Raisler v. Burlington Northern Railroad

No. 84-372 I N THE SUPREME COURT O F THE STATE OF MONTANA 1985 WARREN LOU R A I S L E R , P l a i n t i f f and A p p e l l a n t , BURLINGTON NORTHERN RAILROAD C O . , a D e l a w a r e C o r p . , a n d ROSS-KO G R A I N , Defendants, and BURLINGTON NORTHERN RAILROAD COMPANY, Third-Party P l a i n t i f f and Petitioner, FARMERS UNION ELEVATOR COMPANY, Third-Party Defendant and Respondent. ORIGINAL PROCEEDING: COUNSEL OF RECORD: T h o m a s W. Spence a r g u e d f o r B u r l i n g t o n N o r t h e r n , B i l l i n g s , Montana F o r Defendant/Respondent: A n d e r s o n , B r o w n , G e r b a s e , C e b u l l & Jones; S t e v e n J . H a r m a n & C y n t h i a R. Woods a r g u e d f o r F a r m e r s U n i o n E l e v a t o r , B i l l i n g s , Montana H e r n d o n , H a r p e r & Munro; R o d n e y T. H a r t m a n , B i l l i n g s , M o n t a n a (F?.oss-KO G r a i n ) T o w e , B a l l , E n r i g h t & M a c k e y ; T h o m a s E. T o w e , B i l l i n g s , Montana (Raisler) Submitted: February 21, 1985 Decided: December 31, 1985 4 * Clerk Mr. J u s t i c e F r e d J. Weber d e l i v e r e d t h e Opinion o f t h e C o u r t . The United States District Court for the State of Montana has certified two questions to this Court from a f e d e r a l a c t i o n f o r p e r s o n a l i n j u r i e s and a d e r i v a t i v e t h i r d p a r t y s u i t f o r c o n t r i b u t i o n o r indemnity. The q u e s t i o n s , a s c e r t i f i e d t o u s by t h e f e d e r a l c o u r t , a r e : I. When an injured employee sues a third party for damages and t h e t h i r d party joins the employer as a third party defendant seeking contribution or indemnity, is the a s s e r t i o n of § 39-71-411, MCA, by t h e t h i r d p a r t y d e f e n d a n t employer a s a d e f e n s e , u n c o n s t i t u t i o n a l a s it i s applied t o the third party plaintiff? Our answer i s no. 2. When an injured employee sues a third party for damages, and t h e t h i r d p a r t y j o i n s t h e employer a s a t h i r d party defendant seeking contribution o r indemnity, and the employer h a s s i g n e d a w r i t t e n a g r e e m e n t w i t h t h e p r o v i s i o n s outlined in this certification, can the employer assert 5 39-71-411, MCA, as a complete defense to the third party action? Our a n s w e r i s y e s . The certification order of t h e United States D i s t r i c t Court sets f o r t h t h e following a l l e g a t i o n s o f f a c t : Warren R a i s l e r was employed a s a l a b o r e r by F a r m e r s Union E l e v a t o r Company (Farmers). While loading grain cars at Farmers' f a c i l i t y , h e f e l l from t h e t o p o f a g r a i n c a r t h a t was b e i n g moved by a co-employee. Mr. R a i s l e r s u s t a i n e d severe i n j u - ries, including a partial amputation of his foot. He has received workers' c o m p e n s a t i o n b e n e f i t s from F a r m e r s f o r h i s i njuries. Mr. Raisler initiated a personal injury action in Yellowstone County District Court. He named Ross-Ko Grain (Ross-KO) and Burlington Northern Rail road Company (Burlington Northern) as defendants. He alleged that Ross-KO, a Minnesota corporation, owned the railroad cars i n t o which he was l o a d i n g g r a i n a t t h e t i m e o f t h e a c c i d e n t . Burlington Northern, a Delaware c o r p o r a t i o n , a 1 l e g e d l y owned t h e t r a c k s and t h e l a n d where t h e a c c i d e n t o c c u r r e d . Farm- e r s ' g r a i n h a n d l i n g f a c i l i t y i s s i t u a t e d on l a n d l e a s e d from Burlington Northern. The s u i t was removed t o f e d e r a l c o u r t b a s e d on t h e p a r t i e s ' d i v e r s i t y o f c i t i z e n s h i p . Rurlington Northern joined Farmers as a third party defendant and sought contribution and/or indemnity from Farmers, should Burlington Northern ultimately be found liable to Farmers ' employee, Raisler. Farmers moved for summary judgment on t h e ground t h a t S 39-71-411, MCA, limited its liability to the payment of workers' compensation benefits. S e c t i o n 39-71-411, MCA, p r o v i d e s : P r o v i s i o n s o f c h a p t e r e x c l u s i v e remedy - n ~ n l i a b i l i t ~ o if s u r e d e m p l o y e r . n For a l l employments c o v e r e d u n d e r t h e Work- e r s ' Compensation A c t o r f o r which an e l e c t i o n h a s been made f o r c o v e r a g e u n d e r t h i s chapter, t h e provisions of t h i s chapter a r e exclusive. Except a s provid- ed i n p a r t 5 o f t h i s c h a p t e r f o r unin- s u r e d e m p l o y e r s and e x c e p t a s o t h e r w i s e p r o v i d e d i n t h e Workers' Compensation A c t , a n employer i s n o t s u b j e c t t o a n y l i a b i l i t y whatever f o r t h e death o f o r p e r s o n a l i n j u r y t o an employee c o v e r e d by t h e Workers' Compensation A c t o r f o r any claims f o r contribution or indemnity a s s e r t e d by a t h i r d p e r s o n from whom damages a r e s o u g h t on a c c o u n t of s u c h i n j u r i e s o r death. ... The