Court Opinion

ID: 9469545
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:43:21.822373+00
Date Added: 2024-06-11T17:41:26.629416
License: Public Domain

NORRIS, Circuit Judge,
dissenting:
We seldom encounter a case which may be resolved on the basis of black letter law. Here we are presented with just such a case. Although state worker’s compensation schemes typically provide that an employer’s liability under the worker’s compensation system is an exclusive liability, “[t]he clearest exception to the exclusive-liability clause is the third party’s right to enforce an express contract in which the employer agrees to indemnify the third party for the very kind of loss that the third party has been made to pay to the employee.” 2A A. Larson, Workmen’s Compensation Law, § 76.42 at 14-630 to 14-631 (1982). Apparently underestimating the force of the black letter rule, the majority today voids an express contract between an employer and a third party on the ground that the contract is barred by the Nevada Industrial Insurance Act (NIIA).
With but a single exception, all federal and state courts adhere to the black letter rule and recognize that an express indemnity contract is an exception to an employer’s otherwise exclusive liability under a state worker’s compensation scheme. See id. § 76.42 at 14.631 n.37 (citing cases). The single exception is Alabama, whose courts stand alone in their refusal to follow the mainstream of worker’s compensation decisions involving express indemnity contracts. Id. § 76.43 at 14-639 to 14-641. I would adhere to the black letter rule because neither the structure, the language, nor the policies of the Nevada worker’s compensation scheme provide any basis for refusing to enforce an express indemnity contract between an employer and a third party.
The structure of the NIIA makes it clear that an employer’s liability to third parties is independent from its liability to its employees. That independence is not a “legal fiction” as the majority suggests. The NIIA’s scheme comprehensively describes the legal relationship between employer and employee with respect to work-related injuries, creating three types of liability running from the employer to the employee.1 Since the NIIA creates no liability running from an employer to third parties, an employer’s contractual obligation to indemnify a third party is independent of any obligations imposed by the NIIA.
The language of the NIIA makes an employer’s liability to an employee exclusive in two ways. First, Nev.Rev.Stat. §§ 616.-270 2 and 616.3703 contain general language *1274limiting the liability from an employer to an injured employee to the liability created by the NIIA. The majority concedes that an express indemnity contract might be an exception to the general exclusivity language found in sections 616.270 and 616.370. The majority instead relies heavily on the more explicit language of Nev.Rev.Stat. § 616.265, which prohibits indemnity contracts which would “modify, change or waive any liability created by this chapter [the NIIA].”4 This reliance is misplaced. Section 616.265 prohibits indemnity contracts only if they affect rights created by the NIIA. Since an express indemnity contract between an employer and a third party creates a contractual liability to a third party, rather than waiving or modifying any liability created by the NIIA, such an agreement is not barred by the language of section 616.265.
The majority asserts that the express language of section 616.265 bars voluntary indemnity contracts between employers and third parties because the Nevada statute is unique among state worker’s compensation statutes in its specific prohibition of indemnity contracts. The Nevada statute, however, is not unique. Wash.Rev.Code § 51.-04.060 expressly prohibits an employer from entering into any contract to “exempt himself from the burdens or to waive the benefits [of the Washington worker’s compensation scheme].”5 Washington courts have nonetheless held enforceable express indemnity contracts between employers and third parties, reasoning that the worker’s compensation scheme, which regulates employer-employee relationships, does not void a voluntary contractual relationship separate from the employer-employee relationship. Redford v. City of Seattle, 94 Wash.2d 198, 203-04, 615 P.2d 1285, 1288 (1980).
The Washington Supreme Court further reasoned that express contracts of indemnity do not undermine the policy of the Washington Industrial Insurance Act, to insure compensation for injured workers and their families. Id. The policy of assuring benefits to injured employees and their families is common to all worker’s compensation schemes.6 See, e.g., Grady v. Appalachian Electric Power Co., 126 W.Va. 546, 29 S.E.2d 878, 881 (1944) (protection of worker’s right to compensation for injury is primary policy of worker’s compensation scheme). Although the NIIA does not contain an express statement of purpose, there is no evidence that the Nevada’s worker’s compensation scheme is based on a policy different from that underlying other worker’s compensation schemes.
The majority attempts to distinguish the worker’s compensation, statutes of the states which are not as explicit as the Washington and Nevada statutes in prohibiting contracts of indemnity between employers and employees. Many worker’s compensation statutes nonetheless contain strong language proclaiming the exclusivity of worker’s compensation rights and remedies, and are thus susceptible to the inter*1275pretation that indemnity agreements are prohibited. For example, New Mexico Rev. Stat. § 52-1-8 limits an employer’s liability with the following language: “[A]ll causes of action, actions at law, suits in equity and proceedings whatever, and all statutory and common-law rights and remedies ... accruing to any and all persons whomsoever, are hereby abolished except as provided in the Workmen’s Compensation Act.” Despite this strong language, the New Mexico Court of Appeals held enforceable an express contract of indemnity between an employer and a third party. City of Artesia v. Carter, 94 N.M. 311, 314, 610 P.2d 198, 201 (1980).
The majority’s attempt to distinguish Artesia is unworkable because the policy issues facing us here are precisely the ones the Artesia court confronted:
Enforcing express contracts of indemnity is no more than enforcing the loss distribution agreed to by the contracting parties .... This arrangement to distribute the loss does not offend any policy concerned with securing the payment of workmen’s compensation; the compensation payable is not affected by the indemnity agreement. This arrangement does not depart from the policy of limiting employer’s liability; that policy remains intact.... If the employer desires to voluntarily relinquish his statutory protection, he may do so.
Id. As the policy considerations are the same no matter how explicitly a state worker’s compensation statute bars indemnity contracts between employers and employees, I conclude that the majority has no principled basis for escaping the force of the black letter rule.
While ignoring the black letter rule and relevant policy considerations, the majority relies on the Nevada Supreme Court’s “unnecessary” dictum in Corrao Construction Co. v. Curtis, 94 Nev. 569, 584 P.2d 1303 (1978). See majority opinion at 3790.7 Because the case at bar is a diversity action, this court must look to state law for the appropriate rule of decision. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Where the applicable state law is unresolved, however, this court has a duty to “use its own best judgment in predicting how the state’s highest court would decide the case.” Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir. 1980). The exercise of our best judgment does not require us to follow dictum of the state court. It is my view that if the Nevada Supreme Court were to address the issue squarely, it would look to the well-reasoned decisions of other jurisdictions and hold that the Nevada worker’s compensation scheme does not void express indemnity contracts between an employer and a third party.
.1 see no reason for not enforcing the indemnity contract between Comstock and Nevada Power. Indemnification agreements do not deprive injured workers of the compensation guaranteed them by worker’s compensation schemes. Because the NIIA does not alter an employee’s right to sue third parties, an employer’s agreement to indemnify a third party is a practical and desirable response to the everyday problem of risk allocation in business dealings.
In sum, neither the structure of the Nevada worker’s compensation scheme, the statutory language, nor its policies support the majority’s conclusion that section 616.-265 voids the express contract of indemnity here. Indeed, the practipal aspects of this case suggest that leaving parties free to negotiate the allocation of risk of loss resulting from work-related injuries is economically sound, socially desirable, and consistent with the goal of insuring compensation for injured workers.
I dissent.

