Present: Hassell, C.J., Lacy, Keenan, Koontz, Lemons, and Agee,
JJ., and Stephenson, S.J.
ESTES EXPRESS LINES, INC., ET AL.
OPINION BY
v. Record No. 061302 JUSTICE LAWRENCE L. KOONTZ, JR.
March 2, 2007
CHOPPER EXPRESS, INC.
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Randall G. Johnson, Judge
The sole issue in this appeal is whether an indemnity
provision in a vehicle lease agreement is void as against public
policy insofar as the provision would entitle a party to
indemnification for liability incurred as the result of personal
injuries caused by its own negligence.1
BACKGROUND
The relevant facts are undisputed. Estes Express Lines,
Inc. and Estes Leasing (collectively “Estes”) engage in the
business of leasing trucks. On April 15, 1996, Estes entered
into a written lease agreement to lease several trucks to
Chopper Express, Inc. (“Chopper”), a trucking company.
Section 18 of the parties’ lease agreement contains an
indemnity provision stating, in relevant part, that:
[Chopper] agrees to indemnify, defend and hold
[Estes] harmless from:
1
We also address a similar issue regarding indemnity
provisions relating to personal injury in W. R. Hall, Inc. v.
Hampton Roads Sanitation District, 273 Va. ___, ___ S.E.2d ___
(2007) (this day decided).
. . . .
C. Any and all loss, cost, claim, expense, cause of
action, loss of use and liability by reason of
injury (including death) to persons or damage to
property arising out of the use, operation,
ownership, maintenance or control of a [leased]
Vehicle whether covered by insurance or not,
including claims in excess of insurance limits
and all claims determined not to be covered by
insurance irrespective of who, among [Chopper] or
its insurance carrier or others, may be the cause
for such failure of coverage or recovery in
excess of coverage.
D. Any liability by reason of any claim asserted by
an agent or employee of [Chopper].
On December 11, 2001, James D. Davis, Jr., a Chopper
employee, was injured while operating one of the trucks leased
from Estes under the lease agreement. Davis filed a personal
injury action against Estes and a repair company, Redman Fleet
Services, alleging that their negligence caused his injuries.
Estes and Davis engaged in mediation and eventually settled
Davis’ claim for $350,000. In settling Davis’ claim, however,
Estes did not admit negligence or liability.
Thereafter, pursuant to the indemnity provision in section
18(C) of the lease agreement, Estes demanded that Chopper
reimburse Estes for the $350,000 settlement amount and
$23,898.92 in attorneys’ fees Estes incurred in reaching the
mediated settlement. When Chopper refused this demand, Estes
filed a motion for judgment against Chopper in the trial court
2
asserting that Estes was entitled under section 18(C) of the
lease agreement to indemnity from Chopper in the amount of the
settlement and the attorneys’ fees.
Chopper filed a demurrer to Estes’ motion for judgment. In
the demurrer Chopper asserted, inter alia, that Estes was not
entitled to indemnification because section 18(C) of the lease
agreement was “void as against public policy.”2 In a brief
supporting the demurrer, Chopper elaborated that under Johnson
v. Richmond & Danville R.R. Co., 86 Va. 975, 11 S.E. 829 (1890)
and Hiett v. Lake Barcroft Community Ass’n, 244 Va. 191, 418
S.E.2d 894 (1992), “indemnity agreements involving claims for
personal injury are against public policy and void.” Chopper
asserted that section 18(C) was such an agreement and therefore
unenforceable.
After a hearing, the parties filed additional briefs at the
request of the trial court.3 Subsequently, the trial court
2
Chopper’s demurrer also asserted that Estes was equitably
estopped from bringing and/or waived its indemnity claim by
failing to allege in the motion for judgment that it notified
Chopper prior to settling Davis’ claim. The trial court
rejected this assertion and it is not at issue in this appeal.
