Hamelin v. Simpson Paper (Vermont) Co.

Gibson, J.,

dissenting. I respectfully dissent. Although I agree that parties may contract to allocate liability and require indemnification for loss, I believe the contract between Vescom Corporation and Simpson Paper Company did not justify holding Vescom liable in this instance.

Two important principles underlying tort liability are: (1) a party that causes loss should be held responsible for the damage therefrom, and (2) holding the responsible party hable serves as an incentive to prevent future occurrences of similar harm. See W. Keeton, et al., Prosser and Keeton on the Law of Torts § 4, at 22, 25 (5th ed. 1984). Any departure from these fundamental principles by private parties should be expressly agreed upon. Applying the common-law rule that parties to a contract are not presumed to intend that one party indemnify the other for the latter’s own negligence unless the contract so states in clear and unequivocal terms, I would affirm the trial court. See Davis Constructors & Eng’rs, Inc. v. Hartford Accident & Indem. Co., 308 F. Supp. 792, 794-95 (M.D. Ala. 1968); General Accident Fire & Life Assurance Corp. v. Smith & Oby Co., 148 F. Supp. 126, 128 (N.D. Ohio 1957); United States Fidelity & Guar. Co. v. Mason & Dulion Co., 145 So. 2d 711, 713 (Ala. 1962); Fields v. Lawter Chems., Inc., 252 N.E.2d 120, 122 (Ill. App. Ct. 1969); Heat & Power Corp. v. Air Prods. & Chems., Inc., 578 A.2d 1202, 1206 (Md. 1990); Kansas City Power & Light Co. v. Federal Constr. Corp., 351 S.W2d 741, 745 (Mo. 1961); see also Foucher v. First Vt. Bank & Trust Co., 821 F. Supp. 916, 928 (D. Vt. 1993) (Vermont law generally bars indemnity for both intentional and negligent tortfeasors unless there is express agreement or circumstances are such that law implies right of indemnification); Furlon v. Haystack Mountain Ski Area, Inc., 136 Vt. 266, 269, 388 A.2d 403, 405 (1978) (acknowledging generally accepted rule that “an indemnification clause does not cover liability for the indemnitee’s own negligence unless it expressly so states”).

An example of such language appears in Davis Constructors & Engineers. There, the court held that a nonnegligent subcontractor was required to indemnify the negligent contractor where the parties *23had agreed that the subcontractor would indemnify the contractor for injuries and property damage “arising out of the work undertaken by the sub-contractor . . . and arising out of any . . . other operation no matter by zvhom performed for and on behalf of the sub-contractor, whether or not due in whole or in part to conditions, act [sic] or omissions done or permitted by the contractor.” 308 F. Supp. at 794.

Unlike the contract in Davis Constructors & Engineers, neither § 2(g) nor § 2(c) * of the parties’ contract contains language that expressly requires Vescom to indemnify Simpson even if the loss is caused solely by Simpson’s act or omission. In § 2(g), Vescom agreed to assume all risk “in any manner resulting from or arising out of or in any manner connected with” its operations. I do not agree that the language “in any manner connected with” is unambiguous, 167 Vt. at 20, 702 A.2d at 88, and that it clearly reflects the parties’ intent to cover the situation here. The operations referred to in § 2(g) are presumably those that Vescom agreed to provide in § 1: making tours; checking doors, windows, and lights; reporting unusual incidents or hazardous conditions; and submitting reports on such incidents or conditions. If Robert Hamelin’s injury was the result of negligence, that injury resulted from, arose out of, and was connected with Simpson’s duty to reasonably inspect and maintain its facility, not the services Vescom agreed to provide under the contract.

At best, the language of § 2(g) is ambiguous. Ambiguous contract language is construed against the party that drafted it. State v. Murray, 159 Vt. 198, 205, 617 A.2d 135, 139 (1992). An even “greater degree of clarity is necessary to make [an] exculpatory clause effective than would be required for other types of contract provisions,” Colgan v. Agway, Inc., 150 Vt. 373, 375, 553 A.2d 143, 145 (1988) (emphasis omitted),- thereby requiring strict interpretation against the drafter of the contract. Szczotka v. Snowridge, Inc., 869 F. Supp. 247, 250 (D. Vt. 1994). As drafter, Simpson was in the better position to outline clearly the scope of Vescom’s liability. Because it is not clear that the parties intended Vescom to indemnify Simpson for damages caused by Simpson’s own actions, I would construe the provision in favor of Vescom and hold Simpson responsible for its own negligence.

