Sunday, June 5, 2011

Cover Me

Southwick v. City of Rutland, 2011 VT 53

The factual story behind today’s case is not a tragedy on par with Hamlet or the Iceman Cometh.  It is, in fact, a straightforward narrative that may be dispatched in one sentence: girl attends a swim meet, falls off a piece of playground equipment, and suffers a terrible injury. 

That tale, however, is not really the subject of the SCOV’s decision or its competing analyses.  Rather, this accident and the resulting injuries are just catalysts for the larger events at issue and the broader tragedy that we might title The Well-Meaning Association That Did Not Read Its Contract Carefully. 

Not the stuff that either Robert Louis Stevenson or Walter Scott built their yarns upon, but we are legal followers of sterner stuff.  Let us begin with the dramatis persona to flush out the true tale:

Plaintiff:                      A young, injured girl whose parents sue the City on her behalf for the injuries she sustained on their equipment.  The City settles with her for $700,000, and neither she nor her parents make an appearance in the appeal.

City of Rutland:          A Vermont municipality and the owner/operator of Whites Park (Where People of All Races Can Enjoy Themselves).  They own and have a standing duty to maintain the park equipment on their property.

Vermont Swim Assoc. Otherwise known as the VSA, this is a non-profit group that organizes swim meets throughout the state, offers scholarships, and promotes high school and youth swimming.  It contracted with the City of Rutland to use the City’s pool at Whites.

Aristotle teaches the would-be playwright that she must enter the scene at the last possible moment.  In this case, though, we must start several months before the accident when the good people at the VSA are negotiating with the City of Rutland for the use of the pool.  The City, reasonably asks for an indemnity clause in the agreement, and VSA pulls a section of an older contract and sticks it into the City’s agreement.  The parties sign.  Flash forward to the City’s legal team, which has received the Plaintiff’s complaint and is looking for a way to fight what looks to be an expensive claim.

It is midnight, and the City’s attorney has a desk full of documents.  He is disheveled, and a half empty Chinese food container lies at his feet.  A portrait of his children sits upon the filing cabinet, staring longingly, as if to say, “Daddy, Come home!  He sighs and shifts papers around.  Suddenly, he stops and re-reads the following paragraph from the contract:

[VSA] hereby agrees to defend, indemnify and hold harmless Rutland . . . from all claims for bodily injury or property damage arising from or out of the presence of [VSA], including its employees, agents, representatives, guests and others present because of the event or [VSA]’s activities in or about Whites Park, including the entrances, lobbies and exits thereof, the sidewalks, streets and approaches adjoining the property or any portion of the property used by [VSA] or any of the above stated.

A wide smile breaks out.  He jumps up from the desk and pins the page to his wall and begins a memo to the partners.  Now he can go home.

The clause that our hero has found is what is known as indemnity clause.  It is essentially a promise to hold someone harmless.  In this case, the City of Rutland was the beneficiary of this promise, and the City used it to bring the VSA into its lawsuit with Plaintiff and to effectuate the City’s release. 

In its motion to the trial court, the City argued that this indemnity clause meant that VSA had a duty to cover any actions or damages leveled at the City for anything stemming from VSA's use of Whites Park for the swim meet.  Furthermore, VSA had failed to make the City an additional insured party on VSA's insurance policy. 

The trial court agreed with the City and granted summary judgment to the City.  VSA is now on the hook for the entire $700,000 amount that City has paid to settle its claim with Plaintiff.

On appeal, the VSA objected to this broad reading of the indemnity clause noting that Plaintiff alleged negligence by the City and nothing in the indemnity clause stated that the VSA would assume responsibility for the City’s negligence.  Such an interpretation would mean that the VSA received the park on an “as is” basis and would assume responsibility for equipment and maintenance beyond VSA's control and ability. 

For the SCOV majority, the VSA's arguments fail to persuade.  The language of the contract is clear.  VSA, for better or worse, agreed to indemnify the City for all injuries that occurred in and around the park by people coming as a result of VSA's swim meet.  Such language makes no exception for the City’s negligence but puts it wholly on the VSA. 

Informing its decision, the majority notes that the language at issue came from the VSA who borrowed it from an earlier contract with Dartmouth College, and VSA had equal bargaining power with the City to modify or change the language if it was unsure or desired a different allocation of liability.  As it stands, the parties get what they have coming to them by virtue of the agreement, and no prior Vermont cases require a different outcome. 

Act V: the Chief Strikes Back

In a muscular dissent the Chief Justice disagrees with the majority’s outcome in this case and argues that the SCOV should have reversed the trial court’s determination.

The dissent begins with the principle that parties are responsible for their own negligent actions (or inactions) unless another party expressly agrees to indemnify them.  The reasons for this are that individuals are responsible for their own actions and we, as a society, want such people held responsible as an incentive to prevent future harm of the same nature.  This first principle, the dissent asserts is strongly and consistently supported by prior Vermont case law.  The majority had previously disagreed with this proposition, but this is the Chief’s soliloquy. 

From this first principle, the dissent finds the language quoted above lacking the specific or unambiguous assumption of the City’s negligence necessary for the majority’s conclusions.  It does not address causation and contains no express statement of VSA's intent to indemnify the City for the City’s liability. 

Through this analysis, the dissent seems to be posturing that such allocations carry a high burden of proof, a standard that the majority does not apply, but one that would appear to be consistent with a presumption against interpreting indemnification clauses to cover negligent acts.

Looking further into the contract, the dissent finds that the parties had allocated remedies in such a way that would support a reading that the City maintained liability for its own negligence, and that VSA had not practically intended to assume such responsibilities.  A conclusion that is arguably supported by the fact that the VSA had not named the City as an additional insured on its policy.

The dissent also looks to the circumstances of the relationships.  Rather than being equal players, the dissent notes that the VSA, far from a commercial entity, is a volunteer organization dedicated to benefiting the community.  Such entities will, arguably, have less leverage and sophistication in contract negotiations and should not be seen as equals with larger, more-sophisticated parties such as the City of Rutland.

Furthermore, notes the dissent, the majority’s interpretation is out of whack with the scope of the contract.  VSA had agreed to pay the City $6,000 to rent the pool for the weekend meet.  VSA's expertise and scope of control was limited to the pool and its immediate area.  There is no evidence that the parties intended or planned for VSA to cover the entire park, with all of its playground equipment for any and every individual who might happen to come into the park during the weekend because or related to the swim meet. 

Geographically, the playground is actually located on the other side of two sets of tennis courts and across a creek and a copse of trees from the pool area.  It is, the dissent concludes, unreasonable to believe that the little volunteer VSA intended through this vague language to assume complete and total control and liability for an entire city park. 

Unfortunately for the VSA, the Chief stands alone in this interpretation, and the VSA ends our tale, like the infamous Scottish King with blood and money on its hands.  Ker-Splash!

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