Olch v. Pacific Press & Shear Co.

573 P.2d 1355, 19 Wash. App. 89, 1978 Wash. App. LEXIS 2072

• Court: Court of Appeals of Washington
• Decided: January 23, 1978
• Docket: 4011-1
• Status: Published

Opinions

Callow, J.

Pacific Press & Shear Company (Pacific Press) and Buckner-Weatherby Company (BucknerWeatherby), third parties in an employee's suit for damages resulting from an industrial accident, appeal from a summary judgment dismissing their common-law claim for indemnity against Collator Corporation (Collator), the allegedly negligent employer of the injured workman, Bruce E. Olch.

This appeal presents the question of a third party's right to indemnity from an employer in an employee's action against the employer whose negligence allegedly was the primary cause of the injury.

The facts for the purposes of this appeal are not in dispute and may be summarized as follows: On August 24, 1971, Bruce E. Olch was employed by Collator to operate a hydraulic power press. He was injured when he accidentally actuated the foot pedals causing the power press to close on his hand and arm, requiring amputation. Collator paid all industrial insurance premiums due for the period of time pertinent to this case. Following receipt of full workmen's compensation benefits for such injury, Olch sued both Pacific Press, the manufacturer of the hydraulic power press involved in the accident, and Buckner-Weatherby, who sold the machine to Collator. He alleged that the design and manufacture of the power press was negligent, dangerous and defective, and that when it was sold to the plaintiff's employer it lacked proper safety devices to protect the operator from injury.

Pacific Press and Buckner-Weatherby both denied liability and filed a third-party complaint and cross claim against Collator seeking indemnity and alleged that if the hydraulic press was in any way dangerous, defective, or in violation of safety regulations due to the absence of safeguards or safety devices, it was due to the sole active and primary negligence of Collator in failing to provide the press with such safeguards or safety devices.

Collator denied liability and moved for summary judgment on the basis of the industrial insurance act, RCW 51, which Collator contends is the exclusive remedy and bars actions over for indemnity against an employer covered by the act in the absence of an independent indemnification agreement. Collator's motion was granted, and this appeal by both Pacific Press and Buckner-Weatherby followed entry of judgment dismissing their common-law indemnity action.

The third-party appellants assign error to the order granting summary judgment and contend (1) that sound public policy dictates against extending the immunity provided by the workmen's compensation act to an employer whose negligence is a primary cause of injury to an employee and denying to the third-party outsider, a stranger to the industrial insurance act, his common-law remedy of indemnity; and (2) that the precise issue presented by this appeal has not been decided by any Washington court, nor is it dictated by our decision in either Montoya v. Greenway Aluminum Co., 10 Wn. App. 630, 519 P.2d 22 (1974), or Tucci & Sons, Inc. v. Carl T. Madsen, Inc., 1 Wn. App. 1035, 467 P.2d 386 (1970).

RCW 51.04.010 states in part:

The state of Washington, . . . declares that all phases of the premises are withdrawn from private controversy, and sure and certain relief for workmen, ... is hereby provided regardless of questions of fault and to the exclusion of every other remedy, proceeding or compensation, except as otherwise provided in this title; and to that end all civil actions and civil causes of action for such personal injuries and all jurisdiction of the courts of the state over such causes are hereby abolished, except as in this title provided.

Greenleaf v. Puget Sound Bridge & Dredging Co., 58 Wn.2d 647, 658, 364 P.2d 796 (1961), quoting from Stertz v. Industrial Ins. Comm'n, 91 Wash. 588, 158 P. 256 (1916), said:

When the employer, for his part, pays his share into this fund, all obligation on his part to anybody is ended.

(Italics ours.)

The exclusivity of the employer's liability to anyone for damages arising out of injuries suffered by an employee was recently reemphasized in West v. Zeibell, 87 Wn.2d 198, 550 P.2d 522 (1976), and Ledesma v. A.F. Murch Co., 87 Wn.2d 203, 550 P.2d 506 (1976). These opinions reinforce the position that tort actions against an insured employer after disbursement of a compensation award pursuant to RCW Title 51 cannot be maintained. It has been noted, however, that where an independent duty or obligation is owed by the employer to a third party the exclusivity provisions of the workmen's compensation act will not bar recovery by the third party. In such situations, third-party actions against insured employers have been allowed when an express written contract of indemnification existed, Tucci & Sons, Inc., v. Carl T. Madsen, Inc., supra at 1040-41, and actions requesting indemnity have been disallowed when no special relationship existed. Stevens v. Silver Mfg. Co., 41 Ill. App. 3d 483, 355 N.E.2d 145, 151 (1976); Diekevers v. Brekel Inc., 73 Mich. App. 78, 250 N.W.2d 548, 550 (1976); Montoya v. Greenway Aluminum Co., supra at 631-32. We must inquire whether a contract of indemnification may be implied under the present circumstances.