3
The trial court specifically requested the parties to
address on brief whether Safeway, Inc. v. DPI Midatlantic, Inc.,
270 Va. 285, 619 S.E.2d 76 (2005), which was decided during the
course of this case, modified the law so as to affect the issues
presented. Ultimately, the trial court correctly concluded that
Safeway did not address the issue presented in this case. In
Safeway, although we held that the Virginia Workers’
3
entered an order sustaining Chopper’s demurrer for reasons
stated in a letter opinion. In the letter opinion, relying
principally upon its interpretation of Johnson and Hiett, the
trial court concluded that the indemnity provision in section
18(C) of the lease agreement is void as against public policy.
Interpreting Hiett to hold that only releases and
indemnification agreements pertaining to property damage are
enforceable, and that both releases and indemnification
agreements involving personal injuries are void, the trial court
ruled that section 18(C) is void as applied to Estes’ indemnity
claim stemming from Davis’ personal injury settlement.
The trial court permitted Estes to file an amended motion
for judgment, which Estes filed again claiming that it was
entitled to indemnification under section 18(C). The amended
motion for judgment was not materially different from the
original motion for judgment, other than an added assertion that
Estes was not negligent and that Chopper, Davis, and a third
party were responsible for Davis’ injuries.4 Chopper again filed
Compensation Act did not bar an indemnification claim pursuant
to an indemnity provision nearly identical to section 18(C), the
specific issue of whether the provision was void as against
public policy was not before the Court. Safeway, 270 Va. 288-
90, 619 S.E.2d at 79-80.
4
Estes also added a contribution claim to its amended
motion for judgment, but that claim is not at issue in this
appeal.
4
a demurrer to the amended motion for judgment. By a final
order, the trial court sustained Chopper’s demurrer to the
amended motion for judgment for the reasons stated in its prior
letter opinion. This appeal followed.
DISCUSSION
Estes asserts as its sole assignment of error that the
trial court erred in “ruling as a matter of law that indemnity
agreements contained in contracts wherein a private party
indemnifies itself against the possibility of its own future
negligence for personal injuries are against public policy and
void.” Although the particular indemnity provision at issue
here is drafted broadly so as to include both personal injury
and property damage, under this assignment of error the question
presented is whether Estes, the indemnitee, may enforce the
provision and receive indemnification from Chopper, the
indemnitor, when the loss was the result of a personal injury to
a third party that was caused by Estes’ alleged negligence.
Estes maintains that parties negotiating at arm’s length
are free to make contractual indemnity agreements shifting
losses incurred through damage to a third party. Estes further
maintains that such agreements are enforceable regardless of
whether the indemnitee’s negligence caused the damage to the
third party and regardless of whether that damage was to person
5
or property. With regard to Johnson and Hiett, which were
relied upon by the trial court, Estes contends that those cases
are applicable only to pre-injury release provisions,5 not
indemnity provisions. According to Estes, indemnity provisions
do not give rise to the important public policy concerns
implicated by pre-injury release provisions. This is so, Estes
contends, because pre-injury release provisions bar an injured
party from recovering from the negligent tortfeasor, while
indemnity agreements merely shift losses by means of an
independent contractual relationship. Upon this basis, Estes
asserts that public policy does not forbid a party from
indemnifying itself against liability for personal injury caused
by future negligence.
Chopper responds that the prohibition against pre-injury
release provisions for personal injury announced in Johnson and
Hiett applies with equal force to indemnity agreements relating
to personal injury. Chopper maintains that both types of
provisions violate public policy by allowing a contracting party
to put “at the mercy of its own misconduct” the other party to
the contract. Chopper points to our language in Hiett that
5
Estes alternatively refers to a pre-injury release
provision as an exculpatory provision. For all relevant
purposes, these terms are interchangeable and, for consistency,
we will use the term pre-injury release provisions.
6
“this Court’s decisions . . . have been limited to upholding the
right to contract for the release of liability for property
damage, as well as indemnification from liability to third
parties for such damage” to indicate that a party may only
indemnify itself against losses from property damage, not
personal injury. See Hiett, 244 Va. at 195, 418 S.E.2d at 896.
We begin our review of the indemnity agreement between
Estes and Chopper with the principle that “the law looks with
favor upon the making of contracts between competent parties
upon valid consideration and for lawful purposes.”
