• Defining the Boundaries of Enforceable Indemnity Provisions Under Pennsylvania Law
  • March 17, 2014 | Author: Margaret C. Kucera
  • Law Firm: Marshall Dennehey Warner Coleman & Goggin, P.C. - Pittsburgh Office
  • Key Points:

    • Pennsylvania law will enforce an indemnification provision, even if the party seeking indemnification is more than 50 percent negligent in causing the harm at issue.
    • However, the language of the indemnification provision must be clear and unequivocal where the party seeking indemnification is itself primarily liable and the party seeking such indemnity must not have been actively negligent in causing the harm.

    Recently, it seems that opposing counsel are demanding broader indemnification provisions during negotiations on a variety of contracts throughout Pennsylvania. In order to appropriately advise insurance carriers and clients alike on their potential liability for entering into agreements with strong indemnification provisions, we recently researched the enforceable limits of broad indemnification provisions.

    Although “non-precedential” and, thus, not subject to citation as legal authority, the Pennsylvania Superior Court recently authored a detailed memorandum opinion covering more than 100 years of Pennsylvania history on indemnification clauses. In the case of Molettiere v. CVS et al., Docket No. 3198 EDA 2011, filed April 1, 2013, the court was asked to determine whether CVS was entitled to indemnification in a winter weather slip-and-fall case. The jury had decided that CVS was 85 percent negligent and that the party indemnifying CVS was only 15 percent negligent. After a 20-page discussion, the court found that CVS was not entitled to indemnification, despite having a “standard” broad general indemnity clause in the contract at issue.

    In Molettiere, the plaintiff was injured when she slipped and fell on compacted snow and ice in a CVS parking lot that was immediately adjacent to a sidewalk attached to the store. The jury awarded the plaintiff $250,000, finding that CVS should pay 85 percent and that the ice and snow removal contractor, Cenova, should pay 15 percent. The percentages of liability were assigned based on evidence at trial demonstrating that Cenova had properly cleared the parking lot earlier in the day but that a CVS employee was negligent. The employee, who was charged with clearing the sidewalk (as that work was not within Cenova’s contract), shoveled the snow into the cleared parking lot, placing the snow in the area where the plaintiff fell.

    After the verdict, CVS sought a ruling to have the trial judge enforce a contractual indemnity provision that read as follows:

    Indemnification: [Cenova] agrees to indemnify, hold harmless and defend CVS & Campanelli, any employee or agent thereof (each of the foregoing being hereinafter referred to individually as the “Indemnified Party”) against all liability (including reasonable attorneys’ fees and costs) to third parties (other than liability solely the fault of the Indemnified Party) arising from the acts or omissions of [Cenova], its agents or any snowplow and/or ice removal contractors engaged to remove snow and ice from properties owned or leased by CVS in the performance of [Cenova’s], its agents’ or such contractors obligations thereunder.

    The trial judge ruled in favor of CVS and enforced the above indemnification provision. Because Cenova had settled with the plaintiff prior to trial and remained in the case only on cross-claims, the plaintiff recovered zero dollars as a result of the judge’s ruling. On appeal, the Superior Court ultimately reversed the trial judge’s enforcement of the indemnification provision and required CVS to pay 85 percent of the $250,000 verdict.

    The Superior Court began its analysis by noting that interpretations of contracts pose questions of law, meaning that the appellate court’s review is de novo. The court went on to note that since the early 1900s, Pennsylvania has followed what is known as the Perry-Ruzzi rule. Pursuant to this rule, a contract will not be construed to provide indemnification against a party’s own negligence unless that intent is unequivocally stated. See Perry v. Payne, 217 Pa. 252, 66 A. 553 (1907); Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 588 A.2d 1 (1991). Specifically, in Pennsylvania, words of general import, such as “any and all liability,” do not rise to the level of specificity required for indemnification regarding a party’s own negligence. See DiPietro v. City of Philadelphia, 496 A.2d 407 (Pa.Super. 1985)(en banc); see also Hershey Foods Corp. v. General Electric Service Co., 619 A.2d 285 (Pa.Super. 1992), appeal denied, 536 Pa. 643, 639 A.2d 29 (1993)(finding that a provision which states, “Whether or not” the negligent act was “caused in part by a party indemnified hereunder” to be sufficiently specific to permit indemnification even if the beneficiary of the clause was partly responsible for the harm).

    Regarding the clause at issue in Molettiere, the court first ruled that the language was ambiguous as to whether it would apply to acts involving CVS’s own negligence. As a result of that ambiguity, the provision was construed against the drafter—CVS. The court went on to refuse to enforce the indemnity provision at issue because the court determined that the actions of the CVS employee constituted “active” negligence and that enforcing the provision would elevate Cenova to the status of an insurer, which is impermissible under Pennsylvania law.

    Based on the fact that the ambiguous provision was construed against CVS, and further based on evidence that CVS was itself actively negligent, the Superior Court overruled the trial judge’s setting aside the jury verdict and reinstated CVS’s liability. In light of the particular result in Molettiere, and the myriad of cases discussed in the court’s opinion, Pennsylvania attorneys should now be able to advise their clients and insurance contacts on the metes and bounds of enforceable indemnity provisions in Pennsylvania and the likelihood of potentially “active” acts negating such clauses. In short, such clauses will only be enforced if the contracting parties’ intent is stated in sufficiently specific language and if the party seeking indemnification was not actively negligent.