Indemnity requires full reimbursement and transfers liability from the one who has been compelled to pay damages to another who should bear the entire loss. Hales v. Green Colonial, Inc., 402 F. Supp. 738, 739 (W.D. Mo. 1975), modified on other grounds, 544 F.2d 331 (8th Cir. 1976); Stuart v. Hertz Corp., 302 So. 2d 187, 190 (Fla. Dist. Ct. App. 1974). Indemnity may be permitted on the basis of an express contract, by virtue of vicarious liability, because of a breach of an independent duty between the indemnitor and the indemnitee, and because of the primary or "active" tortious conduct of an indemnitor as compared to the secondary or "passive" tortious conduct of the indemnitee. Hysell v. Iowa Pub. Serv. Co., 534 F.2d 775, 782 (8th Cir. 1976).

The third-party plaintiffs claim a right to recovery under an implied contract of indemnification based upon a breach of an independent duty. They assert that the employer-buyer owed to the third-party plaintiffs a duty to operate the machine in a safe manner and to provide the machine with all necessary safeguards or safety devices. It is true that such a duty might exist in the abstract, but it does not run . by implication to a machinery manufacturer when an employee is injured by a purchased machine operated by the employee. As noted by Judge Learned Hand in Slattery v. Marra Bros., Inc., 186 F.2d 134, 139 (2d Cir.), cert. denied, 341 U.S. 915, 95 L. Ed. 1351, 71 S. Ct. 736 (1951):

[W]e shall assume that, when the indemnitor and indemnitee are both liable to the injured person, it is the law of New Jersey that, regardless of any other relation between them, the difference in gravity of their faults may be great enough to throw the whole loss upon one. We cannot, however, agree that that result is rationally possible except upon the assumption that both parties are liable to the same person for the joint wrong. If so, when one of the two is not so liable, the right of the other to indemnity must be found in rights and liabilities arising out of some other legal transaction between the two.

Here, pursuant to RCW 51, the employer is not liable directly to the employee and no liability exists from the employer to the manufacturer-seller from the contract of sale.

The third-party plaintiffs rely upon cases holding a contract of indemnification may be implied where an employer is "testing" a third party's machine (United States Fidelity & Guar. Co. v. Kaiser Gypsum Co., 273 Ore. 162, 539 P.2d 1065 (1975)), or where an independent duty existing between an employer-buyer and a manufacturer-seller is breached (e.g., Pust v. Union Supply Co., _ Colo. App. _, 561 P.2d 355 (1976); Dole v. Dow Chem. Co., 30 N.Y.2d 143, 282 N.E.2d 288, 331 N.Y.S.2d 382, 53 A.L.R.3d 175 (1972)). A comparable special relationship or independent duty has not been shown to exist here. Independent duties from the buyer to the seller should not be implied to exist where the parties have not contracted for such duties expressly. As noted in 2A A. Larson, The Law of Workmen's Compensation § 76.44 (1976), at pages 14-404 and 14-405:

The "independent duty" in Dole [Dole v. Dow Chem. Co., 30 N.Y.2d 143, 282 N.E.2d 288, 331 N.Y.S.2d 382, 53 A.L.R.3d 175 (1972)] could not very well be held to be based on contract, although there was a contract between the parties. The contract was simply one of sale—in this instance, of a poisonous fumigant. Clearly certain independent obligations run with the sale from the manufacturer to the buyer. But it seems unlikely that any court would be prepared to hold that independent contractual. obligation runs from the buyer to the manufacturer. To do this a court would have to announce the following doctrine: "Whenever a buyer purchases an article from a manufacturer, the buyer assumes an independent contractual obligation to the manufacturer not to use the article in such a way as to bring liability upon the manufacturer."

