The New York Court of Appeals handed down two rulings this week relating to employees’ job injury claims against third parties. One of the cases, Brooks v. Judlau Contracting, Inc., potentially expands an employer’s liability because it allows a third party to enforce a contractual indemnity to the extent that the employer was negligent.
The second, Brothers v. New York State Electric & Gas Corp., discusses the exceptions to the rule that a person hiring an independent contractor is not liable for the contractor’s negligence. (The double negative – exceptions to not being negligent -- in that last sentence is intentional since it often seems that the rule really describes a rule of liability.) Here, however, the court refuses to find a state permit holder vicariously liable for the failure of an independent contractor to comply with safety requirements that were contained in the permit.
Brooks -- Employer/Sub-Contractor Required to Partially Indemnify Contractor
Brooks v. Judlau Contracting, Inc., involved a serious on the job construction injury – a situation which implicated General Obligations Law section 5-322.1, which limits indemnity in construction, maintenance and repair contexts.
Plaintiff, Brooks, sued the general contractor who, in turn, made a third-party claim for contractual indemnity against the sub-contractor, Brooks’ employer. The Appellate Division held that General Obligations Law section 5-322.1 barred indemnity and, therefore, the indemnity was not enforceable.
The Court of Appeals disagreed on the grounds that:
• the purpose of General Obligations Law section is to prohibit indemnity for a party’s own negligence, and
• If the statute is read as a blanket prohibition, it would have the opposite effect -- it would require a contractor to pay for, or, in effect, insure its sub-contractor’s negligence.
The court went on to read the contract, which required the sub-contractor to indemnify the contractor “to the fullest extent permitted by law,” as an agreement contemplating partial indemnification, rather than an agreement requiring full indemnity.
The bottom line is that a contractor has a right of indemnity to the extent that the sub-contractor/employer was negligent. I suspect that a lot will be written about this decision, which on its face seems reasonable but seems to open up a lot of questions about this section of the General Obligations law, vicarious liability/non-delegable duty, and your ongoing business relationships. It seems a lot easier to require insurance.
Brothers – Vicarious Liability Not Present Although Sub-Contractor Did Not Comply with Safety Regulations Required by Contractor's Permit
Brothers v. New York State Electric & Gas Corp. also involved an on the job serious injury. Here, indemnity was not the issue; rather, plaintiff sought to hold defendant New York State Electric & Gas vicariously liable for his employer’s failure to comply with federal and state safety regulations. The basis of the claimed vicarious liability was a work permit, which NYSE&G had obtained from the state and which required that all work be done in accordance with safety regulations. NYSE&G contracted with plaintiff’s employer to do the work. If the safety obligations were delegable, NYSE&G would not be vicariously responsible for the employer’s failures. If they were not, NYSE&G would have breached a duty to plaintiff and be responsible for his injuries.
The opinion discusses the rule that a person who hires an independent contractor is not liable for the contractor’s acts and the various exceptions to the rule. The opinion makes clear that there is no bright line for making a determination that the "rule" does not apply and a party will be responsible for the negligence of its independent contractor. The court repeatedly points out that this determination requires a “sui generis” inquiry. In reaching its determination that the duty of complying with safety regulations could be delegated in this situation, and, accordingly, NYSE&G is not vicariously liable, the court relies on the nature of the permit – not really a bargained for contract – and various policy reasons. One policy reason rejected by the court was the argument that plaintiff would be left with only workers' compensation if NYSE&G were dismissed.
