Saturday, July 4, 2015

Who's Covered Here?

Hemond v. Frontier Communications, Inc., 2015 VT 66

By Andrew Delaney

This appeal is about indemnification. Indemnification can be express or implied. I think of express indemnification as a formal agreement to “pick up the tab.” It’s like two buddies decide to go out for dinner, but before they leave, they write up a formal agreement that says one of them is going to pay for the meal, the tip, parking fees, and anything else associated with the meal. The buddy who agrees to pay ahead of time is expressly indemnifying the other. Implied indemnification would be like when one of the buddies invites the other out, picks the restaurant, orders filet mignon and a dozen drinks, and brags about what a financially productive week last week was.

This is a dispute between two defendants—Frontier Communications, Inc. and Navigant Consulting Group, Inc.—in a case “arising after plaintiff Michael Hemond suffered a tragic electrocution injury while working on an electrical switch.” Frontier owned the equipment. Navigant was a consultant. Navigant was hired to help Frontier get a certificate of public good, and provided testimony at the Public Service Board (PSB) about how an upgrade plan—which is what plaintiff was working on when he was injured—would be a good thing for Frontier’s customers. (You can read about the underlying facts here.)

The switch that injured Mr. Hemond wasn’t properly installed or grounded by the time he was told to open it and he was injured severely by an electrical arc. He and his wife sued Frontier and Navigant, among others, for “negligence in the design, manufacture, installation, and construction of the Richford substation, and of the switch in particular.”

After mediation, the Hemonds settled with all defendants except Frontier. Frontier then sued all the codefendants claiming implied indemnification. A little while later, Navigant sued Frontier for express contractual indemnification.

Both Frontier and Navigant moved for summary judgment (if you need a refresher on what summary judgment is, click here). The trial court granted summary judgment in favor of Navigant and against Frontier in separate orders, reasoning that Navigant was entitled to express indemnity based on the parties’ contract and that Frontier doesn’t get implied indemnity. Frontier appeals both decisions.

The SCOV notes the applicable standard, which I will articulate with a Texas-y tone: “Y’all get sum-jay when y’all agree on the ‘portant facts and the law says it can only be one way.” Sometimes—especially on Fridays—I’ll answer the phone at the office in this accent. Don’t ask me why ‘cause I really don’t know.

The SCOV also notes the express-versus-implied-indemnification difference, and that “a party can expressly agree to indemnify another, or the right to indemnity may be implied where ‘circumstances require the law to imply such an undertaking.’” Both concepts are in play here.

Frontier says that “Navigant was responsible for advising on the suitability of the electrical system” and it screwed up when it failed to say “Don’t use that switch; it’s dangerous.” Navigant counters with “DUDE. CONTRACT.”

The SCOV takes up Frontier’s claim first. Implied indemnification is an equitable exception to the no-contribution-between-joint-tortfeasors rule. So, uh, for those not versed in mumbo-jumbo, this means there’s a general rule that when two or more people or entities are responsible for a harm (this makes ‘em tortfeasors) to another, they (the tortfeasors) are liable for the full amount owed the plaintiff and they don’t get to point fingers at each other and say, “But it’s more HIS fault!” and so on. This concept—known in lawyerspeak as “joint and several liability”—can best be illustrated by an example from my childhood. My brother and I would be doing something perfectly innocent like playing baseball in the house; a lamp or something would get broken; and we’d BOTH get punished even though it was totally my brother’s fault.

So when it “would only be fair” for just one of the joint naughty-makers to be held liable, implied indemnification steps in to level out the playing field. It applies, for example, when liability arises based on a legal relationship only and it really is the other guy’s fault. Like if my brother was playing baseball in the house by himself, and broke a lamp, and I just happened to be sitting in the other room minding my own business, quietly reading a book. This concept had little success in my case for one-he’s-your-little-brother-and-you-need-to-be-watching-him, two-you-can’t-just-run-in-the-other-room-and-pretend-to-be-reading-a-book-when-something-bad-happens, and-three-you’re-holding-the-book-upside-down reasons.

The trial court reasoned that the complaint was that Frontier was directly negligent—not that Frontier failed to discover Navigant’s negligence. Taking the evidence in the light most favorable to Frontier, the trial court was only able to find that Navigant was hired to provide consulting services, not to make the substation safe.

On appeal, Frontier argues that there are disputed questions of fact “regarding whether Navigant was responsible for ensuring the safety of the substation.” Frontier primarily argues that Navigant was negligent in giving testimony to the PSB that the Frontier-designed system was reliable—that Navigant should’ve identified the danger with the switch and so it’s all Navigant’s fault.

The SCOV isn’t having it. Even if everything Frontier alleges is true, it fails to show that it’s only vicariously or secondarily liable, so it can’t get implied indemnity. What it boils down to is that Frontier was responsible for design, maintenance, and installation of the switch in the substation. It can’t delegate all those responsibilities to Navigant by implication. The SCOV quotes a Restatement section and says some smart-sounding stuff about all that—noting that Frontier would have to prove that it was primarily Navigant’s duty to keep things safe, and Frontier can’t really do that.

Apparently, Frontier also wants to argue that there’s a factual dispute about whether it had an “active part” in causing plaintiffs’ injury. If it didn’t, it reasons, it gets indemnity. The SCOV fields that with an “According to Frontier” swipe, noting, “Again, Frontier misses the point.” Frontier doesn’t (and cannot) “demonstrate that its liability was for a dangerous condition created by Navigant’s acts.”

Frontier’s next volley is at the trial court’s ruling in favor of Navigant on the express-indemnity claim. This is a contractual question, so the SCOV looks to the contract language. Frontier’s beef is that Navigant supposedly didn’t “demonstrate that there was an express indemnification agreement.” The SCOV mulls it over, goes through the paperwork and says more or less, “Sorry, Frontier—looks like Navigant did.” There was a letter agreement with terms and conditions attached to it and affidavits that Navigant submitted.

Frontier’s arguments—that Navigant failed to show that the terms and conditions were the ones attached to the letter and that the same terms and conditions applied to the scope of later work—are rejected by the SCOV in short order. Navigant submitted stuff and supported it with affidavits. Frontier doesn’t get to just say “Nuh-uh” and create a material dispute ‘cause that’s not how the summary-judgment rule works.

Finally, the SCOV touches on Frontier’s Navigant-submitted-stuff-that-wasn’t-in-the-record argument by noting that it didn’t consider that information, so it’s a moot point.

And there you have it. Express indemnification beats implied indemnification (or lack thereof) this time around.

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