Court Opinion

ID: 9560128
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:43:28.840973+00
Date Added: 2024-06-11T09:12:11.152489
License: Public Domain

OPINION
GORDON, Chief Justice.
JURISDICTION
Washington Elementary School District No. 6 (School District) petitioned for review of the court of appeals’ memorandum decision reversing the trial court’s ruling that the contract indemnity provision between the School District and Baglino Corporation (Baglino) obligated Baglino to indemnify the School District for losses caused in part by the School District’s active negligence. Specifically, the issue is whether the indemnity provision in the standard American Institute of Architects (AIA) construction contract obligates the contractor/indemnitor (Baglino) to indemnify the owner/indemnitee (School District) for losses caused in part by the indemnitee’s active negligence. We have jurisdiction pursuant to Ariz. Const, art. 6, § 5(3), and A.R.S. § 12-120.24.
FACTUAL AND PROCEDURAL HISTORY
The parties stipulated to the basic facts in the trial court. The School District and Baglino entered into a contract for the construction of an addition to Arroyo Elementary School. During construction, a subcontractor stacked roof trusses on the project site. A child was injured when one of the trusses fell on him. The parties stipulated that (1) the subcontractor was actively negligent in selecting the site and manner in which the trusses were stacked, (2) the School District’s employees were aware of the manner in which the trusses were stacked and the School District was actively negligent for failing to take steps to either warn of or eliminate the unreasonable risk of harm caused by the trusses, and (3) the negligence of the subcontractor and the School District each contributed to the child’s injuries.
The contract between the School District and Baglino contained an indemnification provision that states:
4.18 INDEMNIFICATION
4.18.1 To the fullest extent permitted by law, the Contractor [Baglino] shall indemnify and hold harmless the Owner [School District] and the Architect and their agents and employees from and against all claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from the performance of the Work, provided that any such claim, damage, *60loss or expense (1) is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including the loss of use resulting therefrom, and (2) is caused in whole or in part by any negligent act or omission of the Contractor, any Subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, regardless of whether or not it is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or otherwise reduce any other right or obligation of indemnity which would otherwise exist as to any party or person described in this Paragraph 4.18.
The School District tendered the defense of the injured child’s claim to Baglino, but Baglino refused to defend the School District. Ultimately, the School District settled the child’s claim. It then cross-claimed against Baglino. The trial court, based on the stipulated facts, granted judgment to the School District for the amounts it expended in defending and settling the injured child’s claim. The court of appeals reversed on the basis that the indemnity provision failed to meet the stringent standards required for indemnification of an indemnitee for its own acts of negligence. Washington Elementary School Dist. No. 6 v. Baglino Corp., 1 CA-CV 89-308 (Nov. 29, 1990) (mem.). Because we find the provision’s language indemnifies the School District from the consequences of its own negligence, we reverse the court of appeals’ decision and deny Baglino’s request for attorney’s fees.
DISCUSSION
The School District argues that the court of appeals incorrectly applied existing standards for interpreting and enforcing the indemnity provision. It also argues that these standards should be modified by this court in light of a modern trend toward giving broader effect to indemnity provisions that parties use to allocate risks between them.
Baglino responds that the court of appeals correctly applied the rule that a party seeking indemnity from the consequences of its own negligence must express that intent in clear and unequivocal terms. It further states that Arizona has followed the modern trend since 1966, when the court of appeals held that contracts indemnifying an indemnitee against his own negligence do not violate public policy. See Graver Tank & Mfg. Co. v. The Fluor Corp., 4 Ariz.App. 476, 478, 421 P.2d 909, 911 (1966).
Both parties agree that the indemnity provision applies if it clearly and unequivocally states that a party may be indemnified for its own negligence. The provision at issue here required Baglino to indemnify the School District “regardless of whether or not [the injury] is caused in part by a party indemnified hereunder.” (Emphasis added.)
The court of appeals apparently relied on Allison Steel Manufacturing Co. v. Superior Court to reverse the trial court. See 22 Ariz.App. 76, 523 P.2d 803 (1974). The court of appeals and both parties appear to have misread this case as construing language identical to the indemnity provision at issue here. The parties claim that Allison Steel held that the indemnification clause in the contract, which is identical to the clause in this case, was not sufficiently clear and unequivocal to provide indemnity for a negligent indemnitee.
Allison Steel involved a dispute between a general contractor (Sundt) and a subcontractor (Allison) as to liability for injuries suffered by any subcontractor employee. Sundt’s contract with Allison included an indemnity provision whereby Allison agreed to indemnify Sundt, and further agreed that
[Allison] shall assume toward the Contractor all the obligations and responsibilities that the Contractor assumes toward the Owner, as set forth in the Principal Contract ... and other documents ... insofar as applicable, generally or specifically, to the materials to be furnished, the work to be performed and the *61responsibilities to be assumed under this Subcontract.
