Safeway, Inc. v. Rooter 2000 Plumbing and Drain SSS , 9 N.M. 420 ( 2016 )

1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
2 Opinion Number:
3 Filing Date: February 18, 2016
4 NO. S-1-SC-33969
5 SAFEWAY, INC.,
6 Defendant/Cross-Claimant-Respondent,
7 v.
8 ROOTER 2000 PLUMBING AND DRAIN SSS,
9 Defendant/Cross-Defendant-Petitioner.
10 ORIGINAL PROCEEDING ON CERTIORARI
11 Louis E. DePauli, Jr., District Judge
12 Butt Thornton & Baehr PC
13 Emily A. Franke
14 Jane Laflin
15 Albuquerque, NM
16 for Petitioner
17 Madison & Mroz, P.A.
18 Gregory D. Steinman
19 Minal P. Unruh
20 Albuquerque, NM
1 for Respondent
1 OPINION
2 MAES, Justice.
3 {1} This appeal arises out of a cross-claim for contractual and traditional
4 indemnification. The complaint alleged that Plaintiffs, Briana Fierro and Jason Fierro,
5 suffered injuries when a baby changing table collapsed in a Safeway store, and that
6 the collapse was the result of negligence on the part of Safeway, Inc. (Safeway) and
7 Rooter 2000 Plumbing and Drain SSS (Rooter). The central issue is whether the right
8 to traditional indemnification is available notwithstanding New Mexico’s adoption
9 of comparative fault where the jury compared and apportioned fault among
10 concurrent tortfeasors. After reviewing the genesis of traditional indemnification and
11 the adoption of contribution and comparative negligence, we hold that traditional
12 indemnity does not apply when the jury finds a tortfeasor actively at fault and
13 apportions liability using comparative fault principles. The second issue on appeal is
14 whether the duty to insure and defend provision of the Standard Service Provider
15 Terms and Conditions Agreement (Agreement) between Rooter and Safeway is void
16 and unenforceable under NMSA 1978, Section 56-7-1 (1971, amended 2005). We
17 hold that it is. Therefore, we reverse the Court of Appeals and affirm the district
18 court’s grant of summary judgement in favor of Plaintiffs.
19 I. FACTS AND PROCEDURAL HISTORY
1 {2} Safeway owns and operates a grocery store in Gallup, New Mexico. Thirteen
2 months after Rooter installed a diaper changing table in Safeway’s Gallup store
3 bathroom, Briana Fierro and her baby, Jaye Fierro (Plaintiffs), suffered personal
4 injuries when the changing table became dislodged and fell from the wall because the
5 butterfly bolts were apparently installed backwards. Plaintiffs’ initial complaint
6 against Safeway alleged negligence and personal injuries resulting from the faulty
7 changing table. Plaintiffs filed a second amended complaint naming Rooter as a
8 defendant and alleging that Rooter was negligent in its installation of the baby
9 changing station. Plaintiffs further alleged negligence per se, strict liability, breach
10 of implied warranty, and claims under the doctrine of respondeat superior against all
11 defendants. Safeway filed a cross-claim against Rooter seeking defense,
12 indemnification, contribution, and damages pursuant to both New Mexico common
13 law and the Agreement signed by both parties. The relevant provision of the
14 Agreement provides that:
15 [Rooter] shall indemnify, defend and hold [Safeway] harmless from and
16 “against;” any and all claims, losses, damages, liabilities, and expenses
17 (including the costs of investigation and attorney’s fees) in connection
18 with any claim or cause of action arising from any act or omission of
19 [Rooter;], its employees, agents, and representatives, in the performance
20 of its obligations under this Agreement, except where the claim, loss or
21 damage is caused by the sole negligence of [Safeway].
2
1 The Agreement also stated that Rooter was to name Safeway as an additional insured
2 under its insurance policy. Both Rooter and its insurance carrier refused to defend or
3 indemnify Safeway. Rooter took the position that New Mexico’s anti-indemnification
4 statute, Section 56-7-1, voided any obligation it had to Safeway, and Rooter’s
5 insurance company denied coverage because it had not been named as an insured on
6 the Rooter policy; thus the policy did not cover Safeway.
7 {3} Rooter then filed a motion for summary judgment on Safeway’s cross-claim,
8 asserting that Safeway had no right to indemnification. The district court found as a
9 matter of law that there is no dispute that Safeway will not have to pay for any
10 negligence that is found to have been committed by Rooter. Safeway did not object
11 to or dispute the district court’s finding. The district court granted Rooter’s motion
12 for summary judgment, finding that the Agreement’s contractual indemnification
13 requirements were void and unenforceable as a matter of New Mexico law,
14 foreclosing Safeway’s rights to indemnity, defense, and insurance. In granting
15 Rooter’s motion for summary judgment, the district court thereby dismissed
16 Safeway’s claim for contractual indemnification .” The district court did not indicate
17 whether it applied the original 1971 of the anti-indemnification statute, or the version
3
1 as amended in 2003 that specifically invalidates agreements to insure and defend
2 against an indemnitee’s negligence, when it concluded that the contractual
3 indemnification was void. See NMSA 1978, Section 56-7-1(A) (2003, as amended
4 in 2005).” The district court further found that Plaintiffs were not seeking liability or
5 damages from Safeway for Rooter’s acts or omissions and thus similarly dismissed
6 Safeway’s claim for common law indemnification. The district court determined that
7 Safeway could request that Rooter be included on a special verdict form for the
8 purpose of allocating fault.
9 {4} Plaintiffs ultimately settled all of their claims against Rooter, so those two
10 parties filed a joint motion to dismiss all claims against Rooter, which the district
11 court granted. The case then proceeded to trial on Plaintiff’s claims against Safeway.