federal court requests t h i s Court's interpretation of S39-71-411, MCA, as it relates to the Montana Constitution. Montana e n a c t e d t h e Workmen ' s Compensation A c t i n 1915. Sec. 1, Chap. 96, Laws 1915. Under t h e s t a t u t o r y compensa- t i o n scheme, employees r e l i n q u i s h e d t h e i r common law r e m e d i e s against employers in exchange for employers' guarantee to pay compensation for work-related injuries regardless of fault. The Act limited employers' liability to workers' compensation benefits and provided that a claim under the Act was an injured worker's exclusive remedy against an employer that was covered by the Act. Section 92-204, R.C.M. (1947). Because the common law at that time left many work-related injuries uncompensated, Montana's transition to a statutory remedy was advantageous to workers. However, in light of improved prospects for recovery under modern tort theories, workers and third parties are turning increasingly to the courts for exemption from the exclusive remedy rule. "Continuing challenges to the exclusive remedy rule reveal an underlying tension between the workers' compens5tion system and the tort system.'' Note, Exceptions - - Exclusive to the Remedy Requirements - Workers' Compensation of Statutes, 96 Harv. L. Rev. 1641 (1983). The creation of common law exceptions to the exclusive remedy rule reflects a judicial attempt to reconcile the workers' compensation scheme with modern tort theories, such as strict liability and comparative negligence. Courts have sought by various means to reconcile the relatively modest awards given to injured workers with larger monetary recoveries allowed in modern tort cases. I1 Burlington Northern here asserts its right to collect from Farmers on the grounds of contribution or, in the alternative, on the express indemnity provisions in the lease agreement between Burlington Northern and Farmers. With regard to the theory of contribution, Burlington Northern claims that it was Farmers' act of negligence that caused the accident and affords the basis for contribution. Burlington N o r t h e r n c o n t e n d s t h a t it was o n l y p a s s i v e l y n e g l i g e n t , i f a t all. The indemnity allegation i s based upon the express indemnity p r o v i s i o n s contained i n t h e l e a s e agreement. C o n t r i b u t i o n d i s t r i b u t e s l o s s among j o i n t t o r t f e a s o r s by r e q u i r i n g e a c h t o pay h i s p r o p o r t i o n a t e s h a r e b a s e d upon h i s proportion of the negligence which proximately caused the injuries. S e c t i o n 27-1-703(1), MCA, authorizes contribution between t o r t f e a s o r s . Indemnity, on the other hand, shifts the entire loss from t h e o n e who h a s been r e q u i r e d t o p a y i t t o t h e o n e who should bear t h e l o s s . W. P r o s s e r , - -f T o r t s , 5 5 1 a t 310 Law o ( 4 t h ed. 1971). "The r i g h t o f i n d e m n i t y i s b a s e d upon an i n d e p e n d e n t d u t y o r o b l i g a t i o n owed by t h e employer t o t h e v third party, e i t h e r a s t h e r e s u l t of express contract o r a s the result of an implication raised by law." 2A L a r s o n , Workmen's Compensation Law, 5 76.13 a t 14-571 (1983). In 1977, S 39-71-411, MCA, provided that an insured employer " i s n o t s u b j e c t t o any l i a b i l i t y whatever f o r t h e d e a t h o f o r p e r s o n a l i n j u r y t o an employee" who i s c o v e r e d by the Act. The 1977 s t a t u t e d i d n o t m e n t i o n c o n t r i b u t i o n o r indemnity. This Court interpreted that statute in Cordier v. Stetson-Ross, Inc. ( 1 9 7 9 ) , 184 Mont. 502, 604 P.2d 86. We concluded t h a t t h e s t a t u t e p r o t e c t e d e m p l o y e r s from damages s o u g h t by t h i r d p a r t i e s u n d e r a t h e o r y o f c o n t r i b u t i o n . That conclusion i s i n accord with t h e c u r r e n t m a j o r i t y r u l e t h a t a third party cannot sue o r join a negligent employer as a joint tortfeasor under contribution statutes or a t common law. 2A Larson, Workmen's Compensation - Law, S 76.20 at 14-597 (1983). I n C o r d i e r . t h e Court a l s o concluded t h a t t h e e x c l u s i v e remedy p r o v i s i o n of t h e Workers' Compensation A c t b a r r e d a claim for noncontractual indemnity. No express indemnity c o n t r a c t was i n v o l v e d i n C o r d i e r , and t h e C o u r t r e s e r v e d any r u l i n g on such indemnity. Cordier, 1 8 4 Mont. a t 513, 604 P.2d a t 92. While the appeal in Cordier was pending, the 1979 Montana L e g i s l a t u r e amended § 39-71-411, MCA. In addition to the proviso that the employer is not liable for death or injury to an employee covered by the Act, the amendment provided t h a t employers s h a l l n o t be l i a b l e " f o r any claims f o r c o n t r i b u t i o n o r indemnity a s s e r t e d by a t h i r d p e r s o n from whom damages are sought on account of such injuries or death . " 1 1 1 The f i r s t c e r t i f i e d q u e s t i o n i s : Where a n i n j u r e d e m p l o y e e s u e s a t h i r d