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Common Law Indemnification - A Primer

By Brian F. Mark, Esq.

“Common law indemnification is generally available ‘in favor of one who is held responsible solely by operation of law because of his relationship to the wrongdoer.’”  McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, 375 (2011), quoting Mas v. Two Bridges Assocs., 75 N.Y.2d 680, 690 (1990).

What is Common Law Indemnification and Who Can Assert it?

Indemnification, in general terms, is the right of one party to shift a loss to another and may be based upon an express contract or an implied obligation.  Bellevue S. Assoc. v. HRH Constr. Corp., 78 N.Y.2d 282 (1991).  Based on a separate duty owed the indemnitee by the indemnitor, common law indemnification, or implied indemnification, permits one who was compelled to pay for the wrong of another to recover from the wrongdoer the damages paid to the injured party.  D’Ambrosio v. City of New York, 55 N.Y.2d 454, 460 (1982); Curreri v. Heritage Prop. Inv. Trust, Inc., 48 A.D.3d 505, 507 (2d Dept. 2008). 

The premise of common law indemnification is vicarious liability, defined as “liability that a supervisory party (such as an employer) bears for the actionable conduct of a subordinate or associate (such as an employee) based on the relationship between the two parties” Black’s Law Dictionary (11th ed. 2019).  Common law indemnification “reflects an inherent fairness as to which party should be held liable for indemnity.”  McCarthy, 17 N.Y.3d at 375.  It is a restitution concept which permits shifting the loss because, to fail to do so, would result in the unjust enrichment of one party at the expense of the other.  Mas, 75 N.Y.2d at 680, 690; Kingsbrook Jewish Medical Center v. Islam, 172 A.D.3d 1342, 1343 (2d Dept. 2019).

A key issue in determining whether a party is entitled to implied indemnification from a sub-contractor is one of activity.  In this circumstance, an implied obligation exists on the part of the actual wrongdoer to reimburse the non-culpable party for any damages sustained by the latter, as a result of the former’s conductLinney v. Consistory of Bellevue Reformed Church, 115 A.D.2d 209 (3d Dept. 1985).  The right to indemnity “springs from a contract, express or implied, and full, not partial, reimbursement is sought.”  McDermott v. City of New York, 50 N.Y.2d 211 (1980).  The Court of Appeals in McDermott continued that implied indemnification finds its roots in principles of equity.  Id. 

In order to be entitled to common law indemnification (in the Labor Law context), a party must show (1) that it has been held vicariously liable without proof of any negligence or actual supervision on its part; and (2) that the proposed indemnitor was either negligent or exercised actual supervision or control over the injury-producing work.  Id. at 377-378; Naughton v. City of New York, 94 A.D.3d 1, 10 (1st Dept. 2012).  However, it is important to note that in McCarthy, the Court of Appeals made it clear that “a party’s … [contractual] authority to supervise the work and implement safety procedures is not alone a sufficient basis for requiring common law indemnification.”  Rather, liability can only be imposed against a party who exercises actual supervision of the injury-producing work.  McCarthy, 17 N.Y.3d at 376, 378; Debennedetto v. Chetrit, 190 A.D.3d 933 (2d Dept. 2021); Naughton, 94 A.D.3d at 11.

Therefore, in order to successfully obtain common law indemnification, the entity seeking it will need to establish that it was not negligent and that the entity from whom indemnification is sought was negligent or had the authority to direct, supervise and control the work giving rise the injury.  Although the issue of common law indemnification will have to await liability determinations, it is good practice to assert cross-claims seeking common law indemnification and contribution in the answer. 

In Pope v. Supreme-K.R.W. Construction Corp., 261 A.D.2d 523 (2d Dept. 1999), Supreme was the general contractor for the project.  Supreme hired J.S.C. Dynamic Enterprises to perform carpentry work.  Dynamic then sub-contracted work to Edgar Snagg, T/A Gilco.  The plaintiff worked for Gilco.  Plaintiff and his coworker were cutting and handing beams to two co-workers on ladders who were putting beams in place one floor above.  Plaintiff was injured when one of the beams being installed fell on his head.  He sued the owner KRW, the construction manager general contractor Supreme, and Supreme’s sub-contractor, Dynamic.  KRW and Supreme sought summary judgment as to their claims for common law indemnification over Dynamic.  The Court ruled that they were entitled to this relief, as their only liability was vicarious.  Id. at 634. See also, Perri v. Gilbert Johnson Enterprises, Ltd., 790 N.Y.S.2d 25 (2d Dept. 2005).

Can Contractual Indemnity and Common Law Indemnity Co-Exist?

The short answer is yes; as long as both claims for indemnity flow the same way.  In Lamela v. Verticon, Ltd., 185 A.D.3d 1319 (3d Dept. 2020), a construction contract was entered into between Lamela and Verticon.  The contract included a valid and enforceable indemnification provision flowing from Lamela to Verticon.  As noted by the Court, the indemnity provision, as expected, did not provide for indemnification flowing the other way, from Verticon to Lamela, which is what Lamela was seeking.  As the subject of indemnification was clearly contemplated and expressly addressed by the parties in their contract, the Court held that there could only be a one-way obligation to indemnify by Lamela, as the indemnitor, and any reciprocal obligation was extinguished.  The Court examined two Court of Appeals cases involving claims of both common law and contractual indemnification and found such cases to be distinguishable from Lamela.  In the first case, Hawthorne v. South Bronx Community Corp., 78 N.Y.2d 433 (1991), both the owner and the general contractor were found liable under Labor Law §240(1) on summary judgment and the subcontractor/employer was found liable to the owner and the general contractor under principles of both common law and contractual indemnity.  The critical issue in Hawthorne was whether these principles of indemnity could co-exist for the contractually-benefitted parties.  The Court of Appeals answered in the affirmative, finding that, since the insured paid for coverage of its common-law liability, it should not be deprived of that coverage solely because it also had obtained coverage for contractual indemnity. 