12 At the close of evidence, the jury returned a comparative fault special verdict form.
13 {5} The special verdict form submitted to the jury asked four questions. The first
14 asked, “[w]as [Safeway] negligent?” The jury answered yes. The second question
15 asked, “[w]as any negligence of [Safeway] a cause of Plaintiff’s injuries and
16 damages?” Again, the jury answered yes. The third question and answer established
17 the total damages suffered by Plaintiff to be $450,000. The fourth question asked the
18 jury to do the following:
4
1 Question No. 4: Compare the negligence of the following persons
2 or entities and find a percentage for each. The total of the percentages
3 must equal 100%, but the percentage for any one or more of the persons
4 or entities named may be zero [if] you find that such person or entity
5 was not negligent or that any negligence on the part of such person or
6 entity was not a cause of damage.
7 Safeway ________%
8 Rooter 2000 ________%
9 100% TOTAL
10 The jury entered “40” for Safeway’s negligence because as alleged in Plaintiff’s
11 Uniform Jury Instruction 13-302 NMRA, Safeway either failed to exercise ordinary
12 care to (1) provide proper hardware to Rooter, (2) supervise the installation of the
13 baby changing table, or (3) conduct reasonable inspection of the table during the
14 ensuing thirteen months. The jury entered “60” for Rooter’s negligence.
15 {6} Safeway appealed to the Court of Appeals for review of the district court’s
16 order granting summary judgment in favor of Rooter, thus denying Safeway’s cross-
17 claim against Rooter for common law indemnification, as well as Safeway’s cross-
18 claims alleging Rooter had a contractual duty to indemnify, defend, and insure
19 Safeway. The Court of Appeals, considering New Mexico’s common law of
20 indemnity, and the importance of the instant jury’s apportionment of fault amongst
21 Safeway and Rooter, determined that “[t]he fact that the jury apportioned fault
5
1 between the parties at trial does not strip away Safeway’s common law right of
2 indemnification to obtain full recovery for damages assessed against it from Rooter,
3 assuming that Safeway is found by the jury to be a passive tortfeasor.” Safeway, Inc.
4 v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, ¶ 23, 297 P.3d 3475 (citations omitted). Because the Court of Appeals determined that there were still
6 genuine issues of material fact regarding whether Rooter owed Safeway a common
7 law right of indemnification, and whether Rooter’s duty to insure Safeway was
8 breached, it reversed the district court’s grant of summary judgment. See Id. ¶¶ 24,
9 30-31.The Court of Appeals also held that the 1971 version of Section 56-7-1 applied
10 to the parties’ contract and that the statute voided Rooter’s “agreement to indemnify
11 but not its agreement to defend and insure.” Safeway, 2013-NMCA-021, ¶¶ 1, 26-27.
12 {7} Rooter appealed the following two issues to this Court pursuant to Rule 12-502
13 NMRA: (1) whether the Court of Appeals erred in holding that there are genuine
14 issues of material fact regarding whether Safeway has any common law right to
15 indemnification against Rooter where Rooter had settled and satisfied its
16 proportionate share of liability with the Plaintiffs; and (2) whether the Court of
17 Appeals erred in holding that Rooter owes Safeway its defense fees and costs even
18 though the contractual indemnification provision between Safeway and Rooter is void
6
1 and unenforceable as a matter of law. We granted certiorari. Safeway, Inc. v. Rooter
2 2000 Plumbing & Drain SSS, 2013-NMCERT-001 (No. 33,969, Jan. 28, 2013).
3 II. STANDARD OF REVIEW
4 {8} This appeal requires this Court to review a lower court’s grant of summary
5 judgment. “Summary judgment is appropriate where there are no genuine issues of
6 material fact and the movant is entitled to judgment as a matter of law.” Self v. United
7 Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582 (citation
8 omitted). A lower court’s grant or denial of summary judgment is reviewed de novo.
9 See id. “The validity of an indemnification agreement and interpretation of statutes
10 raises issues of law, which we review de novo.” J.R. Hale Contracting Co., Inc. v.
11 Union Pac. R.R., 2008-NMCA-037, ¶ 62, 143 N.M. 574, 179 P.3d 579 (citation
12 omitted). All issues raised in this appeal are legal issues, which we review de novo.
13 III. DISCUSSION
14 {9} Rooter argues that because it satisfied its proportionate share of negligence
15 with the Plaintiffs, and because Safeway was never held liable for Rooter’s
16 negligence, Safeway does not have a right to traditional indemnification against
17 Rooter. Rooter further asserts that traditional indemnification is inapplicable where
18 fault can be apportioned under comparative negligence principles to the party seeking
7
1 indemnification. Rooter, therefore, concludes that because each party was held liable
2 for their proportionate share of the fault, there is no basis for traditional
3 indemnification and the district court’s grant of summary judgment was proper.
4 {10} Safeway responds that it is entitled to traditional indemnification from Rooter
5 because a jury’s apportionment of fault does not preclude Safeway’s right to common
6 law indemnification against Rooter. Safeway argues that “[n]otwithstanding the
7 doctrine of comparative negligence, New Mexico still adheres to traditional and
8 proportional indemnity principles in some circumstances.” Such circumstances
9 include vicarious liability cases, to which Safeway analogizes to the nondelegable
10 duty doctrine that also being the theory under which Plaintiffs had originally sought
11 damages.
12 {11} The doctrines of indemnity are perplexing as a result of their often
13 misunderstood relationship to contribution. Indeed, the parties in this case often
14 confuse or incorrectly interchange traditional and proportional indemnity in their
15 arguments. In addition, our shift from contributory negligence to comparative
16 negligence and several liability has further confused the doctrines. We take this
17 opportunity to clarify the relationships between traditional indemnification,
18 proportional indemnification, contribution, and comparative negligence. We refer to
8
1 common law indemnification, sometimes called equitable indemnification, as
2 traditional indemnification for the sake of clarity and consistency.