. The three types of liability running from the employer to the employee are the employer’s obligation to pay compensation, Nev.Rev.Stat. § 616.270; the employer’s duty to render all necessary first aid, Nev.Rev.Stat. § 616.340; and the common law liability created by an employer’s failure to comply with the provisions of the NIIA, Nev.Rev.Stat. § 616.375.

. Nev.Rev.Stat. § 616.270 provides in part:
1. Every employer within the provisions of this chapter, and those employers who shall accept the terms of this chapter and be governed by its provisions, as in this chapter provided, shall provide and secure compensation according to the terms, conditions and provisions of this chapter for any and all personal injuries by accident sustained by an employee arising out of and in the course of the employment.
3. In such cases the employer shall be relieved from other liability for recovery of damages or other compensation for such personal injury, unless by the terms of this chapter otherwise provided.

. Nev.Rev.Stat. § 616.370 provides in part:
1. The rights and remedies provided in this chapter for an employee on account of any injury by accident sustained arising out of and in the course of the employment shall be *1274exclusive, except as otherwise provided in this chapter, of all other rights and remedies of the employee, his personal or legal representatives, dependents or next of kin, at common law or otherwise, on account of such injury.

. Nev.Rev.Stat. § 616.265 states:
1. No contract of employment, insurance, relief benefit, indemnity, or any other device, shall modify, change or waive any liability created by this chapter.
2. A contract of employment, insurance, relief benefit, indemnity, or any other device, having for its purpose the waiver or modification of the terms or liability created by this chapter shall be void.

. Wash.Rev.Code § 51.04.060 states: “No employer or workman shall exempt himself from the burden or waive the benefits of this title by any contract, agreement, rule or regulation, and any such contract, agreement, rule or regulation shall be pro tanto void.” See also W.Va. Stat. § 23-2-27 (same).

. “The ultimate social philosophy behind compensation liability is belief in the wisdom of providing, in the most efficient, most dignified, and most certain form, financial and medical benefits for the victims of work-connected injuries which an enlightened community would feel obliged to provide in any case in some less satisfactory form, and of allocating the burden of these payments to the most appropriate source of payment, the consumer of the product.” 1 A. Larson, Workmen’s Compensation Law, § 2.20 at 5 (1982).

. The majority discusses two other cases interpreting an employer’s obligation under the NIIA to indemnify a third party for damages sustained by an employee. See Santisteven v. Dow Chemical Co., 506 F.2d 1216 (9th Cir. 1974); Outboard Marine Corp. v. Schupbach, 93 Nev. 158, 561 P.2d 450 (1977). Since Santis-teven and Outboard involved implied, rather than express, indemnity contracts, those cases are not controlling here.