Shuttleworth, Ruloff & Giordano, P.C. v. Nutter, 254 Va. 494,
498, 493 S.E.2d 364, 366 (1997). Furthermore, although
contracts that violate public policy are void, courts are averse
to holding contracts unenforceable on the ground of public
policy unless their illegality is clear and certain. Id.; see
also Jessee v. Smith, 222 Va. 15, 17-18, 278 S.E.2d 793, 795
(1981); Ryan v. Griffin, 199 Va. 891, 895, 103 S.E.2d 240, 244
(1958).
In Johnson and Hiett, we held that the particular
contractual provisions at issue were so averse to public policy
as to be unenforceable. In Johnson, the plaintiff was the
personal representative of a deceased member of a firm of
quarrymen hired by the defendant railroad company to remove a
7
granite bluff from its right of way. 86 Va. at 975-76, 11 S.E.
at 829. The decedent was killed when struck by a wheelbarrow
that had been hit by an oncoming train. Id. At trial, the jury
was instructed as to a pre-injury release provision in the
agreement between the firm and the railroad company whereby the
railroad company would “in no way be held responsible for any
injuries to or death of any of the members of the said firm, or
of any of its agents and employees, sustained from said work,
should such death or injury occur from any cause whatsoever.”6
Id. at 976, 11 S.E. at 829. The release agreement had been
executed by the decedent so as to act as an individual release
by him in favor of the railroad company. The jury rendered a
verdict in favor of the railroad company, and the trial court
entered a judgment affirming that verdict.
We reversed, holding the release provision to be void to
the extent that it “stipulates for exemption from liability even
for the consequences of the [railroad] company’s own negligence
. . . [and] precludes a recovery by the plaintiff, whether the
company was negligent or not.” Id. at 978, 11 S.E. at 830. We
6
The agreement also contained an indemnity provision
whereby “in the event of any suit being brought against the
[railroad company] or any judgment being obtained against the
same, then the [firm] shall resist said suit, and pay such
judgment, together with all costs incident thereto.” However,
8
stated that to “uphold the stipulation in question, would be to
hold that it was competent for one party to put the other
parties to the contract at the mercy of its own misconduct;
which can never be lawfully done where an enlightened system of
jurisprudence prevails. Public policy forbids it, and contracts
against public policy are void.” Id.
Over one hundred years later, in Hiett, we reiterated the
principle stated in Johnson. In Hiett, the plaintiff was
seriously injured while participating in a triathlon sponsored
by the defendant. 244 Va. at 192, 418 S.E.2d at 894-95. Prior
to the event, the plaintiff had signed an entry form in which he
agreed to “waive, release and forever discharge any and all
rights and claims for damages which I have or may hereafter
accrue to me against the organizers and sponsors . . . for any
and all injuries suffered by me in said event.” Id. at 192-93,
418 S.E.2d at 895. We held the provision to be unenforceable
based on the principle that pre-injury release provisions
pertaining to future negligence are void as against public
policy. Id. at 194-95, 418 S.E.2d at 896. In doing so, we
noted that the cases decided since Johnson were “limited to
upholding the right to contract for the release of liability for
the indemnity provision was inapplicable under the circumstances
of the case.