3 A. The origins of traditional indemnity sought to mitigate the common law
4 rule against contribution among tortfeasors
5 {12} The common law did not permit contribution or any form of pro rata
6 contribution among tortfeasors. See Rio Grande Gas Co. v. Stahmann Farms, Inc.,
7 1969-NMSC-089, ¶ 6, 80 N.M. 432, 457 P.2d 364; Merryweather v. Nixan, 8 Term
8 R. 186, 101 Eng. Rep. 1337 (K.B. 1799). The basic theoretical bar at common law to
9 any apportionment among those who committed torts, whether by indemnity or by
10 contribution, was the unwillingness of the law as a matter of policy to make relative
11 value judgments of degrees of capability. See 42 C.J.S. Indemnity, § 27 (2015).
12 Additionally, tort law was considered punitive, thus distribution among tortfeasors
13 diluted its impact. See Francis H. Bohlen, Contribution and Indemnity Between
14 Tortfeasors, 21 Cornell L. Rev. 552, 557-59 (1936)(footnotes omitted).
15 Commentators and scholars criticized the doctrine’s all-or-nothing philosophy
16 terming it a “chronic invalid who will not die.” W. Page Keeton, et al., Prosser &
17 Keeton on the Law of Torts § 65, at 453 (5th ed. 1984).
18 {13} As a result of the common law rule against contribution, courts resorted to the
9
1 doctrine of indemnity to mitigate the harshness of the no-contribution rule. See
2 Schneider Nat., Inc. v. Holland Hitch Co., 843 P.2d 561, 573 (Wyo. 1992)
3 (“[Traditional] indemnity’s growth may be directly traced to a reaction to the common
4 law prohibition of contribution.” (citation omitted)). This Court likewise “realized
5 that the bar against contribution often worked inequities,” which “led to the
6 recognition of actions for indemnification which provided for a complete shifting of
7 liability from one party to another in cases where a party was held only vicariously
8 liable.” Otero v. Jordan Rest. Enters., 1996-NMSC-047, ¶ 9, 122 N.M. 187, 922 P.2d
9 569 (emphasis, internal quotation marks, and citation omitted).
10 {14} Courts began to discover, however, that the bar to contribution among
11 fault-bearing tortfeasors worked injustice in certain other cases in which the
12 indemnitee, while to some degree personally at fault, was much less culpable than the
13 indemnitor. Some courts thus expanded indemnity to include cases where the
14 difference in relative degrees of fault was so great that the negligence of one
15 tortfeasor could be judged “active” in relation to the “passive” negligence of the
16 other. See Am. Motorcycle Ass’n v. Super. Ct., 578 P.2d 899, 908 (Cal. 1978) (“[T]he
17 equitable indemnity doctrine originated in the common sense proposition that when
18 two individuals are responsible for a loss, but one of the two is more culpable than
10
1 the other, it is only fair that the more culpable party should bear a greater share of the
2 loss.”); Dole v. Dow Chem. Co., 282 N.E.2d 288, 292-95 (N.Y. 1972) superseded by
3 statute as stated in N.Y. Hosp. Medical Ctr. Of Queens v. Microtech Contracting
4 Corp., 5 N.E.3d 993, 998 (N.Y. 2014) (discussing origins of distinction between
5 active and passive tortfeasors and role played by common-law lack of contribution).
6 {15} New Mexico first adopted the active/passive and in pari delicto tests in the
7 1940s and continues to follow these doctrines today. See Krametbauer v. McDonald,
8 1940-NMSC-049, ¶¶ 43, 50, 44 N.M. 473, 104 P.2d 900 (holding that indemnity was
9 not allowed because negligence of both parties was “active”). Acting in pari delicto
10 simply refers to the parties being “negligent in an equal degree.” Trujillo v. Berry,
11 1987-NMCA-072, ¶ 7, 106 N.M. 86, 738 P.2d 1331 (internal quotation marks and
12 citation omitted). The right to traditional indemnification “involves whether the
13 conduct of the party seeking indemnification was passive and not active or in pari
14 delicto with the indemnitor.” Amrep Southwest, Inc. v. Shollenbarger Wood Treating,
15 Inc. (In re Consol. Vista Hills Retaining Wall Litig.), 1995-NMSC-020, ¶ 10, 119
16 N.M. 542, 893 P.2d 438 (Amrep).
17 Active conduct ‘is found if an indemnitee has personally participated in
18 an affirmative act of negligence, was connected with negligent acts or
19 omissions by knowledge or acquiescence, or has failed to perform a
11
1 precise duty which the indemnitee had [a duty to perform]’. Passive
2 conduct occurs when the party seeking indemnification fails to discover
3 and remedy a dangerous situation created by the negligence or
4 wrongdoing of another.
5 Id. ¶ 12 (citations omitted). “In essence, traditional indemnification is a judicially
6 created common-law right that grants to one who is held liable an all-or-nothing right
7 of recovery from a third party . . . .” Id. ¶ 7.
8 {16} New Mexico also enacted the Uniform Contribution Among Tortfeasors Act
9 (UCATA) in 1947 as another method to avoid the harshness of the rule against
10 contribution without changing the underlying law of joint and several liability. See
11 NMSA 1978, §§ 41-3-1 to -8 (1947, as amended through 1987). The purpose of this
12 Act was “to provide for a proportionate allocation of the burden among tortfeasors
13 who are liable”, Rio Grande Gas Co., 1969-NMSC-089, ¶ 6 (citations omitted), and
14 “to prevent [the injured person] from relieving one joint tortfeasor of the obligation
15 of contribution except where the injured person has also released the other tortfeasors
16 from [their] pro rata share of the common liability”. See Garrison v. Navajo Freight
17 Lines, Inc., 1964-NMSC-099, ¶ 6, 74 N.M. 238, 392 P.2d 580 (omission in original)
18 (citation omitted); see also Burt v. W. Jersey Health Sys., 771 A.2d 683, 687 (N.J.
19 Super. Ct. App. Div. 2001) (“The Joint Tortfeasors Contribution Law is also designed
12
1 to ‘alleviate the evident harshness and inequity of the common-law rule . . . pursuant
2 to which there was no right of joint tortfeasors to seek allocation among themselves
3 of the burden of their fault.’” (citation omitted)). The UCATA expressly reserved the
4 right to indemnity in New Mexico. See Section 41-3-6 (providing that this Act “does
5 not impair any right of indemnity under existing law”).
