Pylon, Inc., (Pylon) and its insurance carrier, United States Fire Insurance Company (U.S. Fire), appeal from a judgment indemnifying Rossmoor Sanitation, Inc., (Rossmoor) for certain sums expended in satisfying a prior tort judgment, and finding Rossmoor's carrier, Insurance Company of North America (INA), not liable under an insurance policy. Appellants contend that Rossmoor was actively negligent as a matter of law, thus barring its recovery under an indemnity provision of a contract, and that INA should be liable for a portion of the loss. In addition they urge that the active-passive negligence test used in indemnification cases be modified. We conclude that the judgment was correct and should be affirmed.
Rossmoor employed Pylon to construct a sewage pump station and certain sewer lines at a cost of $88,000. The station was to be constructed in conformity with plans prepared by an engineering firm which Rossmoor retained. In the employment contract Pylon agreed to
Pylon named Rossmoor as an additional insured under a policy issued by U.S. Fire. Rossmoor also had independent coverage under a policy previously issued by its own insurer, INA. Both policies contain "other insurance" clauses; each such clause states that an apportionment shall be made if the insured has other insurance against a loss covered by the policy.
Rossmoor then brought this declaratory action against both Pylon and U.S. Fire, seeking indemnity for the sums thus paid. U.S. Fire cross-complained against INA, seeking an apportionment of the sums between the carriers pursuant to the "other insurance" clauses. The case was tried before the same judge who had presided in the original tort suit, and transcripts from the prior action, the construction contract, and the applicable policies were admitted in evidence.
After reviewing the record, the court reasoned that inasmuch as the U.S. Fire policy was part of the consideration for the job, it provided primary coverage to Rossmoor; that the INA policy was merely excess; and that neither Pylon nor U.S. Fire was entitled to any benefits or setoffs by reason of the INA coverage. It further declared that the indemnity agreement was sufficiently explicit to cover the accident, and found that any negligence by Rossmoor in the events that led to the cave-in was merely of a "passive" nature, i.e., in failing to discover that Pylon employees intended to enter an unshored trench. The court was also of the opinion that both INA and U.S. Fire were subrogated to the rights of their respective insureds, implying INA could benefit from Rossmoor's indemnity agreement. As a result, judgment was rendered in favor of Rossmoor and INA. Pylon and U.S. Fire now appeal.
Count I of Rossmoor's complaint seeking indemnification is based on the indemnity agreement with Pylon. Count II is based on the insurance policies. Rossmoor contends that because of the indemnity agreement and the U.S. Fire insurance policy Pylon is obligated to pay the entire
Past cases have held that an indemnity agreement may provide for indemnification against an indemnitee's own negligence, but such an agreement must be clear and explicit and is strictly construed against the indemnitee. (Goldman v. Ecco-Phoenix Elec. Corp. (1964) 62 Cal.2d 40, 44 [41 Cal.Rptr. 73, 396 P.2d 377].)
Provisions purporting to hold an owner harmless "in any suit at law" (Markley v. Beagle, supra, at p. 961), "from all claims for damages to
Whether conduct constitutes active or passive negligence depends upon the circumstances of a given case and is ordinarily a question for the trier of fact; active negligence may be determined as a matter of law, however, when the evidence is so clear and undisputed that reasonable persons could not disagree. (See Morgan v. Stubblefield, supra, at pp. 625, 627; Cahill Brothers, Inc. v. Clementina Co., supra, at pp. 382-383; see also Pearson Ford Co. v. Ford Motor Co. (1969) 273 Cal.App.2d 269, 275 [78 Cal.Rptr. 279].)
We believe, however, that the trier of fact could reasonably conclude from all the evidence that at the time of the accident Rossmoor had no supervisory personnel at the site of the accident and had no knowledge that Pylon employees intended to enter the unshored trench; that Pylon
Pylon and U.S. Fire submit nevertheless that we should overrule our decisions allowing passively negligent indemnitees to recover under general indemnity clauses; they argue that the concept of active and passive negligence is vague (Pearson Ford Co. v. Ford Motor Co. (1969) supra, at p. 272; Ford Motor Co. v. Robert J. Poeschl, Inc. (1971) 21 Cal.App.3d 694, 696 [98 Cal.Rptr. 702]), and that Rossmoor should not be entitled to indemnification under the agreement if its negligent conduct was a proximate cause of the accident. We are urged to adopt a rule by which the right to express indemnity under a general indemnity clause would exist only when the indemnitee's negligence is derivative in nature, such as under the doctrine of respondeat superior.
In Vinnell Co. v. Pacific Elec. Ry. Co. (1959) 52 Cal.2d 411 [340 P.2d 604], we dealt with an indemnity clause under which a contractor performing certain excavation work "release[d] and agree[d] to indemnify and save Railroad harmless from and against any and all injuries to and deaths of persons, claims, demands, costs, loss, damage and liability, howsoever same may be caused, resulting directly or indirectly from the performance of any or all work...." (52 Cal.2d at p. 414.) The agreement was prepared by the railroad and the question presented was whether the indemnity clause operated to exculpate the railroad from the consequences of its own negligence — the switching of a string of railroad cars into the excavation while operating the railroad system. We held that the language of the clause fell short of expressing such an intention, and cited with approval the rule that "where the parties fail to refer
Subsequent cases have followed this approach and restated the principle in somewhat varying terms. Thus it has been said that while "An indemnity clause phrased in general terms will not be interpreted ... to provide indemnity for consequences resulting from the indemnitee's own actively negligent acts," mere nonfeasance or passive negligence "will not preclude indemnity under a general clause...." (Markley v. Beagle, supra, at p. 962.)
