Court Opinion

ID: 9761646
Source: CourtListenerOpinion
Date Created: 2023-08-29 01:48:46.833869+00
Date Added: 2024-06-11T10:24:40.037362
License: Public Domain

*82CAPPY, Justice,
dissenting.
I respectfully dissent. I cannot agree with the majority’s interpretation of the Perry-Ruzzi rule, a rule of contract construction peculiar to indemnification provisions which states that, where such a provision purports to indemnify a party against its own negligence, it must do so in language that is clear and unequivocal. Perry v. Payne, 217 Pa. 252, 66 A. 553 (1907); Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 588 A.2d 1 (1991).
The majority holds that this rule of construction is inapplicable here, notwithstanding the fact that Atlantic invokes a contractual indemnification provision to recover the litigation costs it incurred in defending a negligence action brought against it (as well as against Barqawi and against Barqawi’s employee, who actually committed the underlying battery). The controlling fact in the majority’s rejection of the Perry-Ruzzi rule is the fortuity that, by the time Atlantic sought to enforce its indemnification right, a final legal determination had been made in the underlying tort action that Atlantic was not negligent. The fact that the third party plaintiff in the tort action alleged that Atlantic had been negligent became irrelevant once .Atlantic prevailed on its summary judgment motion. Atlantic’s ultimate success in the underlying suit, in the majority’s eyes, renders Perry-Ruzzi inapplicable.
However, the fortuity of the ultimate result in the underlying tort action should not control the question of the applicability of the Perry-Ruzzi rule in determining the rights and responsibilities of the parties under the indemnification provisions. Instead, under the language of those provisions at issue here, the applicability of Perry-Ruzzi should depend upon the allegations in the underlying lawsuit, for that is the time when the obligation to defend arises. Cf. General Accident Ins. Co. of America v. Allen, 547 Pa. 693, 692 A.2d 1089, 1094 (1997) (“The obligation to defend an action brought against the insured is to be determined solely by the allegations of the complaint in the action ....”) (quoting Wilson v. Maryland *83Cas. Co., 377 Pa. 588, 105 A.2d 304, 307 (1954)).1
Here, the majority essentially finds that the Perry-Ruzzi rule of construction is only applicable to cases where the would-be indemnitee has actually been adjudicated negligent. But nothing in Perry-Ruzzi requires such a limitation. To the contrary, as this case well illustrates, the concerns that animated the Perry-Ruzzi rule — i.e., that provisions that purport to afford a party protection from claims premised upon its own negligence are so “unusual and extraordinary” that they should be found to exist only when the contract expressly requires it — exist the moment the would-be indemnitee is “merely alleged” to have been negligent, for that is -when the indemnitor’s obligation is triggered.
On their face, the indemnification provisions at issue here, which were contained in “standard form documents regularly used by Atlantic in their business relationships” (trial court slip op., 5), purport to impose a duty upon Barqawi not only to “indemnify and hold harmless” Atlantic if it is not solely negligent, but also to defend Atlantic. That duty of defense, when it exists, obviously is triggered before any determination is made as to ultimate fault in the underlying action. For it is upon the mere allegation that legal consequences — to wit, the costs of defense that are at issue here — begin to arise. It is that duty of defense for which Atlantic now seeks compensation. Indeed, but for the Plaintiffs allegation that Atlantic was negligent, Atlantic would have no claim at all against Barqawi. Atlantic cannot have it both ways. Barqawi’s contractual obligation to defend Atlantic thus arose, if it arose at all, when Atlantic was jointly sued in negligence, along with Barqawi and Perry, in connection with the assault by Barqawi’s employee, Perry.
As a result of the majority’s decision, claims for defense costs will sometimes be treated differently than indemnification costs for purposes of the Perry-Ruzzi rale. While these liabilities are distinct, the Perry-Ruzzi rule should apply to *84claims for both types of costs. In this case, the two provisions at issue are entitled “Indemnity and Insurance” and under that heading, the parties intentionally encompassed both indemnification and defense costs. Additionally, defense costs in many instances can be just as burdensome as indemnification costs; this court should be wary of presuming that the indemnitor intended to assume the responsibility for the costs of defending against claims alleging, the indemnitee’s own negligence without an express agreement. See Perry, 66 A. at 557 (“The liability on such indemnity is so hazardous, and the character of the indemnity so unusual and extraordinary, that there can be no presumption that the indemnitor intended to assume the responsibility unless the contract puts it beyond doubt by express stipulation.”).
Contrary to the majority, I would affirm the Superior Court’s order because the provisions here are npt sufficiently specific under the Perry-Ruzzi rule to award Atlantic coverage for its defense costs. In Topp Copy Products, Inc. v. Singletary, 533 Pa. 468, 626 A.2d 98 (1993), we explained that “[i]n contracts of indemnity, this principle [that exculpatory language must be expressed in clear and unequivocal terms] is applied with a force that requires the parties to state in express terms that the active negligence of the indemnitee will be assumed by the indemnitor.” Id. at 101. This court in Ruzzi emphasized that “[n]o inference from words of general import can establish such indemnification.” Ruzzi, 588 A.2d at 4.
In the instant case, the parties failed to state in express terms that liability for Atlantic’s own negligent acts will be assumed by Barqawi. To the contrary, the indemnity provisions use words of general import in setting forth the claims for which Barqawi will assume liability. See, e.g., Franchise Agreement, Section 12 (“[Barqawi] agrees to indemnify, hold harmless and defend ATLANTIC’ from and against all claims, losses and damages for personal .injury or death____”). The provisions only specifically refer to Atlantic’s negligence when addressing the liability that will not be assumed by Barqawi. See id. (“.... excepting any damage br loss caused solely by *85the negligence of [Atlantic] or solely by [Atlantic’s] failure to perform its obligations hereunder.”).
The Perry-Ruzzi rule does not permit the subtleties of discerning, by resort to inferences, what the parties intended. The rule requires clarity.2 At best, the indemnity provisions are ambiguous as to the liability that Barqawi has agreed to assume, and under Perry-Ruzzi, this ambiguity cannot be construed in Atlantic’s favor to afford indemnity for its own negligent acts.
Accordingly, I would hold that the Perry-Ruzzi rule is a rule of contract construction which applies to an agreement at the time that the potential indemnitee is sued to determine both indemnification and defense obligations. In this case, the indemnity provisions do not sufficiently express the parties’ intent that Barqawi would indemnify and defend Atlantic against claims alleging Atlantic’s own negligent acts. Because the Superior Court properly determined that Atlantic is not entitled to recover its defense costs, its order should be affirmed.
Justice CASTILLE joins this dissenting opinion.

. Although General Accident was speaking to the duty oí an insurer, it is no less relevant here when the indemnification provisions effectively convert Barqawi into Atlantic's insurer in some instances.

. Compare the provision in Willey v. Minnesota Min. & Mfg. Co., 755 F.2d 315 (3d Cir.1985) ("[CJontractor agrees to indemnify, defend an 1 hold harmless Owner from and against any and all common law, statutory and other liability, loss, cost and expense, including court costs and legal fees, incurred by them because of any and all ... injuries ... referred to in this Article, whether or not based in whole or in part upon the active, passive, concurrent (but not sole) negligence of Owner....”) Alternatively, Atlantic could have included a separate paragraph in the agreements clearly defining Barqawi’s defense obligations.