6 {17} In conclusion, both traditional indemnity and the UCATA sought to soften the
7 all-or-nothing rule of common law contributory negligence. Traditional
8 indemnification and the active/passive test evolved as a restitutionary device designed
9 to ensure that the most culpable party, as between the two wrongdoers, bore the
10 ultimate loss. In contrast, whereas traditional indemnification implies shifting 100%
11 of the loss to the passive tortfeasor, contribution contemplates a shift of only part of
12 the loss to the other tortfeasor. See Rio Grande Gas Co., 1969-NMSC-089, ¶ 13
13 (“[T]he difference between indemnity and contribution in cases between persons
14 liable for an injury to another is that, with indemnity, the right to recover springs from
15 a contract, express or implied, and enforces a duty on the primary wrongdoer to
16 respond for all damages; with contribution, an obligation is imposed by law upon one
17 joint tortfeasor to contribute his share to the discharge of the common liability.”).
18 B. New Mexico adopts comparative fault and several liability but retains the
13
1 rights to indemnity and contribution
2 {18} The move to comparative negligence began with this Court’s ruling in Scott v.
3 Rizzo, 1981-NMSC-021, ¶ 30, 96 N.M. 682, 634 P.2d 1234, superseded by statute as
4 stated in Delfino v. Griffo, 2011-NMSC-015, ¶ 23, 150 N.M. 97, 257 P.3d 917. This
5 Court established a system of comparative fault which, rather than barring a
6 plaintiff’s recovery completely if the plaintiff was at fault, allows liability for
7 damages to be split amongst negligent actors who contribute to a harm suffered.
8 The thrust of the comparative negligence doctrine is to accomplish (1)
9 apportionment of fault between or among negligent parties whose
10 negligence proximately causes any part of [a] loss or injury, and (2)
11 apportionment of the total damages resulting from such loss or injury in
12 proportion to the fault of each party.
13 Id. ¶ 20.
14 {19} Comparative negligence limits a party’s liability in such a way that joint and
15 several liability does not: “[A]ll parties [are] fully responsible for their own respective
16 acts to the degree that those acts have caused harm,” and a “jury must ascertain the
17 percentage of negligence of all participants to an occurrence,” so that no party is held
18 liable under comparative negligence for the harm that party did not inflict. Garcia v.
19 Gordon, 2004-NMCA-114, ¶ 8, 136 N.M. 394, 98 P.3d 1044 (internal quotation
20 marks and citation omitted). The Scott court noted that the pure form of comparative
14
1 negligence has three benefits: (1) it denies recovery for one’s own fault; (2) it permits
2 recovery to the extent of another’s fault; and (3) it holds parties responsible to the
3 degree that they have caused harm. See 1981-NMSC-021, ¶ 29.
4 {20} Not long after Scott, the Court of Appeals held that “[j]oint and several liability
5 is not to be retained in our pure comparative negligence system on a theory of one
6 indivisible wrong. The concept of one indivisible wrong, based on common law
7 technicalities, is obsolete, and is not to be applied in comparative negligence cases
8 in New Mexico.” Bartlett v. N.M. Welding Supply, Inc., 1982-NMCA-048, ¶ 33, 98
9 N.M. 152, 646 P.2d 579 (citation omitted), superseded by statute as stated in Payne
10 v. Hall, 2006-NMSC-029, ¶ 11, 139 N.M. 659, 137 P.3d 599 (citation omitted).
11 {21} The New Mexico Legislature codified the principles of Scott and Bartlett in
12 1987. See NMSA 1978, §§ 41-3A-1 to -2 (1987); Reichert v. Atler, 1992-NMCA-134,
13 ¶ 34, 117 N.M. 628, 875 P.2d 384 (“Following our Supreme Court’s decision in Scott
14 and this Court’s decision in Bartlett, our [L]egislature enacted legislation continuing
15 the doctrine of joint and several liability in certain situations.” (Footnote and citation
16 omitted)). The statute provides that:
17 In any cause of action to which the doctrine of comparative fault applies,
18 the doctrine imposing joint and several liability upon two or more
19 wrongdoers whose conduct proximately caused an injury to any plaintiff
15
1 is abolished except as otherwise provided hereafter. The liability of any
2 such defendants shall be several.
3 Section 41-3A-1(A). The same section further provides that a defendant who is
4 severally liable shall be liable only for the amount of harm that the defendant’s
5 damage caused, and not jointly liable for any harm another party caused:
6 In causes of action to which several liability applies, any defendant who
7 establishes that the fault of another is a proximate cause of a plaintiff’s
8 injury shall be liable only for that portion of the total dollar amount
9 awarded as damages to the plaintiff that is equal to the ratio of such
10 defendant’s fault to the total fault attributed to all persons, including
11 plaintiffs, defendants and persons not party to the action.
12 Section 41-3A-1(B).
13 {22} The Legislature reserved the application of joint-and-several liability to the
14 following specific situations:
15 (1) to any person or persons who acted with the intention of
16 inflicting injury or damage;
17 (2) to any persons whose relationship to each other would make
18 one person vicariously liable for the acts of the other, but only to that
19 portion of the total liability attributed to those persons;
20 (3) to any persons strictly liable for the manufacture and sale of
21 a defective product, but only to that portion of the total liability
22 attributed to those persons; or
23 (4) to situations not covered by any of the foregoing and having
24 a sound basis in public policy.
16
1 Section 41-3A-1(C).
2 {23} This Court has applied Section 41-3A-1 to mean that, “[u]nder our comparative
3 negligence system, each negligent party is charged an amount representing its
4 percentage of fault.” Gutierrez v. City of Albuquerque, 1998-NMSC-027, ¶ 11, 125
5 N.M. 643, 964 P.2d 807 (citing Section 41-3A-1(B)). Tortfeasors must now accept
6 responsibility for damages commensurate with their own relative culpability unless
7 one of the specified exceptions to joint and several liability apply. See Otero, 1996-
8 NMSC-047, ¶ 11 (“New Mexico tort law is premised on the notion that each
9 concurrent tortfeasor should bear responsibility for an accident in accordance with his
10 or her fault.”).