p a r t y f o r d a m a g e s and the third party joins the employer as a third party defendant s e e k i n g c o n t r i b u t i o n or indemnity, is t h e a s s e r t i o n o f § 39-71-411, MCA, b y t h e t h i r d p a r t y d e f e n d a n t e m p l o y e r a s a d e f e n s e , c o n s t i t u t i o n a l a s it i s a p p l i e d t o t h e t h i r d p a r t y plaintiff? P h r a s e d more succinctly: Is it c o n s t i t u t i o n a l for an employer to use $ 39-71-411, MCA, as a complete defense t o a t h i r d p a r t y claim f o r c o n t r i b u t i o n o r indemnity? Burlington Northern argues t h a t t h e l i m i t a t i o n contained i n S 39-71-411, MCA, v i o l a t e s Art. 11, §§ 1 6 a n d 17 o f t h e Montana C o n s t i t u t i o n . Art. 11, § 1 6 , Mont. Const. 1972 p r o v i d e s i n p a r t t h a t courts of justice shall b e open t o e v e r y p e r s o n and s p e e d y remedy a f f o r d e d f o r e v e r y i n j u r y . Burlington Northern argues that S 39-71-411, MCA, deprives Burlington Northern of its constitutional right t o a remedy f o r e v e r y i n j u r y and full legal redress. The 1889 C o n s t i t u t i o n had a c o m p a r a b l e p r o v i s i o n . Art. 111, § 6 , Mont. Const. 1889 s t a t e s : C o u r t s o f j u s t i c e s h a l l b e open t o e v e r y p e r s o n , and a s p e e d y remedy a f f o r d e d f o r every i n j u r y of person, property, o r c h a r a c t e r ; and t h a t r i g h t and j u s t i c e s h a 11 b e administered b~ithout sale, denial, o r delay. T h i s p r o v i s i o n was interpreted in Shea v . North-Butte Mining Co. (1919), 55 Mont. 522, 179 P . 499, a personal injury action by a miner against his employer. Shea ' s counsel argued t h a t t h e Workmen's Compensation A c t o f 1915 was r e p u g n a n t t o t h e c o n s t i t u t i o n a l g u a r a n t e e t h a t c o u r t s o f justice s h a l l be open t o every person and a s p e e d y remedy afforded for every injury. Shea insisted that the l e g i s l a t u r e could n o t a b o l i s h an i n j u r e d w o r k e r ' s right t o sue in tort. This Court discussed the basis for the l e g i s l a t u r e ' s adoption of t h e A c t : [ T l h e o b j e c t s o u g h t was t o s u b s t i t u t e f o r t h e i m p e r f e c t and e c o n o m i c a l l y w a s t e f u l common-law s y s t e m by p r i v a t e a c t i o n by t h e i n j u r e d employee f o r damages f o r n e g l i g e n t f a u l t on t h e p a r t o f t h e em- p l o y e r , which, w h i l e attended w i t h g r e a t d e l a y a n d w a s t e , compensated t h o s e em- p l o y e e s o n l y who w e r e a b l e t o e s t a b l i s h t h e proximate connection between the f a u l t and t h e i n j u r y , a s y s t e m by which e v e r y employee i n a h a z a r d o u s i n d u s t r y might r e c e i v e compensation f o r any i n j u r y s u f f e r e d by him a r i s i n g o u t o f and d u r i n g t h e c o u r s e o f t h e employment ... In o t h e r words, t h e t h e o r y o f such l e g i s l a - t i o n i s t h a t l o s s o c c a s i o n e d by r e a s o n o f i n j u r y t o t h e employee s h a l l n o t b e b o r n e by t h e employee a l o n e a s it was u n d e r t h e common-law s y s t e m , b u t d i r e c t l y by t h e i n d u s t r y i t s e l f , and i n d i r e c t l y by t h e public ... S h e a , 55 Mont. 528-29, 179 P . a t 500. The Shea r a t i o n a l e w i t h r e g a r d t o t h e t h e o r y o f w o r k e r s ' compensation was reaffirmed a number of times after its initial declaration in 1919. Finally, the rationale was recognized in the 1.972 Montana Constitution. Art. 11, § 16, tlont. Const. 1972 states: Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character. No serson shall be desrived - this of - - full legal redress for injury incurred in employment for which another serson m a r b e YiaLle excest as to fellow L A - L - - employees - - immediate employer who and his hired - - - immediate employer him if such srovides coveraae under - Workmen's L -I the Compensation - -of this state. Laws - Right and justice shall be administered without sale, denial, or delay. (Emphasis supplied.) The underscored sentence was added to the original provisions of Art. 111, § 6, Mont. Const. 1-889. An explanation of the amendment is set forth in a Committee Report to the Constitutional Convention: The committee voted unanimously to retain this section with one addition. The provision as it stands in the present Constitution guarantees justice and a speedy remedy for a l l without sale, denial or delay. The committee felt, in light of a recent interpretation of the Workmen's compensation Law, that this remedy needed to be explicitly guaranteed to persons who may be employed by one covered by Workmen's Compensation to work on the facilities of another. Under Montana law, as announced in the recent decision of Ashcraft v. Montana Power - the employee has no redress against Co., thir.d parties for injuries caused by them if his immediate employer is covered under the Workmen's Compensation Law. The committee feels that