*24Section 2(c) likewise cannot be interpreted to require indemnification. That provision pertains solely to liability “resulting . . . from [Vescom’s own] acts or omissions.” Regardless of whether Simpson was negligent in its duty to inspect, maintain, and repair its stairway, Hamelin’s injuries were not caused by any act or omission by Vescom.

I also disagree that Furlon, 136 Vt. 266, 388 A.2d 403, controls. In Furlon, a contract between a ski lift manufacturer and the purchasing resort required the resort to assume all legal responsibility for any injury or property damage resulting from the erection or operation of the lift. Id. at 268, 388 A.2d at 404. When an injured resort employee sued the manufacturer for negligent manufacture and design and received a default judgment, we held that under the contract he could enforce the judgment against the resort. Id. at 270, 388 A.2d at 405. Although we went on to discuss public policy concerns such as disparity of bargaining power, the opinion began with a key factual distinction. The parties could not have intended that the provision requiring the resort to “assumeü all legal responsibility” merely required indemnification for the resort’s negligence because the manufacturer had no duty for a negligent act or omission committed by the resort. Id. at 268-69,388 A.2d at 405. As we noted, interpreting the clause to require the resort to indemnify only for its own negligence “would render that clause a nullity.” Id. at 268,388 A.2d at 405.

The Vescom-Simpson contract presents an entirely different situation. All duties performed by Vescom security guards occurred at Simpson’s plant, for which Simpson had a duty of reasonable care for construction, inspection, and maintenance. As noted by the majority, Simpson declared itself the special employer of Vescom’s employees. Therefore, Simpson, unlike the manufacturer in Furlon, ran the risk of being found to have a duty for accidents involving Vescom employees.

Under this approach, National Union would have no duty to defend or indemnify Simpson. Whether an insurer is required to indemnify a third party for its own negligence under a policy depends on whether the insured party is obligated to indemnify the negligent third party under the associated agreement. See Fields, 252 N.E.2d at 122; Kansas City Power & Light Co., 351 S.W.2d at 748-49; 7A J. Appleman & W. Berdal, Insurance Law and Practice § 4497.02 (1979). Interpretation of an insurance policy “cannot be decided upon any supposed ‘intent’ evidenced merely by the insurance requirement, when the full contract language is before [the court] for construction, and when the *25policy of insurance (approved by [the negligent party]) clearly expresses its coverage.” Kansas City Power & Light Co., 351 S.W.2d at 748. Because the contract between Simpson and Vescom does not explicitly require Vescom to indemnify Simpson for Simpson’s own acts or omissions, I would hold that National Union has no duty to defend or indemnify Simpson.

I point out that this interpretation is supported by the certificate of insurance issued by National Union. This document, like the terms of the insurance policy, demonstrates the insurer’s and the insured’s intent when drafting the policy. Utica Mut. Ins. Co. v. Central Vt. Ry., 133 Vt. 292, 295, 336 A.2d 200, 203 (1975). Here, National Union specifically noted that Simpson was added as an “additional insured only with respecto to the negligent acts, errors or omissions [of Vescom’s] employees in the performance of their agreed upon duties.” (Emphasis added.) This language is yet another indicator that none of the parties at the time of contract formation and purchase of insurance intended Vescom to indemnify Simpson for liability caused by Simpson’s own acts or omissions.

I am authorized to say that Justice Morse joins in this dissent.

Because it found § 2(g) to be controlling, the majority did not address § 2(c), under which Vescom agreed to “[¡Indemnify and hold Simpson harmless against all claims or liabilities asserted by third parties, including governmental agencies, resulting directly or indirectly from [Vescom’s] acts or omissions hereunder whether negligent or otherwise.”