The fact that one party settled a claim against another will not entitle that party to indemnity, for unless the party that settled could have been compelled at law to pay the claim there is no right to indemnity. Ashland Oil & Refining Co. v. General Tel. Co., 462 S.W.2d 190, 193 (Ky. 1970). Likewise, the existence of an "abstract duty" does not trigger indemnity. See Santisteven v. Dow Chem. Co., 506 F.2d 1216, 1219 (9th Cir. 1974). An alleged breach of an independent duty must be shown to exist as a specific and defined duty before it will provide a basis for indemnity of a third party against an employer providing benefits under workmen's compensation. Hysell v. Iowa Pub. Serv. Co., supra at 782; Sayler v. Holstrom, 239 N.W.2d 276, 281 (N.D. 1976). An agreement of an employer to buy a specific item and of a manufacturer to sell the specific item, without more, is not sufficient to meet the test required for indemnity. "No duty flows upstream from the purchaser to the manufacturer." William H. Field Co. v. Nuroco Woodwork, Inc., 115 N.H. 632, 634, 348 A.2d 716, 718 (1975). See Jennings v. Franz Torwegge Mach. Works, 347 F. Supp. 1288, 1289 (W.D. Va. 1972); Outboard Marine Corp. v. Schupbach,_Nev._, 561 P.2d 450, 454 (1977). Further, as observed in Larson, Workmen's Compensation: Third Party's Action Over Against Employer, 65 Nw. U.L. Rev. 351, 419 (1970), it would stretch the concept of contract out of relation to reality to impose upon the purchaser an implied contract with the manufacturer to use the goods in such a way as to not bring liability upon the manufacturer. Larson states:

[W]hen the relation between the parties involves no contract or special relation capable of carrying with it an implied obligation to indemnify, the basic exclusiveness rule generally cannot be defeated by dressing the remedy itself in contractual clothes, such as indemnity. What governs in these cases is not the delictual or contractual form of the remedy but the question/is the claim "on account of" the injury, or on account of a separate obligation running from the employer to the third party?

Robinson v. International Harvester Co., 44 Ill. App. 3d 439, 445-47, 358 N.E.2d 317, 322-23 (1976), held:

Actions based upon strict liability in tort for unreasonably dangerous or defective products are outside the scope of the active-passive theory of indemnification. Consequently, "third party actions for indemnity against a subsequent user are not maintainable by the manufacturer or seller of the defective product." . . .

. . . Producing a reasonably safe product is the nondelegable duty of the manufacturer. Thus, employer's intentional purchase of the [machine] without the overhead safety device is no basis for manufacturer's third-party complaint for indemnity against employer.

The manufacturer's allegation that indemnity should be permitted because the employer acted with reckless disregard for the employee's safety has no merit. If established, the manufacturer's claim that the employer misused the machine or allowed various dangerous practices, would be a complete defense to the action brought by the employee. As such, the manufacturer's claim cannot serve as the basis for the indemnity action against the employer-user. . . .

The manufacturer's argument is not without appeal. In the future, equitable apportionment or contribution may be recognized as a solution for allowing recovery by a manufacturer against a purchaser-user who refuses to purchases available safety equipment when it is necessary. Such changes in either the realm of the active-passive doctrine for indemnity or the no contribution rule should be decided by the highest court in this State or the legislature of this State.

Indemnity might have arisen had the employer and the third-party plaintiffs entered into a contractual relationship in which the employer, in return for a reduction in the purchase price or for subsequent reimbursement from the manufacturer, agreed to inspect the machine, to perform necessary repairs, and to install subsidiary safety devices if necessary for the machine's safe operation. In such a situation, a contract of indemnification could be implied if the manufacturer met its burden of showing the existence of such a valid contract. Cf. Lane v. Celanese Corp. of America, 94 F. Supp. 528, 529 (N.D.N.Y. 1950); H.P. Hood & Sons, Inc. v. Ford Motor Co.,_Mass._, 345 N.E.2d 683, 689 (1976). This was not the situation, however.

Here, the only evidence before the trial court on the motion for summary judgment was evidence which showed only that a machine manufactured by the third-party plaintiffs had been sold to the employer. Considering the evidence that a contract for the purchase and sale of a machine existed and all reasonable inferences therefrom in the light most favorable to the plaintiffs, it cannot be said that a genuine issue of material fact exists with regard to the existence of an independent duty or a contract of indemnity. This leaves the third-party plaintiffs' action necessarily based on the employer's negligence. Since such an action would arise out of the employee's injury, it cannot be maintained under Washington law. RCW 51.24.010. See Rock v. Delaware Elec. Cooperative Inc., 328 A.2d 449, 452-53 (Del. Super. Ct. 1974); Blaw-Knox Food & Chem. Equip. Corp. v. Holmes, 348 So. 2d 604, 608 (Fla. Dist. Ct. App. 1977); Vangreen v. Interstate Mach. & Supply Co., 197 Neb. 29, 246 N.W.2d 652, 654 (1976). Compare Sunspan Eng'r & Constr. Co. v. Spring-Lock Scaffolding Co., 310 So. 2d 4 (Fla. 1975), with Walker & LaBerge, Inc. v. Halligan, 344 So. 2d 239, 243-44 (Fla. 1977); United Gas Pipeline Co. v. Gulf Power Co., 334 So. 2d 310, 313-14 (Fla. Dist. Ct. App. 1976).

The judgment of the trial court is affirmed.

Williams, J., concurs.