Opinion ID: 1272625
Heading Depth: 2
Heading Rank: 2

Heading: Indemnification Agreement

Text: As an alternate means of locating the insurance coverage necessary to avoid application of sovereign immunity principles, Appellant points to NECC's execution of an indemnification agreement under which it agreed to hold the Department and its employees harmless from all liability for damage to persons or property that may accrue during and by reason of the acts or negligence of the Contractor [NECC], his agents, employees, or subcontractors if there be such. Appellant posits that the indemnification agreement while not necessarily synonymous with insurance, is nevertheless the practical equivalent of `insurance' for purposes of the analysis set forth in Pittsburgh Elevator .... This argument does not withstand analysis. As we explained in Marlin v. Wetzel County Board of Education, 212 W.Va. 215, 569 S.E.2d 462 (2002), indemnification agreements are by nature essentially non-insurance contractual risk transfers. Id. at 221, 569 S.E.2d at 468. Without question, as the trial court determined, in the event any liability for damage to persons or property were to accrue to the Department as a result of the facts and circumstances set for[th] ... in the Complaint, as amended, the hold harmless provision set forth in the contract between NECC and the Department would apply. Notwithstanding the potential application of a hold harmless agreement, [13] such an agreement and its risk-shifting provisions are not the functional equivalent of the liability insurance required by Pittsburgh Elevator for purposes of avoiding the bar of sovereign immunity. See 172 W.Va. at 744, 310 S.E.2d at 676, syl. pt. 2. First and foremost, the indemnification agreement protects the Department from damages arising from the acts of NECC and its subcontractors. Any damages attributable to the acts of the Department and Mr. Smith are not covered by the hold harmless language of the agreement. Thus, the only risk-shifting that the indemnification agreement has the potential to effect [14] is as to the acts of non-governmental entities. Because the state would still be at risk for damages awarded in connection with either the actions of the Department or Mr. Smith, the foundational premise for sovereign immunityprotecting the state's purseremains in place. At the heart of our reasoning in Pittsburgh Elevator was a recognition that the fulcrum which enables suits to be instituted against the State and its agencies is the legislative provision [15] proscribing an insurer who contracts with the Board of Risk from asserting sovereign immunity as a bar to litigation. See 172 W.Va. at 756-57, 310 S.E.2d at 688-89. We were clear in that decision that the bar of sovereign immunity is lifted only to the extent of the liability insurance procured by the state through the Board of Risk. Because the indemnification agreement does not stand in the place of an insurance policy issued by an insurer to the Board of Risk for the purpose of protecting the state from damages accruing to it, state funds theoretically remain at risk with regard to claims asserted by Appellant against the Department and Mr. Smith. Therefore, the indemnification agreement is not the practical equivalent of insurance for purposes of this Court's decision in Pittsburgh Elevator. [16]