9
property damage, as well as indemnification from liability
to third parties for such damage.” Id. at 195, 418 S.E.2d at
896 (discussing C & O Ry. Co. v. Clifton Forge-Waynesboro
Telephone Co., 216 Va. 858, 224 S.E.2d 317 (1976); Nido v. Ocean
Owners’ Council, 237 Va. 664, 378 S.E.2d 837 (1989), Richardson-
Wayland Elec. Corp. v. VEPCO, 219 Va. 198, 247 S.E.2d 465
(1978), Appalachian Power Co. v. Sanders, 232 Va. 189, 349
S.E.2d 101 (1986), and Kitchin v. Gary Steel Corp., 196 Va. 259,
83 S.E.2d 348 (1954)).
While Johnson and Hiett clearly prohibit pre-injury release
provisions relating to personal injury, we agree with Estes that
such provisions are substantively different from indemnity
provisions with regard to their purpose, effect, and public
policy implications. The purpose of pre-injury release
provisions such as those in Johnson and Hiett is to
prospectively extinguish one party’s right to recover for future
bodily injuries caused to that one party by the other party’s
negligence. The effects of such provisions are twofold: a
party suffering personal injury is barred from seeking a
recovery from the tortfeasor, likely depriving the injured party
of all possibility of recovery, and the released party’s
motivation to exercise ordinary care to prevent harm to the
releasing party may be diminished because the possibility of
10
legal liability is removed. In both Johnson and Hiett, these
concerns were realized because, had the release provisions been
enforced, the plaintiff would have been left with no possible
recovery for the defendant’s alleged negligence and those same
defendants would have been, essentially, judgment-proof despite
their negligence. As we stated long ago in Johnson, such
provisions cannot be tolerated under an enlightened system of
jurisprudence.
In contrast, the purpose of an indemnity provision is to
pre-determine how potential losses incurred during the course of
a contractual relationship will be distributed between the
potentially liable parties. See Safeway, 270 Va. at 289, 619
S.E.2d at 79. Moreover, indemnity provisions, including those
indemnifying a party against future liability for personal
injury caused by its own negligence, do not invoke the same
public policy concerns as pre-injury release agreements.7 The
primary reason for this distinction is that, unlike pre-injury
release provisions, indemnity provisions do not bar or even
7
Such provisions are likely prevalent in the business
community given that several of our cases have involved such
provisions. See, e.g. Seaboard Air Line Railroad Co. v.
Richmond-Petersburg Turnpike Auth., 202 Va. 1029, 1030, 121
S.E.2d 499, 501 (1961) (provision indemnifying against “any
liability, damage, loss or injury”); Appalachian Power Co., 232
Va. at 195-96, 349 S.E.2d at 105 (provision indemnifying against
“any and all claims of whatever nature”).
11
diminish an injured party’s ability to recover from a
tortfeasor. Indeed, regardless of whether the indemnitee
recovers from the indemnitor, the negligent indemnitee remains
liable to the injured party. That being the case, it is evident
that enforcement of an indemnity provision does not jeopardize
in any way the injured party’s ability to recover.
We recognize that to allow a party to indemnify itself
against its own negligence in causing personal injury to another
potentially puts the indemnitor at the mercy of the indemnitee’s
own misconduct. Theoretically, it can be argued that an
indemnitee may have a diminished concern with being negligent
because of its contractual right ultimately to be reimbursed by
the indemnitor, which may lead to less motivation to act with
care toward preventing personal injury. However, the mere
existence of an indemnity provision does not guarantee
reimbursement by the indemnitor because, for example, it may
have become insolvent. With no guarantee of indemnity, we think
it highly unlikely that a party would neglect to exercise
ordinary care simply in anticipation that it ultimately might
not have to bear the burden of any liability incurred as a
12
result of its failure to exercise ordinary care to avoid
personal injury to another.8
Chopper does not put forth, and we cannot envision, any
other reason why public policy would forbid a party from
indemnifying itself against its own negligence through a
contractual provision negotiated at arm’s length with a willing
indemnitor. The indemnity provision at issue here, set forth in
section 18(C) of the lease agreement between Estes and Chopper,
is thus enforceable even to the extent that it would entitle
Estes to be reimbursed from Chopper in the amount of its loss as
a result of Davis’ personal injuries caused by Estes’ alleged
negligence.
CONCLUSION
For these reasons, we hold the trial court erred in ruling
that the indemnity provision in section 18(C) is unenforceable,
and in sustaining Chopper’s demurrer for that reason.
Accordingly, we will reverse the trial court’s judgment and
remand the case for further proceedings.
Reversed and remanded.
8
We also note that, at least since C & O Railway Co., we
have upheld even pre-injury release provisions relating to
property damage, 216 Va. at 865-66, 224 S.E.2d at 322, and no
13
evidence has arisen that this has in any way engendered public
harm.
14