Appellants contend that attempts to classify conduct as either "active" or "passive" are often difficult, and that on occasions the distinction between the types of negligence can be criticized as serving only to "muddy already troubled waters" in contractual indemnity situations. (Conley & Sayre, Indemnity Revisited: Insurance of the Shifting Risk (1971) 22 Hastings L.J. 1201, 1207.) Appellants insist that under the active-passive approach an analysis to determine whether a particular set of circumstances warrants indemnification pursuant to an agreement is evaded in favor of an inflexible rule of construction which may not reflect the intent of the parties, which ignores the language of the agreement, and which focuses instead on an illusory distinction between "active" or "passive" negligence. They urge that indemnity should not depend on mere labels. (See, e.g., Dole v. Dow Chemical Company (1972) 30 N.Y.2d 143 [331 N.Y.S.2d 382, 282 N.E.2d 288, 53 A.L.R.3d 175].)
In actuality, however, we do not employ the active-passive dichotomy as wholly dispositive of this or any other case. We are ever mindful of the pragmatic approach taken by this court in Harvey Mach. Co. v. Hatzel & Buehler, Inc. (1960) 54 Cal.2d 445 [6 Cal.Rptr. 284, 353 P.2d 924]. There we viewed the issue as whether the indemnity clause in question
The opinion in Harvey, while distinguishing Vinnell, pointed out that throughout Vinnell "it is manifest that it is the intent of the parties which the court seeks to ascertain and make effective. Where, as in the present case, the circumstances of the claimed wrongful conduct dictate that damages resulting therefrom were intended to be dealt with in the agreement, there is no room for construction of the agreement. It speaks for itself." (Id. at p. 449.)
Thus, while adhering to the underlying distinction between active and passive negligence which has long been accepted by the bench, the bar, and the insurance industry, we hold that, as declared in Harvey, the question whether an indemnity agreement covers a given case turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control. When the parties knowingly bargain for the protection at issue, the protection should be afforded. This requires an inquiry into the circumstances of the damage or injury and the language of the contract; of necessity, each case will turn on its own facts.
Under the indemnity agreement in the present case, Rossmoor is not to be held accountable for any loss or injury to any person occurring during construction undertaken by Pylon, and Pylon has agreed to indemnify Rossmoor for all claims arising out of its execution of the work. It is a reasonable and practical conclusion that the parties bargained for the protection here at issue, given the language of the contract and the facts, as found by the trial court, that the accident resulted from Pylon's inadequate execution of the work, not from any active negligence by Rossmoor. Since the accident may be seen as one of the risks against which Rossmoor sought to be covered, Rossmoor is entitled to the protection it seeks under the agreement.
Pylon and U.S. Fire, however, cite language in Universal Underwriters Ins. Co. v. Aetna Ins. Co. (1967) 249 Cal.App.2d 144, 153 [57 Cal.Rptr. 240], for the proposition that the terms of the insurance contracts requiring proration in case of other insurance should control, rather than the right to indemnification that exists between the parties insured by the contracts. Under the circumstances of the present case, we cannot agree. However correct the Universal rule may be when applied in tort suits arising out of automobile accidents, we do not find it to be controlling authority here. The case at bar concerns a contractual indemnity agreement, not theoretical noncontractual rights of indemnification between insureds. Cases following Universal are thus distinguishable.
It appears that both INA and U.S. Fire calculated and accepted premiums with knowledge that they might be called upon to satisfy a full judgment. There is no evidence that either company knew there was or would be other insurance when they issued the policies. The fact that there is other insurance is a mere fortuitous circumstance. We view one factor as compelling, however: to apportion the loss in this case pursuant to the other insurance clauses would effectively negate the indemnity agreement and impose liability on INA when Rossmoor bargained with Pylon to avoid that very result as part of the consideration for the construction agreement. We therefore conclude that the rights of indemnity and subrogation must control, and are persuaded the trial court was correct in finding that because the U.S. Fire policy was part of the consideration for the construction job, it must be viewed as primary
The judgment is affirmed.
Wright, C.J., McComb, J., Tobriner, J., Sullivan, J., Clark, J., and Richardson, J., concurred.
"Contractor [Pylon] shall indemnify and save Owner, the Engineer or other authorized assistants harmless against all claims for damages to persons or property arising out of Contractor's execution of the work covered by this contract and any and all costs, expenses, attorney's fees and liability incurred by Owner, the Engineer or said assistants, in defending against such claims, whether the same proceed to judgment or not and Contractor at his own expense agrees upon written request by Owner, to defend any such suit or action brought against Owner, said Engineer or assistants. In the prosecution of any successful claim or suit by Owner for the enforcement of this Contract, or any of the monetary or other obligations of Contractor hereunder, Contractor agrees to pay to Owner any reasonable attorney's fees and any costs of suit incurred by Owner.
".... .... .... .... .... .
"K. CONTRACTOR'S INSURANCE: The Contractor shall not commence work under this Contract until he has obtained all insurance required hereunder in a company or companies acceptable to the Owner, nor shall the Contractor allow any subcontractor to commence work on his subcontract until all insurance required of the subcontractor has been obtained. The Contractor shall take out and maintain at all times during the life of this Contract the following policies of insurance:
".... .... .... .... .... .
"(2) Public liability and property damage; on account of bodily injuries including death resulting therefrom, in the sum of not less than Five Hundred Thousand Dollars ($500,000.00) for one person and One Million Dollars ($1,000,000.00) for more than one person, and property damage in the sum of One Million Dollars ($1,000,000.00) resulting from any one accident which may arise from the operations of the Contractor in performing the work provided for herein.
".... .... .... .... .... .
"Each of the policies of insurance provided for in subparagraphs (1), (2) and (3) shall name Owner as an additional assured."