11 {24} Several liability incorporates the Scott/Bartlett approach of limiting several
12 liability to particular causes of action. Section 41-3A-1(A) states that the doctrine of
13 several liability applies to “any cause of action to which the doctrine of comparative
14 fault applies,” unless the statute provides an exception. In this context, comparative
15 fault is the affirmative defense that reduces the defendant’s liability by the percentage
16 of fault attributable to the plaintiff—the doctrine created in Scott. Unless a provision
17 of the statute provides otherwise, several liability applies to any cause of action to
18 which the partial affirmative defense of comparative negligence applies to plaintiff’s
17
1 cause of action.
2 {25} In addition, this Court modified traditional indemnification in 1995 by adopting
3 proportional indemnity, “under which a defendant who is otherwise denied
4 apportionment of fault may seek partial recovery from another at fault.” Amrep, 1995-
5 NMSC-020, ¶ 36. Amrep reasoned proportional indemnification goes hand-in-hand
6 with New Mexico’s adoption of comparative fault.
7 [T]o establish an equitable system in which a defendant who cannot
8 raise the fault of a concurrent tortfeasor as a defense because of the
9 plaintiff’s choice of remedy, we adopt the doctrine of proportional
10 indemnification . . . [to fill] a void in the overall picture that
11 contemplates proration of liability among all those at fault. . . . By
12 embracing proportional indemnification, this Court takes comparative
13 fault and several liability another logical step.
14 Id. ¶¶ 36, 40-41. Proportional indemnification applies when the one seeking
15 indemnification “has been adjudged liable for full damages on a third-party claim that
16 is not susceptible under law to proration of fault among joint tortfeasors.” Id. ¶ 38.
17 “[P]roportional indemnification applies only when contribution or some other form
18 of proration of fault among tortfeasors is not available.” Id. ¶ 39. “[P]roportional
19 indemnification does not apply when [the UCATA ] provides for proration of
20 damages among joint tortfeasors.” Id. ¶ 37 (citation omitted). For example, actions
21 for negligence are governed by comparative fault, which apportions fault among
18
1 tortfeasors, so traditional indemnity principles apply because each tortfeasor is liable
2 only for his or her share of the fault and will never pay more damages than his or her
3 share. On the other hand, when a plaintiff chooses to sue under breach of contract, a
4 defendant “should be able to seek proportional indemnification for that percentage
5 of fault attributable to” another. Id. ¶ 41.
6 {26} Therefore, indemnification now takes several forms in New Mexico.
7 “[T]raditional indemnification is a judicially created common-law right that grants to
8 one who is held liable an all-or-nothing right of recovery from a third party . . . .” Id.
9 New Mexico also recognizes proportional indemnification, which allows defendants
10 to recover from a third-party for the portion of a plaintiff’s loss which the
11 third-party’s conduct caused, even when the law does not apportion fault amongst
12 tortfeasors under a theory of comparative fault. “When applicable, proportional
13 indemnification allows a defendant to seek partial recovery from another for his or
14 her fault.” N.M. Pub. Schs. Ins. Auth. v. Gallagher & Co., 2008-NMSC-067, ¶ 23, 145
15 N.M. 316, 198 P.3d 342. And, although joint-and-several liability was for the most
16 part abolished when New Mexico adopted a comparative fault regime,
17 joint-and-several liability has been retained in certain matters by statute, which allows
18 a tortfeasor to seek contribution or indemnification from a fellow tortfeasor. See § 41-
19
1 3A-1.
2 C. Traditional indemnity does not apply when the jury finds a tortfeasor
3 actively at fault and apportions liability using comparative fault principles
4 {27} The parties differ as to the effect Amrep has on a party’s right to traditional
5 indemnification. Safeway asserts that this Court made it clear that traditional
6 indemnification was to survive the adoption of comparative fault and proportional
7 indemnification. Rooter, however, argues that Amrep specifically indicated that
8 traditional indemnification is not applicable where fault for negligence is to be
9 apportioned under New Mexico’s system of comparative fault.
10 {28} Because recovery under traditional indemnification requires at least one active
11 tortfeasor and one passive concurrent tortfeasor, the remedy only applies in a limited
12 number of tort cases premised on vicarious or derivative liability. For example, the
13 Restatement (Third) of Torts: Apportionment of Liability § 22 (Am. Law Inst. 2000)
14 provides:
15 (a) When two or more persons are or may be liable for the same
16 harm and one of them discharges the liability of another in whole or in
17 part by settlement or discharge of judgment, the person discharging the
18 liability is entitled to recover indemnity in the amount paid to the
19 plaintiff, plus reasonable legal expenses, if:
20 (1) the indemnitor has agreed by contract to indemnify the
21 indemnitee, or
20
1 (2) the indemnitee
2 (I) was not liable except vicariously for the tort of
3 the indemnitor, or
4 (ii) was not liable except as a seller of a product
5 supplied to the indemnitee by the indemnitor and the
6 indemnitee was not independently culpable.
7 (b) A person who is otherwise entitled to recover indemnity
8 pursuant to contract may do so even if the party against whom indemnity is
9 sought would not be liable to the plaintiff.
10 The Restatement (Third) of Torts is consistent with our past observations in Amrep
11 that:
12 [t]he right to indemnification may arise through vicarious or derivative
13 liability, as when an employer must pay for the negligent conduct of its
14 employee under the doctrine of respondeat superior or when a person is
15 directed by another to do something that appears innocent but is in fact
16 wrongful. Further, traditional indemnification principles apply in both
17 negligence and strict liability cases involving persons in the chain of
18 supply of a product, and in breach of warranty cases.