this violates the spirit of the quarantee of a speedy - - - remedy for - injuries of person, all property or character. It is this specific denia 1--and this one only--that the committee intends to alter with the following additional wording: "no person shall be deprived of this full legal redress for injury incurred in employment for which another person may be liable except as to fellow employees and his immediate employer who hired him if such immediate employer provides coverage under the Workmen's Compensation Laws of this state." In other words the committee wants to insure that the Workmen's Compensation Laws of the state will be used for their original purpose--to provide compensation to i n j u r e d workmen--rather than t o deprive a n i n j u r e d worker o f r e d r e s s a g a i n s t negligent third parties (beyond his e m p l o y e r and f e l l o w e m p l o y e e s ) b e c a u s e h i s immediate employer i s c o v e r e d b y Workmen's Compensation. Montana C o n s t i t u t i o n a l Convention, Committee Report at 636 (1972). T h e r e i s no i n d i c a t i o n o f i n t e n t t o modify o r c h a n g e an e m p l o y e r ' s l i a b i l i t y t o an i n j u r e d w o r k e r . The c h a n g e was s p e c i f i c a l l y aimed a t a l l o w i n g r e c o v e r y by a w o r k e r a g a i n s t a responsible t h i r d party. For the first time, t h e Montana Constitution provided that the State could deprive an employee of full legal redress against his employer for injury incurred during employment. That i s a express c o n s t i t u t i o n a l recognition of t h e r a t i o n a l e o r i g i n a l l y s t a t e d i n Shea. Burlington Northern's challenge t o § 39-71-411, MCA, is b a s e d p r i m a r i l y on t h e f i r s t s e n t e n c e o f A r t . 11, § 1 6 , which provides t h a t courts of justice s h a l l b e open t o a l l and a s p e e d y remedy afforded for every injury. This contention tends to disregard the next sentence in 5 16, which s p e c i f i c a l l y l i m i t s recovery f o r work-related injuries. We conclude that Art. 11, § 16 must be considered in its entirety, including the second sentence which limits the broad guarantees contained i n t h e f i r s t sentence. The p e r t i n e n t p a r t o f t h e s e c o n d s e n t e n c e s t a t e s : No p e r s o n [ R a i s l e r ] s h a l l b e d e p r i v e d o f t h i s f u l l legal redress f o r injury in- c u r r e d i n employment f o r which a n o t h e r person [Burl i n g t o n Northern] may be l i a b l e except a s t o ... h i s immediate employer [ F a r m e r s ] ... The s e n t e n c e makes c e r t a i n t h a t no employee i s d e p r i v e d o f redress against a third party. However, it allows an employee t o be deprived of full legal redress against h i s employer. I n s u b s t a n c e , 5 39-71-411, MCA, p r o v i d e s t h a t F a r m e r s i s not l i a b l e f o r a claim f o r contribution o r indemnity a s s e r t e d by B u r l i n g t o n Northern, a third party. If t h i s limitation can b e i n t e r p r e t e d a s an e x t e n s i o n o f t h e l i m i t a t i o n on t h e worker's right to claim against his employer, then the l i m i t a t i o n would be expressly authorized by A r t . 11, S 1 6 , B'Iont. C o n s t . 1972. Is t h e r e a r e a s o n t o d i s t i n g u i s h between a c l a i m by a third party for contribution or indemnity and a claim asserted directly by the employee? This question was answered i n C o r d i e r , where t h i s C o u r t s t a t e d : I t i s our opinion t h a t t h e broad provi- s i o n s o f s e c t i o n 92-204.1, R.C.M. 1947, now s e c t i o n 39-71-411, MCA, r e q u i r e u s t o hold t h a t t h e p r o v i s i o n s o f t h e Workers' Compensation A c t a r e e x c l u s i v e a s t o t h e l i a b i l i t y o f t h e e m p l o y e r f o r damages s u s t a i n e d by t h e i n j u r e d employee w h e t h e r t h e y a r e s o u g h t by t h e employee d i r e c t l y , o r by a t h i r d p a r t y under c o n t r i b u t i o n . Our s t a t u t e r u l e s o u t " a n y l i a b i l i t y w h a t e v e r " e v e n b e f o r e it g o e s on t o s t a t e t h a t t h e e m p l o y e e and t h o s e u n d e r him a r e l i m i t e d t o such recovery a s t h e A c t a l l o w s a g a i n s t t h e employer. The l a n - g u a g e " a n y l i a b i l i t y w h a t e v e r " would b e s u r p l u s a g e u n l e s s it i s r e a d t o mean l i a b i l i t y n o t o n l y t o t h e e m p l o y e e and t h o s e c l a i m i n g u n d e r him, b u t a l s o any o t h e r p a r t y attempting t o claim l i a b i l i t y against the employer for the same incident. Cordier, 184 Mont. a t 508-09, 604 P.2d a t 89-90. Under t h e Cordier holding, t h e e m p l o y e r was l i a b l e t o t h e e m p l c y e e f o r workers' c o m p e n s a t i o n b e n e f i t s , b u t t h e e m p l o y e r was f o u n d t o he free of any o t h e r liability to the employee o r t o a n y other party attempting to claim liability against the e m p l o y e r a s a r e s u l t o f t h e same i n j u r