Opinion ID: 2521108
Heading Depth: 4
Heading Rank: 2

Heading: Implied contractual indemnity

Text: AVCP also alleges that Vranckaert failed in its implied duty under the contract to perform the construction contract in a non-negligent manner. In Fairbanks North Star Borough v. Kandik Construction & Associates, we concluded that an action for implied contractual indemnity rests on the principle that a contract to perform a service contains an implied promise: 1) the indemnitor will perform the service in a proper manner, or 2) the indemnitor will discharge foreseeable damages resulting from improper performance, unless 3) the indemnitee's own participation in causing the damages precludes recovery. [19] Implied contractual indemnity is grounded on the principle 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. [20] It is not based on equitable considerations. [21] In Vertecs Corp. v. Reichhold Chemicals, a case that predates the current several liability statute, [22] we held that Alaska does not recognize a cause of action for implied indemnity between concurrently negligent tortfeasors. [23] We rejected Vertecs's argument that the common law would allow indemnity in any situation wherein one tortfeasor's conduct was not as blameworthy as another's and it would be just and fair as between the parties that the entire loss fall upon the indemnitor. [24] We determined that adoption of Vertecs's position would impose on courts the difficult task of determining what cases justify implied indemnity among concurrently negligent tortfeasors, would undermine the modern tort law goal of having each tortfeasor pay for the damages attributable to its own tortious acts, would discourage settlement, and would be judicially inefficient. [25] The same public policy considerations dictate our conclusion that AVCP may not recover on a theory of implied contractual indemnity from Vranckaert; the plaintiffs had fault-based claims pending against AVCP, and AVCP's settlement was to resolve a dispute about its own negligence rather than to extinguish Vranckaert's liability. Section 22 of the Restatement (Third) of Torts: Apportionment of Liability (1999) supports our conclusion. It requires the indemnitee to extinguish the liability of the indemnitor, by settlement or judgment, to collect indemnity. Section 22 provides: (a) When two or more persons are or may be liable for the same harm and one of them discharges the liability of another in whole or in part by settlement or discharge of judgment, the person discharging the liability is entitled to recover indemnity in the amount paid to the plaintiff, plus reasonable legal expenses, if: (1) the indemnitor has agreed by contract to indemnify the indemnitee, or (2) the indemnitee (i) was not liable except vicariously for the tort of the indemnitor or (ii) was not liable except as a seller of a product supplied to the indemnitee by the indemnitor and the indemnitee was not independently culpable. (Emphasis added.) Comment b to section 22 explains: [A]n indemnitee must extinguish the liability of the indemnitor to collect indemnity. The indemnitee may do so either by a settlement with the plaintiff that by its terms or by application of law discharges the indemnitor from liability or by satisfaction of judgment that by operation of law discharges the indemnitor from liability. (Emphasis added.) The theory behind these provisions is that the indemnitee has provided a benefit to the indemnitor by fully discharging the indemnitor's liability, making restitution appropriate. [26] Such a benefit is conferred only if the indemnitee guarantees that the indemnitor is protected from further claims by the plaintiffs that the indemnitor is liable. [27] To hold that a party must indemnify another while the party is still liable to the plaintiffs would lead to the unjust result that the indemnitor could face double liability. [28] It would also eliminate any incentive for parties to settle since settlement would not limit the indemnitor's exposure. [29] The Restatement (Third) of Torts: Apportionment of Liability § 22 and Comment b are consistent with AS 09.17.080, which provides for the apportionment of a damages award against a party according to the factfinder's allocation of that party's fault. [30] We conclude that AVCP's implied contractual indemnity claim must fail under our reasoning in Vertecs and under the Restatement (Third) of Torts § 22. To recover damages from Vranckaert on an implied contractual indemnity theory, AVCP must not itself have been liable, except vicariously, to the plaintiffs and must have obtained from the plaintiffs a release of liability for all direct claims that the plaintiffs had against Vranckaert. AVCP did not pay the Engler plaintiffs to settle the Engler plaintiffs' claims against Vranckaert. Indeed, the record indicates that the Engler plaintiffs had already settled with Vranckaert and had released AVCP from any vicarious liability claims it was asserting. In their settlement agreement with Vranckaert, the Engler plaintiffs expressly reserved all claims which have been made or which may in the future be made against [AVCP]. Only fault-based claims remained against AVCP at the time AVCP settled with the Engler plaintiffs. Therefore, the AVCP settlement included, at least in part, payment in consideration for the plaintiffs' release of claims relating to AVCP's own negligence. Neither did AVCP's settlement with the Nilsson plaintiffs effect a settlement of the claims the Nilsson plaintiffs had against Vranckaert. The settlement agreement makes no mention of Vranckaert. The agreement clearly indicates that its purpose is to settle direct claims asserted by the plaintiffs against AVCP as a landlord: Despite numerous tenant complaints and repeated warnings from the Bethel Fire Department, AVCP-RHA unreasonably and without justification failed to correct this problem in a timely manner. And even if AVCP had paid damages to the Nilsson plaintiffs for injuries caused by Vranckaert, AVCP failed to obtain a release of Vranckaert's liability from the Nilsson plaintiffs. Without a release of liability, Vranckaert was left exposed to pay directly to the plaintiffs its own share of the damages. Indeed, Vranckaert did subsequently settle with the Nilsson plaintiffs. If we were to conclude that Vranckaert must indemnify AVCP, Vranckaert would pay twice for the same injuries to the same plaintiffs. Because AVCP failed to obtain a release of liability for Vranckaert and because AVCP's settlements with both groups of plaintiffs only discharged AVCP's own share of fault, AVCP is not entitled to implied contractual indemnity.