19 1995-NMSC-020, ¶ 9 (citations omitted); see also Otero, 1996-NMSC-047, ¶¶ 3 n.2,
20 14 (affirming the district court’s finding that a restaurant “would be entitled to
21 indemnification from the contractor and architect for whose negligence [the
22 restaurant] is liable” because “[t]his reasoning accords with the general rule that one
23 held vicariously liable has an action for traditional indemnification against the person
21
1 whose act or omission gave rise to the vicarious liability.” (citations omitted)).
2 {29} In each one of these factual scenarios, traditional indemnification would allow
3 a party who has been found liable without active fault to seek restitution from
4 someone who was actively at fault. Importantly, a finding of negligence does not
5 necessarily mean a finding of active conduct. For example, if a claim alleges that a
6 contractor failed to discover and remedy a dangerous condition, that is passive
7 conduct—if the contractor in the exercise of ordinary care could not have discovered
8 the dangerous condition—and traditional indemnification would be available from
9 the active concurrent tortfeasor who created the dangerous condition. See Amrep,
10 1995-NMSC-020, ¶¶ 12-13 (defining passive conduct and providing an example to
11 distinguish passive conduct from active conduct in failing to discover and remedy a
12 dangerous situation). Alternatively, if the contractor discovered, or should have
13 discovered, the dangerous condition and did not remedy the dangerous condition, that
14 is active conduct, and traditional indemnification is not available. See id. ¶ 19. In
15 strict liability cases, only if the retailer was blameless—passive conduct—is the
16 retailer entitled to full indemnification from the manufacturer. See id. ¶ 24.
17 {30} Retaining traditional indemnification is consistent with the equitable goals of
18 our comparative fault regime. Id. ¶ 36. Comparative fault ensures that all actively
22
1 negligent parties pay for their respective faults. See id. ¶ 37. Traditional
2 indemnification ensures that a party who is not actively at fault can force the actively
3 at fault party to pay. See id. ¶ 10.
4 {31} Comparative fault is inapplicable under true vicarious and derivative liability
5 scenarios because the “ ‘vicariously liable party has not committed any breach of duty
6 to the plaintiff but is held liable simply as a matter of legal imputation of
7 responsibility for another’s tortious acts.’ ” Valdez v. R-Way, LLC, 2010-NMCA-068,
8 ¶ 7, 148 N.M. 477, 237 P.3d 1289 (quoting Restatement (Third) of Torts:
9 Apportionment of Liab. § 13 cmts. b, c). The Legislature therefore excluded true
10 vicarious and derivative liability from several liability because those whose liability
11 is only vicarious are only liable because “someone else’s fault is imputed to them by
12 operation of law.” Id. (internal quotation marks and citations omitted). Our
13 Legislature left traditional indemnification as the only scheme for a passive joint
14 tortfeasor to recover from the active joint tortfeasor under the four categories of
15 vicarious and derivative liability listed above. See id. ¶ 6.
16 {32} Preserving traditional indemnification by limiting its application to situations
17 of vicarious and derivative liability situations where the indemnitee is not actively
18 negligent, is consistent with the approach adopted by a majority of jurisdictions that
23
1 have adopted comparative fault; these jurisdictions follow the indemnification
2 principles summarized in the Restatement (Third) of Torts: Apportionment of
3 Liability.1 Previously, under the Restatement (Second) of Torts, an actively negligent
4 concurrent tortfeasor could recover from a more actively negligent concurrent
5 tortfeasor in traditional indemnification. See Restatement (Second) of Torts:
6 Apportionment of Liab. § 886B (Am. Law Inst. 1979). For example, an indemnitee
7 would have a right to indemnity when the “indemnitor supplied a defective chattel or
8 performed defective work upon land or buildings as a result of which both were liable
9 to the third person, and the indemnitee innocently or negligently failed to discover the
10 defect.” Restatement (Second) of Torts: §886B(2)(d) (emphasis added).
11 {33} Therefore, we reiterate that traditional indemnity survives and co-exists with
12 comparative negligence, several liability, and proportional indemnification in New
17 1
See, e.g., Mizuho Corp. Bank (USA) v. Cory & Assocs., Inc., 341 F.3d 644,
18 652-653 (7th Cir. 2003) (applying Illinois law); Nichols v. CitiGroup Global Mkts.,
19 Inc., 364 F. Supp. 2d 1330, 1339-40 (N.D. Ala. 2004) (applying Alabama law);
20 Orient Overseas Container Line v. John T. Clark & Sons of Boston, Inc., 229 F. Supp.
21 2d 4, 15 (D. Mass. 2002) (applying Massachusetts law); Barry v. Hildreth, 9 A.D.3d
22 341, 342, 780 N.Y.S.2d 159, 161 (N.Y.App. Div. 2004); Bowyer v. Hi-Lad, Inc., 609
23 S.E.2d 895, 914 (W.Va. 2004); Horowitz v. Laske, 855 So.2d 169, 174 (Fla. Dist. Ct.
24 App. 2003); INS Investigations Bureau, Inc. v. Lee, 784 N.E.2d 566, 575-76 (Ind. Ct.
25 App. 2003); Med James, Inc. v. Barnes, 61 P.3d 86 (Kan. Ct. App. 2003); Hamway
26 v. Braud, 838 So.2d 803, 806-07 (La. Ct. App. 2002); Carr v. Home Ins. Co., 463,
27 458 S.E.2d 457 (Va. 1995).
24
1 Mexico because it “addresses other considerations of contractual right or of
2 restitution to which a passive wrongdoer is entitled.” Amrep, 1995-NMSC-020, ¶ 40.
3 We also adopt the Section 22, Restatement (Third) of Torts, in place of Section 886B,
4 Restatement (Second) of Torts, because it correctly limits the application of
5 traditional indemnity to cases truly premised on vicarious or derivative liability.