Id. at 78-79, 523 P.2d at 805-06.
The Principal Contract, which was incorporated by reference, contained an indemnity provision identical to the provision used here except that it did not include the introductory phrase “[t]o the fullest extent permitted by law.” See id.
Allison Steel actually held that the subcontract failed to meet “the stringent standard” that “the intention to compensate the indemnitee for his own negligence must be expressed in ‘clear and unequivocal terms.’ ” Id. at 80, 523 P.2d at 807. It found that the incorporation by reference did not meet this standard. It did not construe that indemnity provision in the contract between Allison and the owner as inadequate; in fact, it did not construe the provision at all. Therefore, we do not find Allison Steel dispositive as to whether the indemnification clause in this case indemnifies the School District for its active negligence.
In Graver Tank, the court of appeals held that contracts indemnifying a party against his own negligence do not violate public policy. 4 Ariz.App. at 478, 421 P.2d at 911. Since then, Arizona courts have enforced such contracts. See, e.g., Superior Cos. v. Kaiser Cement Corp., 152 Ariz. 575, 733 P.2d 1158 (App. 1986); Estes Co. v. Aztec Constr., Inc., 139 Ariz. 166, 677 P.2d 939 (App.1983). An indemnity contract, however, will be strictly construed and generally will not protect an indemnitee against his own negligence unless the indemnitor's obligation to do so is expressed in clear and unequivocal terms. Pioneer Roofing Co. v. Mardian Constr. Co., 152 Ariz. 455, 474, 733 P.2d 652, 671 (App.1986); Allison Steel, 22 Ariz. App. at 80, 523 P.2d at 807.
It has been the general rule that under a general indemnity agreement “an indemnitee is entitled to indemnification for a loss resulting in part from an indemnitee’s passive negligence, but not active negligence.” Pioneer Roofing, 152 Ariz. at 474, 733 P.2d at 671; Estes Co., 139 Ariz. at 169, 677 P.2d at 942. A general indemnity clause is one that does “not specifically address what effect the indemnitee’s negligence [will] have on the indemnitor’s obligation to indemnify.” Pioneer Roofing, 152 Ariz. at 474, 733 P.2d at 671; see Estes Co., 139 Ariz. at 168-69, 677 P.2d at 941-42; Morton Thiokol, Inc./Morton Salt Div. v. Metal Bldg. Alteration Co., 193 Cal.App.3d 1025, 1027-28, 238 Cal.Rptr. 722, 723 (Cal.App.1987).
Although we ordinarily follow the above rule, that a party will not be indemnified for its own active negligence under a general indemnification agreement, we also believe that a mechanical application of it should be avoided in determining the parties’ intent. Relying exclusively on the active/passive distinction in determining whether an indemnity agreement applies in a given case may prevent an agreement from being enforced as the parties intended. Some states, including Arizona, look at the contract itself or at the all-encompassing language of the indemnification clause in order to find an intent to indemnify the indemnitee for his own negligence. Superior Cos., 152 Ariz. at 577, 733 P.2d at 1160; Morton Thiokol, 193 Cal.App.3d at 1027-28, 238 Cal.Rptr. at 723; Drzewinski v. Atlantic Scaffold & Ladder Co., 521 N.Y.S.2d 216, 218, 70 N.Y.2d 774, 777, 515 N.E.2d 902, 904 (1987). There is, however, no requirement that the term negligence actually be used, or that specific reference be made to liability arising out of the indemnitee’s negligence. See, e.g., Gulf Oil Corp. v. Burlington N. R.R., Inc., 751 F.2d 746, 748-49 (5th Cir.1985) (construing Texas’ “clear and unequivocal rule”); Drzewinski, 515 N.Y.S.2d at 218, 70 N.Y.2d at 777, 515 N.E.2d at 904.
Therefore, we must determine whether the words in this particular indemnity provision, “regardless of whether or not [the injury] is caused in part by a party indemnified hereunder,” clearly and unequivocally protect the School District against its own active negligence. We believe they do. The words “caused in part” are broad enough to encompass behavior that includes the indemnitee’s active negli*62gence. By using such broad language, it appears that the parties contemplated coverage for any type of damage caused by the negligent behavior of the indemnitor, even though also caused in part by the active negligence of the party indemnified. Thus, we hold that where, as here, the agreement clearly and unequivocally indicates that one party is to be indemnified, regardless of whether or not that injury was caused in part by that party, indemnification is required notwithstanding the indemnitee’s active negligence.
DISPOSITION
We conclude that the indemnity provision in the contract between Baglino and the School District obligates Baglino to indemnify the School District for losses caused in part by the School District’s active negligence. We vacate the court of appeals’ decision and affirm the trial court’s ruling. Baglino's request for attorney’s fees is denied.
FELDMAN, Y.C.J., and CAMERON and MOELLER, JJ., concur.