact concerning the indemnity claim, we review the record independently under MGM and Velsicol to determine whether the district court committed reversible error in approving the Vincent settlement as in good faith. [25] TDC attacks the good faith of the settlement on the following grounds: that it was entered into without arm's-length negotiations, that the payment was nominal in relation to Vincent's actual liability to Woods, that it represented only a minute portion of Vincent's policy limits, that it was improperly calculated to cut off TDC's rights against Vincent, and that the settlement did not fairly account for Vincent's potential indemnity liability. As noted, the district court was not restricted to the MGM factors for determining good faith, including the fact that Vincent settled for an amount representing only a small fraction of his insurance limits. Relative culpability of the parties to an implied indemnity action is also an important factor in any determination concerning good faith under NRS 17.245. Here, TDC would be obligated to pay the benefits only in the event the coverage was placed on an effective date before Woods' accident; that is, if the accident occurred after the date after postmark. Thus, TDC could arguably enjoy a right of implied indemnity if it could persuade the fact-finder in the subsequent indemnity action that Vincent fraudulently backdated his postage meter to cover up his failure to timely forward the application to TDC, and that TDC's actions in accepting and then rejecting coverage were passive in relation to Vincent's fraud. However, the litigation below was marked by considerable disputes over whether TDC initially accepted the coverage effective before the accident, whether Vincent fraudulently backdated the application, and whether Vincent's role in the matter affected acceptance of the coverage, e.g., whether Vincent's date of postmark governed acceptance of the risk. Because resolution of these highly contested issues were in large part determinative of whether TDC was actively at fault in its refusal to cover Woods' February 11, 1998, accident, the validity of the implied indemnity claim was far from clear. We acknowledge, as do the parties, that the TDC settlement was designed to account for its potential joint and several exposures to awards of special and general compensatory damages, and its several exposure to Woods' claim of punitive damages. To the extent that TDC's settlement was intended to extinguish its liability in connection with its active fault, TDC would have no substantive claim in implied indemnity, regardless of whether Vincent's settlement was entered into in good faith under NRS 17.245. [26] Thus, an erroneous ruling on that issue would only prejudice TDC to the extent that its settlement extinguished liabilities that could, as a matter of law, be subject to a right of implied indemnity. Again, although a claim of active fault on the part of the party seeking indemnity in connection with monies paid in settlement is an affirmative defense to the separate indemnity action, a district court may consider active fault issues in deciding whether to approve a separate settlement by the indemnity defendant as in good faith under NRS 17.245. The district court's order of approval in this case analyzes the good-faith issue as it relates to the potential contribution claim: [b]ased on the record or lack thereof at this point, TDC has failed to show that the [$25,000] agreed to by [Woods] is disproportionately lower than Vincent's fair share of the damages. But it contains no such analysis of the settlement in terms of its implication for TDC's potential implied indemnity claim. As noted, the litigation below over the good faith of Vincent's settlement was marked by highly contested issues of fact that were in large part determinative of whether TDC was actively at fault in its refusal to cover Woods' accident. Because the district court apparently approved the settlement as in good faith without evaluating the merits of the potential indemnity claim, and because the district court is in a far superior position to evaluate the factual issues underlying this good-faith determination, we reverse the order insofar as it relates to TDC's separate indemnity claims and remand this matter for a complete analysis, taking into consideration the MGM factors, the extent to which the settlement may not have reflected liability for compensatory and punitive damages arising from the claims of active fault against TDC, and whether the Vincent settlement was otherwise fair in relation to TDC's chances of success on the substantive implied indemnity claim. [27] In this way, the district court can completely determine whether Vincent's settlement should pass muster under NRS 17.245. [28]