Williams v. Litton Systems, Inc. , 433 Mich. 755 ( 1989 )

Levin, J.

The principal question presented is whether Litton Systems, Inc., may recover on a theory of implied contractual indemnity from Ford Motor Company for damages it paid in settlement of claims asserted in an action commenced by Sandra E. Williams as administratrix of her husband’s estate. We hold it may not, and affirm the decision of the Court of Appeals.

i

Robert N. Williams, a Ford employee, was killed when he was struck by a malfunctioning robotic machine that was part of a system designed and manufactured by Litton for Ford. Williams’ administratrix commenced an action against Litton, and a jury awarded $10 million. Litton settled for less, and now seeks to recover against Ford on a theory of implied contractual indemnity. Litton asserts that Ford breached its agreement with Litton that its employees, including Williams, would be well trained to use the automated system and would not be allowed inside the storage area unless the lock-out system was on, and that the breach gave rise to an implied contract to indemnify Litton.

The circuit court denied Ford’s motion for summary disposition. The Court of Appeals denied interlocutory leave to appeal. This Court remanded the case to the Court of Appeals as on leave granted. The Court of Appeals reversed and remanded.¹

We agree with the Court of Appeals that Litton may not maintain an action for either common-law or implied contractual indemnity to recover amounts paid in settlement or payment of a claim asserting only active fault against Litton, and affirm its decision.

ii

Litton argues that decisions of the Court of Appeals² recognize a cause of action for implied contractual indemnity and that these decisions correctly held that freedom from active negligence is not a prerequisite to maintaining the action.

Freedom from active fault is not a prerequisite to maintaining an action for express contractual indemnity. Where there is an express contract of indemnity, a defendant who is found to be at fault may nevertheless maintain an action for express contractual indemnity against a third party, including an employer of an injured worker-plaintiff.

Courts recognize implied contracts where parties assume obligations by their conduct.³ Litton argues that Ford’s promises to properly train its employees and assure that no employee entered the dangerous area created an implied contract to indemnify Litton for damages resulting from its breach of those undertakings. The question is then asked, if freedom from fault is not a necessary element of an action for express contractual indemnity, why is freedom from fault necessary to maintain an action based on implied contractual indemnity? In both cases, the action is based not on the common-law rule that a person held vicariously liable for the acts of another is entitled to indemnity, but rather on the express or implied contractual undertaking of the indemnitor. The liability is not based on the third-party defendant’s breach of a duty to the plaintiff, for which breach the third-party plaintiff is held responsible by operation of law as in common-law indemnity, but rather on the breach of the undertaking to the third-party plaintiff.

Contractual indemnity, whether express or implied, subjects a defendant who is an employer of an injured worker to liability for damages resulting from injury in the workplace that otherwise has been abrogated by the exclusive remedy provision of the workers’ compensation act.⁴ It is one thing to enforce an employer’s express agreement to indemnify where the employer has clearly and unambiguously assumed that liability. It is quite another to impose liability on an employer who, while he promised to take certain actions, did not expressly agree that the consequence of the failure to do so would be the assumption of liability for damages suffered by an injured worker, although liability therefor has been abrogated by statute.

We agree with the Supreme Court of Alaska that where parties chargeable with knowledge of the exclusive remedy provision enter into a written contract, there is no reason to infer a contractual term of indemnification not there expressed. Golden Valley Electric Ass'n, Inc v City Electric Serv, Inc, 518 P2d 65, 69 (Alas, 1974).

This Court has ruled that an action for indemnity can only be maintained on the basis of express contract or by a person free of negligence or fault.⁵

Williams’ theory was that Litton was actively negligent or at fault. There was no allegation of vicarious or passive fault. Litton would not have been subjected to the liability for which it seeks indemnification from Ford of an amount paid in settlement⁶ of a judgment unless Williams had claimed that Litton was negligent or at fault.

Litton cannot obtain contribution from Ford because the exclusive remedy provision of the workers’ compensation act⁷ has been held to relieve the injured worker’s employer from liability to make contribution.⁸_

Litton contends that the law should be changed to permit it to maintain an action for indemnification against Ford although Ford had not expressly contracted to indemnify Litton and it did not seek to hold Litton liable on a theory of vicarious liability. Litton also asks that a doctrine of comparative indemnity be adopted.

We reiterate the statement in Downie v Kent Products, Inc, 420 Mich 197, 213; 362 NW2d 605 (1984), that any change in the law "must await legislative action.”⁹ Until the law is changed by the Legislature, persons in the position of Litton may seek indemnification from an injured worker’s employer only on the basis of express contractual indemnity or where held vicariously liable.¹⁰

Affirmed.

Brickley and Griffin, JJ., concurred with Levin, J. Cavanagh, Boyle, and Archer, JJ., concurred in the result only.

1 Williams v Litton Systems, Inc, 164 Mich App 195; 416 NW2d 704 (1987).

2 Hill v Sullivan Equipment Co, 86 Mich App 693; 273 NW2d 527 (1978), Pontious v E W Bliss Co, 102 Mich App 718; 302 NW2d 293 (1981), and Kirin v Riise Engineering Co, 148 Mich App 278; 384 NW2d 149 (1986).

3 See Nash v Sears, Roebuck & Co, 383 Mich 136, 142; 174 NW2d 818 (1970).

4 See MCL 418.131; MSA 17.237(131).

5 Downie v Kent Products, Inc, 420 Mich 197, 220; 362 NW2d 605 (1984); Langley v Harris Corp, 413 Mich 592, 597-598; 321 NW2d 662 (1982); Dale v Whiteman, 388 Mich 698, 705; 202 NW2d 797 (1972); Husted v Consumers Power Co, 376 Mich 41, 56; 135 NW2d 370 (1965).

Litton’s reliance on Ryan Stevedoring Co v Pan-Atlantic SS Corp, 350 US 124; 76 S Ct 232; 100 L Ed 133 (1956), and Italia Societa v Oregon Stevedoring Co, 376 US 315; 84 S Ct 748; 11 L Ed 2d 732 (1964), ignores this Court’s statement in Langley v Harris Corp, supra, pp 599-600, n 4, that "[t]his Court has consistently held that the active negligence of a party will preclude the recovery of indemnity. In cases where negligence is alleged, we reject the notion that the Italia comparative test is an appropriate consideration.”

6 It is of no importance whether Litton paid Williams pursuant to a judgment entered on a jury’s verdict or pursuant to a consent judgment or settlement. It would not have been subjected to any liability but for Williams’ theory that Litton was actively negligent or at fault, and Williams did not allege vicarious or passive fault.

7 See n 4.

8 Husted v Consumers Power Co, n 5 supra, p 56.

9 See also id., p 218.

10 A different question might be presented if the injured worker seeks to recover against the third-party plaintiff both on the theory that it was actively negligent and also on the theory that it was vicariously liable for a breach of implied warranty by the third-party defendant against whom indemnification is sought. In such a case, the third-party plaintiff might be entitled to have the jury apportion the damages so that third-party plaintiff could obtain indemnification for the portion assessed against the third-party plaintiff on the basis of vicarious liability.