In the second case, Felker v. Corning Inc., 90 N.Y.2d 219 (1997), the Court of Appeals examined the question of whether a contractual agreement by a subcontractor to indemnify a general contractor is superseded by any common law right to indemnity owed to the general contractor by the subcontractor.  The Court held that it is not superseded because, in this case, the subcontractor supervised and controlled the work of the injured plaintiff.  Therefore, the subcontractor was liable for common-law indemnification.  As neither of these cases support the availability of common law indemnity to an indemnitor against the very party it expressly agreed to contractually indemnify, the Third Department in Lamela found that the Hawthorne and Felker cases dealt with an entirely different issue.  The Court also pointed out the lack of cases permitting common law indemnification where the party seeking common law indemnity was not found responsible by operation of law, but rather was based solely upon a voluntarily assumed obligation undertaken by virtue of a contract.

Can a Claim for Common Law Indemnification be Asserted Against any Entity?

Unfortunately, there are specific circumstances in which the entity being held liable cannot seek common law indemnification from the entity that is actually negligent.  Such situations can occur regularly in construction cases.

As is often the case, when the entity seeking indemnification also bears some negligence (or exercised actual supervision or control), indemnification under the common law is not available.  When this occurs, all hope of recovery is not lost.  If the entity being held liable was only partially negligent, it may be entitled to assert a claim for common law contribution from the other joint tortfeasors.  Common law contribution, unlike common law indemnification, is based on each of the joint tortfeasors’ degree of fault.

Another common situation where common law indemnification is not available is when the negligent entity is the employer of the person injured.  Section 11 of the Workers’ Compensation Law prohibits third-party indemnification or contribution claims against employers unless the plaintiff has suffered a “grave injury[1]” or there is a contractual indemnity obligation.  See, Workers’ Compensation Law § 11.

Common Law Contribution a/k/a Partial Indemnity  

The principle governing claims for contribution – that a loss should be apportioned among multiple tortfeasors who combined to cause an injury – was introduced into New York law by Dole v Dow Chemical Co., 30 N.Y.2d 143 (1972).  Prior to the landmark decision of Dole, the traditional doctrine of joint and several liability subjected concurrent tortfeasors to liability to a plaintiff for all of his or her damages, regardless of that tortfeasor’s actual percentage of fault.  Pro rata apportionment was only available between defendants who had been jointly sued by a plaintiff.  Thus, a plaintiff could choose to pursue only the tortfeasor with the deepest pockets and enforce a judgment against only that party.  This defendant could only shift the burden of the full judgment if his negligence was “passive” to the point where full indemnification from an “actively” negligent tortfeasor was warranted, i.e. common-law indemnification.

In Dole, the Court of Appeals recognized a common law right to contribution (or “partial indemnity”) among all joint tortfeasors based on actual degree of fault.   Plaintiffs’ rights were generally unaffected as joint and several liability remained the law, however, any loss was more equitably distributed among the culpable parties, according to their degree of fault.   “The goal of contribution, as announced in Dole and applied since, is fairness to tortfeasors who are jointly liable.” See, Sommer v. Fed. Signal Corp., 79 N.Y.2d 540 (1992).  Article 14 of the CPLR was amended to codify this new concept of contribution.

The crucial requirement in allowing a claim for contribution to proceed is that “the breach of duty by the contributing party must have had a part in causing or augmenting the injury for which contribution is sought.”  Nassau Roofing & Sheet Metal Co., Inc. v. Facilities Development Corp., 71 N.Y.2d 599 (1988).  Thus, a defendant must establish that the proposed contributor’s negligence caused or contributed to the damage or injuries claimed.  Contribution is available “whether or not the culpable parties are allegedly liable for the injury under the same or different theories” and the remedy may be invoked against concurrent, successive, independent, alternative, and even intentional tortfeasors.  See, Board of Educ. v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21 (1987). 

The existence of some form of tort liability is a prerequisite for a contribution action under CPLR §1401.  See, Board of Educ., 71 N.Y.2d at 28.  A claim arising solely from breach of contract will not suffice for a contribution claim.  Id.

Conclusion

Evaluating whether common law indemnification (or contribution) applies in a given case is complicated and requires consideration of the relevant facts on a case-by-case basis.  If you have a situation or have questions about the possibility of common-law indemnification or contribution in your case, please reach out to the Hurwitz & Fine, P.C. Labor Law team.  We have extensive experience with these matters, and we are always happy to help.

 

[1] Grave injuries means one or more of the following: death, permanent and total loss of use or amputation of an arm, leg, hand or foot, loss of multiple fingers, loss of multiple toes, paraplegia or quadriplegia, total and permanent blindness, total and permanent deafness, loss of nose, loss of ear, permanent and severe facial disfigurement, loss of an index finger or an acquired injury to the brain caused by an external physical force resulting in permanent total disability. NY WORK COMP § 11.

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