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Crawford v. Weather Shield Mfg., Inc.

Supreme Court of California

July 21, 2008, Filed

S141541

Case Summary

Procedural Posture

Defendant subcontractor sought review of a judgment from the Court of Appeal, Fourth Appellate District, Division Three (California), which affirmed a trial court's declaratory ruling that required the subcontractor to reimburse the general contractor's expense of defending plaintiff homeowners' construction defect action and prosecuting the general contractor's cross-complaint.

Overview

The subcontractor was contractually required to indemnify the general contractor against all claims for damages growing out of the execution of the subcontractor's work and was further required, at its own expense, to defend any suit or action brought against the general contractor founded upon the claim of such damage. The court held that those terms, even if strictly construed in the subcontractor's favor, obligated the subcontractor to defend, from the outset, any suit against the general contractor insofar as that suit was founded upon claims alleging damage or loss arising from the subcontractor's negligence. The court stated that Civ. Code, § 2778, subd. 4, placed in every indemnity contract, unless otherwise provided, a duty to assume the indemnitee's defense if tendered against all claims embraced by the indemnity. That duty did not depend on the outcome of the litigation. The subcontractor thus had a contractual obligation to defend the suit even though the subcontractor was later found not to be negligent. The indemnity provision, by contrast, applied under Civ. Code, § 2772, only to the extent that the general contractor actually sustained liability or paid damages.

Outcome

The court affirmed the judgment of the court of appeal.

LexisNexis® Headnotes

 

 

Business & Corporate Compliance > ... > Contracts Law > Types of Contracts > Construction Contracts

Business & Corporate Compliance > ... > Contracts Law > Contract Conditions & Provisions > Indemnity Clauses

HN1  Construction Contracts

Parties to a contract, including a construction contract, may define therein their duties toward one another in the event of a third party claim against one or both arising out of their relationship. Terms of this kind may require one party to indemnify the other, under specified circumstances, for moneys paid or expenses incurred by the latter as a result of such claims. Civ. Code, § 2772, provides that indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person. They may also assign one party, pursuant to the contract's language, responsibility for the other's legal defense when a third party claim is made against the latter. As befits the contractual nature of such arrangements, but subject to public policy and established rules of contract interpretation, the parties have great freedom to allocate such responsibilities as they see fit. When the parties knowingly bargain for the protection at issue, the protection should be afforded. Hence, they may agree that the promisor's indemnity and/or defense obligations will apply only if the promisor was negligent, or, conversely, even if the promisor was not negligent.

 

Contracts Law > Contract Interpretation > General Overview

Business & Corporate Compliance > ... > Contracts Law > Contract Conditions & Provisions > Indemnity Clauses

HN2 In general, an indemnity agreement is construed under the same rules as govern the interpretation of other contracts. Effect is to be given to the parties' mutual intent pursuant to Civ. Code, § 1636, as ascertained from the contract's language if it is clear and explicit. Civ. Code, § 1638. Unless the parties have indicated a special meaning, the contract's words are to be understood in their ordinary and popular sense. Civ. Code, § 1644.

 

Real Property Law > Construction Law > Contracts

Business & Corporate Compliance > ... > Contracts Law > Contract Conditions & Provisions > Indemnity Clauses

Contracts Law > Contract Interpretation > Ambiguities & Contra Proferentem > General Overview

HN3  Contracts

Though indemnity agreements resemble liability insurance policies, rules for interpreting the two classes of contracts differ significantly. Ambiguities in a policy of insurance are construed against the insurer, who generally drafted the policy, and who has received premiums to provide the agreed protection. In noninsurance contexts, however, it is the indemnitee who may often have the superior bargaining power, and who may use this power unfairly to shift to another a disproportionate share of the financial consequences of its own legal fault. This public policy concern influences to some degree the manner in which noninsurance indemnity agreements are construed. For example, it has been said that if one seeks, in a noninsurance agreement, to be indemnified for his or her own active negligence, or regardless of the indemnitor's fault -- protections beyond those afforded by the doctrines of implied or equitable indemnity -- language on the point must be particularly clear and explicit, and will be construed strictly against the indemnitee. For similar public policy reasons, statutory law imposes some absolute limits on the enforceability of noninsurance indemnity agreements in the construction industry.

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44 Cal. 4th 541 ; 187 P.3d 424 ; 79 Cal. Rptr. 3d 721 ; 2008 Cal. LEXIS 9072 

KIRK CRAWFORD et al., Plaintiffs and Appellants, v. WEATHER SHIELD MFG., INC., Defendant and Appellant.

Subsequent History: Reported at Crawford (Kirk) v. Weather Shield Manufacturing, Inc., 2008 Cal. LEXIS 9607 (Cal., July 21, 2008)

Prior History:  [1] Court of Appeal Fourth Appellate District, Division Three, No. G032301. Superior Court of Orange County, Nos. 815154, 815156, 815182, 816278, Raymond J. Ikola, Judge.

Crawford v. Weather Shield Mfg., Inc., 136 Cal. App. 4th 304, 38 Cal. Rptr. 3d 787, 2006 Cal. App. LEXIS 133 (Cal. App. 4th Dist., 2006)