y . I n Montana, t h e r e is no distinction between a third party claim for c o n t r i b u t i o n o r i n d e m n i t y a g a i n s t a n e m p l o y e r and a c l a i m b y a n employee a s s e r t e d d i r e c t l y a g a i n s t t h e employer. In White v. State (Mont. 1983), 661 P.2d 1272, 40 St.Rep. 507 and in Pfost v. State of Montana, Supreme Court Cause No. 85-007, decided December 31, 1985, this Court struck down two Montana statutes as unconstitutional, on the grounds that the right to bring an action for personal injuries was a fundamental right and that any statutory abridgment of that fundamental right must pass the test of strict scrutiny. Those holdings are not applicable in the present case. Because an employer's immunity from tort liability in a workers' compensation case is constitutionally recognized in Art. 11, (5 16, Mont . Const. , we conclude no analysis of § 39-71-411, MCA, on a strict scrutiny theory is required. In a similar manner, in Hall v. State Comp. Ins. Fund (Mont. 1985), 708 P.2d 234, 42 St.Rep. 1502, the Court disallowed subrogation by an insurance company against an employee. The Court concluded that it would be an unconstitutional application of an otherwise constitutions-l statute if the State Fund were granted suhrogation against a claimant employee who had not achieved full legal redress. Here we are not concerned with an employee as in Hall, but rather the third party who has been sued by the employee. The third party claims that its constitutional right of full legal redress against the employer has been eliminated. We have already concluded that an employee, may be constitutionally deprived of full legal redress against his employer, both directly and indirectly. We conclude that there is no distinction between a direct claim by Raisler, the employee, against Farmers, the employer, or an indirect claim by Burlington Northern, third party, against Farmers, the employer. Hall does not conflict with our holding here. In our analysis of Art. 11, S 16, Mont. Const., we conclude that, in workers' compensation cases, the second sentence affords a limitation upon the broad provisions in the first sentence. We conclude that where an employer has provided workers' compensation coverage, an employee constitutionally may be deprived of full legal redress for injury against his employer, both directly and indirectly. We hold that in denying liability for any claims for contribution or indemnity by a third party, S 39-71-411, MCA, does not violate Art. 11, § 16, Mont. Const. Burlington Northern also argues that $ 39-71-411, MCA, violates Art. 11, 1 7 Mont. Const. which provides that: "No person shall be deprived of life, libertv, or property without due process of law." Burlington Northern argues that the statute deprives a third party plaintiff of its substantive right to contribution. Because no reasonable substitute has been provided, Burlington Northern contends it has been unlawfullv deprived of a due process right. We disagree. Substantive due process analysis requires a test of the reasonableness of a statute in relation to the State's power to enact such legislation. "The essence of substantive due process is that the State cannot use its police power to take unreasonable, arbitrary or capricious action against an individual." Matter of C.H. (Mont. 1984), 683 P.2d 931, 936, 41 St.Rep. 997, 1002. In order to satisfy substantive due process guarantees, a statute enacted under a state's police power must he reasonably related to a permissible legislative objective. State v. Turk (1982), 197 Mont. 311, 314-15, 643 P.2d 224, 226. The 1979 legislature amended § 39-71-411, MCA, specifi- cally to preclude liability on the part of an insured employer for contribution or indemnity to third parties. The legislative objective was to protect employers from "the great potential liability" that could result if employers were required to pay the amount collected by an employee in his action against a third party in addition to payment of the compensation benefits. Memorandum, Senate Judiciary Committee, February 7, 1979. Section 39-71-411, MCA, was amended to ensure that the scope of liability of employers would continue to be limited by the Workers' Compensation Act in spite of developing tort theories. The effect of the amendment to S 39-71-411, MCA, was to promote the continued economic welfare of employers who pay into the State Fund and the welfare of employees who receive compensation benefits. We therefore conclude that the limitations contained in S 39-71-411, MCA, are reasonably related to the permissible legislative objective of protect- ing the public welfare. We hold that assertion of S 39-71-411, MCA, as a defense to liability of an employer covered by the Act, does not violate Art. 11, S 17, Mont. Const. 