6 {34} Accordingly, traditional indemnity is not applicable in this case because
7 Plaintiffs clearly advanced, and the jury found, theories of liability that alleged
8 Safeway to be an active tortfeasor. The parties agreed at a summary judgment motion
9 hearing that Safeway would not have to pay for any negligence that is found to have
10 been committed by Rooter and that is exactly what occurred. The district court
11 therefore instructed the jury on the following four active negligence theories: (1)
12 failure to provide proper instructions and hardware for the baby changing station
13 installation, (2) failure to supervise the station installation, (3) failure to inspect the
14 station after installation, and (4) failure to periodically inspect the station between the
15 time of installation and the time of Plaintiff’s injury. Safeway acknowledges as much
16 in its docketing statement, and concedes that in the comparative negligence context,
17 it has no right to indemnification from Rooter for its own active negligence.
18 {35} Further, this is not a true vicarious or derivative liability case that would entitle
25
1 Safeway to traditional indemnity because the jury found Safeway actively at fault.
2 Safeway and Rooter were adjudged liable for their proportion of fault–40% Safeway,
3 60% Rooter. To hold either party liable for more or less of their fault would be
4 inequitable and contrary to the goals of both comparative negligence and traditional
5 indemnity. Therefore, we reverse the Court of Appeals and affirm the district court’s
6 dismissal of Safeway’s cross-claim for traditional indemnification.
7 D. Rooter does not have a duty to defend under the Agreement because the
8 whole indemnification clause is void and unenforceable under the 1971 version
9 of Section 56-7-1 and is against public policy
10 {36} As mentioned above, the Agreement between Rooter and Safeway provided
11 that:
12 [Rooter] shall indemnify, defend and hold [Safeway] harmless from and
13 against; any and all claims, losses, damages, liabilities, and expenses
14 (including the costs of investigation and attorney’s fees) in connection with
15 any claim or cause of action arising from any act or omission of [Rooter,] its
16 employees, agents, and representatives, in the performance of its obligations
17 under this Agreement, except where the claim, loss or damage is caused by the
18 sole negligence of [Safeway].
19 {37} This Court must determine whether the contractual provision requiring Rooter
20 to defend and maintain liability insurance and name Safeway as an additional insured
21 is enforceable under Section 56-7-1.
22 {38} “Our primary goal is to ascertain and give effect to the intent of the Legislature.
26
1 In doing so, we examine the plain language of the statute as well as the context in
2 which it was promulgated . . . .” State v. Office of Pub. Def. ex rel. Muqqddin,
3 2012-NMSC-029, ¶ 13, 285 P.3d 622 (internal quotation marks and citation omitted).
4 “Under the rules of statutory construction, [w]hen a statute contains language which
5 is clear and unambiguous, we must give effect to that language and refrain from
6 further statutory interpretation.” First Baptist Church of Roswell v. Yates Petroleum
7 Corp., 2015-NMSC-004, ¶ 9, 345 P.3d 310 (alteration in original) (internal quotation
8 marks and citation omitted). We also “look at the overall structure and function of the
9 statute, as well as the public policy embodied in the statute.” Delfino,
10 2011-NMSC-015, ¶ 12 (citations omitted) ; see also State Bd. of Educ. v. Bd. of Educ.
11 of Alamogordo Pub. Sch. Dist. No. 1, 1981-NMSC-031, ¶ 14, 95 N.M. 588, 624 P.2d
12 530 (“In ascertaining the legislative intent, we look not only to the language used in
13 [a] statute, but also to the object sought to be accomplished and the wrong to be
14 remedied.” (citation omitted)).
15 {39} The 1971 version of Section 56-7-1 provides:
16 Any provision, contained in any agreement relating to the construction,
17 installation, alteration, modification, repair, maintenance . . . of any real
18 property . . . by which any party to the agreement agrees to indemnify
19 the indemnitee, or the agents and employees of the indemnitee, against
20 liability, claims, damages, losses or expenses, including attorney fees,
27
1 arising out of bodily injury to persons or damage to property caused by,
2 or resulting from, in whole or in part, the negligence, act or omission of
3 the indemnitee, or the agents or employees of the indemnitee, or any
4 legal entity for whose negligence, acts or omissions any of them may be
5 liable, is against public policy and is void and unenforceable . . .
6 In 2003, Section 56-7-1 was amended to specifically include agreements to insure and
7 defend against the indemnitee’s negligence, stating: “A provision in a construction
8 contract that requires one party to indemnify, hold harmless, insure or defend the
9 other party to the contract” against liability for the negligence, act or omission of the
10 indemnitee “is void, unenforceable and against the public policy of the state.” NMSA
11 1978, Section 56-7-1(A) (2003, amended 2005). The Court of Appeals held that the
12 1971 version of Section 56-7-1 applies in this case and that issue is not disputed. See
13 Safeway, 2013-NMCA-021, ¶ 27. Because the agreement was signed by the parties
14 on November 26, 2002, we agree.
15 {40} The Court of Appeals concluded, though, that while the indemnification
16 provision under the contract was void and unenforceable under NMSA 1978, Section
17 56-7-1 (1971, amended 2005), Rooter still had a duty to defend Safeway. Safeway,
18 2013-NMCA-021, ¶¶ 26-27, 29. The Court of Appeals reasoned that the duty to
19 defend is “distinct and separate from an agreement to indemnify” and that the 1971
20 version of Section 56-7-1 did not prohibit such agreements. Safeway, 2013-NMCA-
28
1 021, ¶ 28 (citation omitted). The Court of Appeals further noted that Section 56-7-1
2 (1971) does not preclude defend and insure provisions in construction contracts,
3 unlike the 2003 version of Section 56-7-1. Safeway, 2013-NMCA-021, ¶ 26.
