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A defendant against whom a plaintiff has obtained a judgment sometimes seeks indemnification from another person or business, attempting to pass the entire liability on the judgment to that other party. However, indemnification is available only in very limited circumstances.
Consider, for example, a situation in which a convenience store is sued by a customer who was injured when she slipped on juice which apparently had leaked from a juice dispenser on the premises. The store, takes the position that if it is liable to the customer, it should be indemnified by the juice distributor who owned and installed the machine, and was responsible for its maintenance. However, the contracts between the store and the distributor do not expressly provide for indemnification. Can the store shift its liability to the distributor? Probably not.
In Araujo v. Woods Hold Martha’s Vineyard Nantucket Steamship Authority, 693 F.2d 1 (1982), the Court of Appeals for the First Circuit, applying Massachusetts law, explained that indemnification is available only in three situations:
Three different sets of circumstances may give rise to a right to indemnification. First, an express agreement may create a right to indemnification. Second, a contractual right to indemnification may be implied from the nature of the relationship between the parties…. Third, a tort-based right to indemnification may be found where there is a great disparity in the fault of the parties.
Id. at 2. (Citation omitted). See also Medeiros v. Whitcraft, 931 F.Supp. 68, 75 (D. Mass. 1996); United States v. Dynamics Research Corp., 441 F.Supp.2d 259, 267 (D. Mass. 2006); In re Access Cardiosystems, Inc., 361 B.R. 626, 647-48 (Bkrtcy. D. Mass. 2007).
None of those theories applies in the hypothetical described above. First, there was no express contract written or oral, relating to or providing for indemnification.
Second, no contractual right to indemnification should be implied. “A contractual right to indemnification will only be implied when there are unique special factors demonstrating that the parties intended that the would-be indemnitor bear the ultimate responsibility for the plaintiff’s safety … or when there is a generally recognized special relationship between the parties.” Medeiros v. Whitcraft, 931 F.Supp. at 75, quoting Araujo, 693 F.2d at 2-3. See also Coons v. A.F. Chapman Corp., 460 F.Supp.2d 209, 223 (D. Mass. 2006), citing Samos Imex Corp. v. Nextel Communications, Inc., 20 F.Supp.2d 248, 250 (D. Mass. 1998); Dynamics Research, 441 F.Supp.2d at 267-68. The vendor-purchaser relationship between the store and the distributor does not rise to the level of a special relationship. In Coons, the District Court stated:
As to the existence of a special relationship, Chapman neither identifies nor suggests the presence of a special relationship between Industrial and Chapman. See, e.g., Medeiros v. Whitcraft, 931 F.Supp. 68, 75 (D.Mass.1996) (allowing summary judgment on indemnity inasmuch as the party seeking indemnity “neither alleged any facts, nor offered any evidence, to even suggest … that any ‘special relationship’ exists between the parties”). … Furthermore, the case law does not support the existence of such a relationship under the circumstances. See, e.g., Oates v. Diamond Shamrock Corp., 23 Mass.App.Ct. 446, 503 N.E.2d 58, 59-60 (1987) (defendant retailer not entitled to indemnification from co-defendant manufacturer inasmuch as there is no special relationship between the parties); Myrtle Beach Pipeline Corp. v. Emerson Electric Co., 843 F.Supp. 1027, 1064 (D.S.C.1993) (“courts have uniformly held that this vendor-vendee relationship does not constitute a ‘special’ or ‘unique’ circumstance justifying implied contractual indemnity”). Summary judgment on counts III and IV is therefore warranted.
460 F.Supp.2d at 224. (Emphasis added).
Finally, there is no basis for common law (a/k/a “tort based”) indemnification of the store by the distributor. With very rare exceptions, common law indemnification is available only when the party seeking indemnity is liable only vicariously or derivatively, and was not personally at fault for the plaintiff’s injuries. Fireside Motors, Inc. v. Nissan Motor Corp. in USA, 395 Mass. 366, 369 (1985). (“At common law a person may seek indemnification if that person ‘does not join in the negligent act but is exposed to derivative or vicarious liability for the wrongful act of another’”). See also Thomas v. EDI Specialists, Inc., 437 Mass. 536, 538 n.1 (2002).
In Medeiros, the court stated:
the tort-based theory of indemnification is “[d]esigned to shift the whole loss upon the more guilty of the two tortfeasors … [and] has usually been available only when the party seeking it was merely passively negligent while the would-be indemnitor was actively at fault. ‘Passive negligence’ has been limited to instances in which the indemnitee was vicariously or technically liable. Where the party seeking indemnification was itself guilty of acts or omissions proximately causing the plaintiff’s injury, tort indemnification is inappropriate.”
931 F.Supp. at 75-76. See also Coons, 460 F.Supp.2d at 224. (“indemnity … permissible where the person seeking indemnification did not join in the negligent act of another but was exposed to liability because of that negligent act. … The general rule, however, is that a person who negligently causes injury to a third person is not entitled to indemnification from another person who also negligently caused that injury.” (Internal quotation marks omitted)).[1]
In our hypothetical, the store, if liable to the customer at all, is liable for its own negligence in failing to maintain a safe premises, not derivatively or vicariously for any negligence of the distributor. Tort based indemnity is therefore, not available.[2]
Whenever a defendant seeks to shift all liability to another, the claim should be carefully analyzed to determine whether the facts of the case fit within any of the limited situations in which indemnification is available.
[1] In rare circumstances the Massachusetts courts will grant tort-based indemnification to a party who has some fault, where that party’s fault is insignificant compared to the fault of the party from whom indemnification is sought. It appears, however, that this differing degree of fault indemnification is very difficult to obtain. Rathbun v. Western Massachusetts Electric Co., 395 Mass. 361 (1985). This exception to the general rule requiring vicarious liability is discussed in more detail here.
[2] Medeiros, 931 F.Supp. at 76 (“In order to be held responsible for any damages in the instant case, the jury would of necessity have to find that E.T. & L. was itself negligent. Put another way, E.T. & L. could not be held vicariously liable for any acts or omissions of Fellows/Whitcraft, but rather only for its own independent negligence, if any. There quite simply is no relationship between the third-party plaintiffs and the third-party defendant, i.e., agent and principal, such as would give rise to any vicarious or derivative responsibility one for the other. Because E.T. & L. would have to be an active wrongdoer, independently negligent in order to be found liable, a tort-based claim for indemnification is precluded.”).