1972. IV The second certified question is: Where an injured employee sues a third party for damages, and the third party joins the employer as a third party defendant seeking contribution or indemnity, and the employer has signed a written agreement with the provisions outlined in this certification, can the employer assert S 39-71-411, MCA, as a complete defense to the third party action? As previously discussed, indemnity is an all or nothing proposition. It shifts the entire loss from the one who has been required to pay it to the one who should bear it. In C o r d i e r , t h i s C o u r t h e l d t h a t a n e m p l o y e r who h a s p a i d work- e r s ' c o m p e n s a t i o n b e n e f i t s t o an employee i s n o t s u b j e c t t o i n d e m n i t y b a s e d on a n o n c o n t r a c t u a l c l a i m b y a t h i r d p a r t y . The Cordier Court did not rule on contractual indemnity. C o n t r a c t u a l i n d e m n i t y was c o n s i d e r e d i n Howard S. W r i g h t Const. v. F.E. DeBeer Mech. ( 1 9 7 9 ) , 1 8 5 Mont. 47, 604 ~ . 2 d 323. W r i g h t C o n s t . a l l o w e d r e c o v e r y by t h e p l a i n t i f f u n d e r a contractual indemnification provision e x e c u t e d by D e B e e r , a subcontractor to Wright, the primary contractor. We distinguish that case from t h e p r e s e n t case, where Farmers a s s e r t s immunity u n d e r 5 39-71-411, MCA. I n Wright Const., t h e subcontractor did not a s s e r t a defense against l i a b i l i t y nor c l a i m immunity a s an i n s u r e d e m p l o y e r u n d e r S 39-71-411, MCA . As a result, the holding in Wright Const. is not controlling i n t h e present case. In t h i s case, Farmers, a s lessee, a g r e e d i n w r i t i n g t o i n d e m n i f y and h o l d B u r l i n g t o n N o r t h e r n h a r m l e s s f o r a n y l o s s , damage, i n j u r y o r d e a t h from a n y a c t o r o m i s s i o n o f F a r m e r s , i t s employees o r a g e n t , to the person or property of the parties to the lease and their employees. In form, the i n d e m n i t y p r o v i s i o n i n t h e l e a s e a g r e e m e n t i s b r o a d enough t o allow recovery a s a matter of c o n t r a c t i n t e r p r e t a t i o n . Our q u e s t i o n i s w h e t h e r F a r m e r s c a n now a s s e r t 5 39-71-411, MCA, as a complete defense to the action for contractual indemnity. A majority of c o u r t s has recognized express c o n t r a c t u a l i n d e m n i t y a s a n e x c e p t i o n t o t h e e x c l u s i v e remedy r u l e . See, Annot., 100 A.L.R.3d 5 8[b] at 380 (1980). The frequently-stated r a t i o n a l e i s t h a t t h e indemnity c l a i m i s by definition a separate legal c a u s e b a s e d upon a contractual relationship and a contractual obligation. 2A Larson, Workmen's Compensation Law, 5 76.42 at 14-630 (1983). The increased exposure of the employer is bargained for and serves as consideration or at least partial consideration for whatever is received from the third party. Robinson, Workmen's Compensation: The Third Party Dilemma, 19 Idaho L. Rev. 259, 268 (1983) . Courts in three jurisdictions have concluded that their statutory language specifically precludes third party suits for contractual indemnity, and such contractual obligations are therefore void. Roberts v. Gray's Crane & Rigging (0r.Ct.App. 1985), 697 P.2d 985; Paul Krebs & Assoc. TT. Fritts Const. (Ala. 1978), 356 So.2d 638; Gulf Oil Corp. v. Rota-Cone Field Operating Co. (N.M.Ct.App. 1972), 505 P.2d 78. The stated rationale in these cases is that if the employee is allowed to recover from a third party and then the third party is allowed to recover from the employer, the employer is subjected to double liability. In view of these contradictions in legal theories, we find it important to review our Montana cases and Constitution. Shea construed Montana's Act in relation to the 1889 Constitution and set forth reasons why the legislature adopted the workers' compensation system as a substitute for common law tort suits by an employee against his employer. We concluded in Shea that the Act was a per- missible exercise of legislative power, based on sound social policy of protecting injured workers. The Constitutional Convention Committee which considered Art. 11, § 16, Mont. Const. 1972, was keenly aware of a need to protect the interests of injured employees. As previously discussed, it was that awareness that resulted in the addition of the second sentence in Art. 11, § 16. Indemnification of third parties was a commonly recog- nized theory of recovery at the time of the 1972 C o n s t i t u t i o n a l Convention. The above-quoted Committee R e p o r t indicates that the Convention had in mind the 1889 Constitution and a t l e a s t one judicial interpretation that 1-imited a n e m p l o y e e ' s r i g h t t o s u e t h i r d p a r t i e s . Had t h e Convention chosen t o do s o , it c o u l d h a v e amended A r t . 