4 {41} Rooter cites Sierra v. Garcia, 1987-NMSC-116, 106 N.M. 573, 746 P.2d 11055 to support its assertion that Section 56-7-1 voids the entire contractual agreement, and
6 not merely part of it. In contrast, Safeway argues that pursuant to City of Albuquerque
7 v. BPLW Architects & Eng’rs, Inc., 2009-NMCA-081, 146 N.M. 717, 213 P.3d 1146,
8 (BPLW) the indemnity provision can be read out of the agreement leaving the defense
9 provision intact because Rooter’s duty to defend and insure is separate and distinct
10 from Rooter’s duty to indemnify Safeway.
11 {42} In Sierra, a general contractor was sued for the wrongful death of a
12 subcontractor’s employee and filed a third-party complaint against the subcontractor
13 asserting that the subcontractor had agreed to indemnify the general contractor.
14 1987-NMSC-116, ¶ 1. The agreement between the contractor and general contractor
15 provided that “Subcontractor shall defend at its own cost and indemnify and hold
16 harmless Contractor and Owner, their agents and employees from any and all liability,
17 damages, losses, claims and expenses, however caused resulting directly or indirectly
18 from or connected with the performance of this subcontract.” Sierra, 1987-NMSC-
29
1 116, ¶ 4. This Court rejected the notion that portions of the agreement could be read
2 out in order to render any part of the provision enforceable. Id. ¶¶ 6, 10. Instead,
3 Sierra held “that the contract is voided in its entirety by . . . [Section 56-7-1 (1971,
4 amended 2005)].” Id. ¶ 10.
5 {43} BPLW involved a “dispute over an indemnification clause in a contract between
6 the City of Albuquerque and BPLW Architects & Engineers, Inc.” after a pedestrian
7 was injured at the facility. BPLW, 2009-NMCA-081, ¶ 1. The City requested that
8 BPLW provide its defense pursuant to the agreement, which BPLW denied. Id. In
9 examining whether BPLW was contractually obligated to defend the City, the Court
10 of Appeals examined the language of the defend and indemnify clause, which
11 provided that BPLW agreed “to defend, indemnify, and hold harmless the
12 City . . . against all suits . . . brought against the City because of any injury or damage
13 received or sustained by any person . . . arising out of or resulting from any negligent
14 act, error, or omission of [BPLW] . . . arising out of the performance of this
15 Agreement.” Id. ¶ 14 (alteration and omissions in original). The Court of Appeals
16 concluded that “there [was] no language in the contract that limit[ed] BPLW’s duty
17 to defend the City. ” and that “the plain language of [the] clause indicate[d] that the
18 duty to defend applies to all suits against the City arising out of a negligent act, error,
30
1 or omission of BPLW arising out of the performance of the agreement.” Id. Thus, the
2 Court of Appeals held that “BPLW ha[d] a duty to defend the City, even if only the
3 City [was] alleged to be negligent, as long as the cause of action [arose] from the
4 alleged negligent act, error, or omission of BPLW.” Id. ¶ 15. The Court noted that this
5 interpretation of the contract furthered the policy behind both versions of Section 56-
6 7-1, which is to promote “safety in construction projects by holding each party to the
7 contract accountable for injuries caused by its own negligence.” Id ¶ 19 (citation
8 omitted).
9 {44} The Agreement in this case does not require Rooter to defend Safeway only for
10 claims arising out of Rooter’s negligence in performance of the contract. Instead, the
11 Agreement also requires a defense of Safeway for Safeway’s own negligence, “except
12 where the claim, loss or damage is caused by the sole negligence of [Safeway].”
13 Sierra made clear that the anti-indemnity statute voids the entire contractual
14 agreement, not merely part of it, when the clause requires the indemnitor to indemnify
15 the indemnitee for the indemnitee’s own negligence. This case and Sierra are distinct
16 from BPLW because BPLW only had to indemnify the city against suits “arising out
17 of or resulting from any negligent act, error, or omission of [BPLW].” BPLW,
18 2009-NMCA-081, ¶ 14.
31
1 {45} The indemnification provision in this case is statutorily void and unenforceable
2 because it requires Rooter to indemnify Safeway for Safeway’s own negligence.
3 Similarly, as a matter of both law and policy, Rooter should not have to pay for
4 Safeway’s legal defense caused by Safeway’s own fault where Rooter settled with
5 Plaintiffs for its share of fault. As noted by BPLW,
6 Both the current version and the version in effect at the time the contract was
7 executed, however, have the same effect because both ensure that an
8 indemnitor only has to indemnify for causes of action that arise from the
9 indemnitor’s own negligent conduct. In addition, both versions of the statute
10 are based on a public policy promoting safety in construction projects by
11 holding each party to the contract accountable for injuries caused by its own
12 negligence.
13
14 2009-NMCA-081, ¶ 19 (citation omitted). This public policy is frustrated if we order
15 Rooter to pay Safeway’s defense costs for Safeway’s own negligence that the jury
16 clearly found and appropriately apportioned using comparative fault. Accordingly,
17 we reverse the Court of Appeals on the issue of the contractual duty to defend and
18 affirm the district court’s grant of summary judgment.
19 IV. CONCLUSION
20 {46} We hold that traditional indemnity is not applicable in this case because the
21 jury apportioned fault under comparative negligence principles. And because we hold
22 that Rooter’s contractual duty to indemnify, defend, and insure Safeway under the
32
1 Agreement is unenforceable, we reverse the Court of Appeals’ holding that Section
2 56-7-1 (1971, as amended through 2005) did not render the defense and insurance
3 requirements of the Agreement void and unenforceable. Therefore, we reverse the
4 Court of Appeals and affirm the district court’s grant of summary judgment finding
5 that Rooter owed no common law or contractual duties to Safeway. This case is
6 remanded to the district court for proceedings consistent with this opinion.
7 {47} IT IS SO ORDERED.
8 ___________________________________
9 PETRA JIMENEZ MAES, Justice
10 WE CONCUR:
11 ___________________________________
12 BARBARA J. VIGIL, Chief Justice
13 ___________________________________
14 EDWARD L. CHÁVEZ, Justice
15 ___________________________________
16 CHARLES W. DANIELS, Justice
33
1 JUDITH NAKAMURA, Justice, not participating
34