111, fj 6, 1889 Mont. Const. t o diminsh t h e p r o t e c t i o n granted t o employers. The Convention concluded instead that the continued protection of employers covered by workers' c o m p e n s a t i o n was p r o p e r . A s previously discussed, the legislature's 1979 amend- ment o f § 39-71-411, MCA, expressed l e g i s l a t i v e i n t e n t t h a t t h e l i a b i l i t y o f an employer should n o t be broadened i n such a manner as to allow a third party to recover from an employer. As t h e b i l l ' s sponsor explained: With d e v e l o p m e n t s i n t h e p r o d u c t l i a b i l i - t y law, a r e l a t i v e l y n e w problem f o r employers has emerged. The i n j u r e d employee c o l l e c t s c o m p e n s a t i o n . H e then sues t h e manufacturer o r seller of t h e e q u i p m e n t which may h a v e c o n t r i b u t e d t o h i s injury. The m a n u f a c t u r e r o r s e l l e r o f t h e equipment then s u e s t h e employer f o r t h e amount s o u g h t by t h e employee on t h e t h e o r y o f i m p l i e d o r e x p r e s s indemni- ty Thus, t h e employer i s c o n f r o n t e d with t h e p o s s i b i l i t y of n o t only paying workers' compensation b e n e f i t s , b u t a l s o t h e amount c o l l e c t e d by t h e employee i n h i s action against a third party. Oregon was c o n f r o n t e d w i t h t h i s same problem and t o p r o t e c t t h e e m p l o y e r s i n that state from t h e g r e a t p o t e n t i a l l i a b i l i t y , it e n a c t e d an amendment t o i t s law t o p r o t e c t i t s e m p l o y e r s and i n s u r e r s from s u c h c l a i m s by t h e m a n u f a c t u r e r s o r sellers. Senate B i l l 322 i s designed t o accomplish t h e same r e s u l t i n Montana. Memorandum, S e n a t o r John E . Healy, S e n a t e J u d i c i a r y Commit- t e e , F e b r u a r y 7 , 1979. L e g i s l a t i v e i n t e n t t o p r o t e c t employ- ers from l i a b i l i t y t o t h i r d p a r t i e s i s c l e a r . No d i s t i n c t i o n i s made between c o n t r a c t u a l and e q u i t a b l e i n d e m n i t y i n t h e statute itself or in the legislative history of the amendment. The Montana Legislature chose - to grant a third party not the right to recover on a contractual indemnity theory from an employer carrying workers' compensation insurance. That choice was consistent with the opinion of the people as expressed by their adoption of Art. 11, 1.6, Mont. Const. 1972. We conclude that neither the Convention nor the legislature desired to make a change which would grant a third party the right to recover from an employer on a contractual indemnity theory. Burlington Northern argues that a failure to allow recovery against Farmers impairs the obligation of its indemnification contract. This subject was discussed at length in Neel v. First Federal Sav. and Loan Assoc. (Mont. 19841, 675 P.2d 96, 41 St.Rep. 18. Both Art. 11, § 31, Mont. Const. and Art. 1, § 10, U. S. Const. prohibit the impairment of contracts. This Court pointed out in Neel that the two contract clauses have been construed interchangeably and set forth the test to be applied: The Supreme Court in Energy Reserves, noted that an examination of the legislation for validity under the contract clause requires a three step analysis. The threshold inquiry is "whether the state law has, in fact, operated as a substantial impairment of the contractual relationship." If there is no substantial impairment of the contractual relationship, the inquiry is ended. Second, if the legislation substantially impairs the contractual rights, " [t]he state, in justification, must have a significant and legitimate public purpose behind the regulation." Third, the adjustment of rights and responsibilities of contracting parties must be based " [ulpon reasonable conditions'' and be " [o]f a character appropriate to the public purpose justifying the legislation's adoption." As the opinion notes, unless the State is a party to the contract, courts will p r o p e r l y d e f e r t o 3 e g i s l a t i v e judgment on t h i s t h i r d step. Neel, 675 P.2d at 104-05, 41 St.Rep. 27-28 (citations omitted). We find that the statutory prohibition against enforcement of an indemnity contract is a substantial impairment of the contractua 1 relationship that exists between B u r l i n g t o n N o r t h e r n and F a r m e r s . Thus, t h e t h r e s h o l d i n q u i r y i s met. The second question is whether the State had a significant and legitimate public purpose in enacting the statute. A s p r e v i o u s l y p o i n t e d o u t i n S h e a , t h e aim o f the Workers' Compensation A c t was t o c o m p e n s a t e e v e r y employee for any injury suffered during the course of employment, whether the employer was at fault or not. Employers who participated in the compensation system were guaranteed limited liability. The s y s t e m was d e s i g n e d f o r t h e common good s o t h a t i n j u r e d w o r k e r s would n o t become p u b l i c w a r d s . This purpose is both significant and legitimate. The l e g i s l a t i v e purpose behind $ 39-71-411, MCA, is t o continue t o guarantee limited l i a b i l i t y t o e m p l o y e r s c o v e r e d by t h e Act. The statutory prohibition against t h i r d party claims f o r c o n t r i b u t i o n o r i n d e m n i t y was e n a c t e d w i t h t h e p u r p o s e o f p e r p e t u a t i n g Montana's workers' compensation system i n l i g h t of recent tort law development. We find this to be a significant and l e g i t i m a t e public purpose, which meets t h e second p a r t o f t h e t e s t . The t h i r d r e q u i r e m e n t i s t h a t t h e s t a t u t o r y a d j u s t m e n t o f t h e r i g h t s and r e s p o n s i b i l i t i e s o f t h e c o n t r a c t i n g p a r t i e s must be based upon reasonable conditions and be of a character appropriate to the purpose of the statute. In Neel, this Court concluded t h a t where a State is a not a party t o the contract i n question, courts w i l l properly defer t o l e g i s l a t i v e judgment. N e e l , 6 7 5 P.2d a t 1 0 5 , 28 S t . R e p . at 27-28. We conclude that it is proper to defer to the l e g i s l a t i v e judgment on t h i s t h i r d p o i n t . W e recognize t h a t many c o u r t s h a v e h e l d t h a t an a c t i o n t o e n f o r c e a n i n d e m n i t y c o n t r a c t i s an a c t i o n s e p a r a t e from t h e o r i g i n a l c l a i m f o r the injury of t h e employee, and recovery can therefore be allowed against the employer. That i s n o t an a p p r o p r i a t e d i s t i n c t i o n u n d e r o u r Workers' Compensation A c t . A s pointed out in Cordier, a n employer should n o t be held liable for damages sustained by an injured employee, whether such damages are s o u g h t by the employee d i r e c t l y or indirectly t h r o u g h r e c o v e r y from a t h i r d p a r t y . In the present case, i t i s p o s s i b l e t h a t Rais'l.er c o u l d r e c o v e r a l l o f h i s damages i n t o r t from B u r l i n g t o n N o r t h e r n i f he could prove t h a t t h e negligence o f Burlivgton Northern was a c a u s e o f h i s i n j u r i e s , e v e n t h o u g h t h e p r i n c i p a l c a u s e of such injuries might have been the neg3igence of his employer. I n t h e e v e n t o f s u c h a r e c o v e r y by t h e employee, Burlington Northern then could claim its right to recover from Farmers on a contractual indemnity basis. The end r e s u l t would b e t h a t t h e employee would r e c o v e r indirectly from h i s employer a l l o f h i s t o r t damages f o r t h e i n j u r y f o r which h e a l s o r e c e i v e d c o m p e n s a t i o n b e n e f i t s . That i n d i r e c t recovery is inappropriate. I t would contradict the basic foundation of t h e workers' compensation law i n t h i s s t a t e , which imposes a b s o l u t e l i a b i l i t y upon an employer f o r i n j u r y t o employees and e l i m i n a t e s a l l o t h e r l i a b i l i t y on t h e p a r t of t h e employer. W e conclude t h a t t h e t h r e e - p a r t t e s t i n N e e l h a s been met. We hold that § 39-71-411, MCA, does not v i o l a t e t h e c o n s t i t u t i o n a l p r o h i b i t i o n s a g a i n s t impairment o f o b l i g a t i o n of contracts, and that Farmers can assert 5 39-71-All, MCA, as a complete defense to the third party action by Burlington Northern. Shea, Cordier, and the Judiciary Committee Minutes on th.e amendment to 5 39-71-411, MCA, set forth sound reasons for limiting employers' liability in order to protect the workers' compensation system in Montana. We find the l~gislature' s 1imit.ation on employers' liability to be constitutional. We conclude that an insured employer can properly assert 5 39-71-411, MCA, as a complete defense to a third party action for express indemnity. Justices Mr. Justice L. C. Gulbrandson dissenting. I concur with the response to certified question no. 1, but would respond "no" to certified question no. 2. The majority opinion states: The legislative purpose - - behind S 39-71-411, MCA, is to continue to guarantee limited liability to employers covered by the Act. The statutory prohibition against third party claims for constitution or indemnitv was enacted . L with the purpose of perpetuatiny Montana's workers' compensation system in light of recent tort law development. (Emphasis added.) In my view, the majority has done more than "continue" or "perpetuate" what was present at the time the legislature acted. This Court's previous pronouncements in DeShaw v. Johnson (1970), 155 Mont. 355, 472 P.2d 298 and Howard S. Wright Const. v. F. E. DeBeer Mech. (1979), 604 P.2d 323, 185 Mont. 47, were in line with the majority of the states in approving contractual indemnity. I would allow contractual indemnity, where the parties have had the opportunity to negotiate, prior to any claim, the distribution of the loss, as long as the injured employee's right to bring an action against the third party is not prejudiced. Under current law, where an employee recovers from a third party, the employer's insurer can share in the recovery through subrogation. Section 39-71-414, MCA. Where an employee recovers from a passively negligent third party, it may now be possible for the employer's insurer to share under subrogation, no matter how careless the employer has been in preparing the work place, and even though the employer has specifically contra.cted, through liability insurance, or otherwise, to be personally liable to the third party. In my opinion, the legislature never intended, nor considered, such a result. r