New York Law Review

Tag: indemnification

  • Glielmi v. Toys “R” Us, Inc., 62 N.Y.2d 664 (1984): Establishes Indemnification Obligations in Labor Law Cases

    Glielmi v. Toys “R” Us, Inc., 62 N.Y.2d 664 (1984)

    A contractor whose negligence contributes to a worker’s injury is obligated to indemnify the owner and tenant under a contractual indemnification provision, even if the owner’s liability is vicarious under Labor Law § 240(1).

    Summary

    This case addresses indemnification obligations in the context of New York Labor Law § 240(1). Angelo, a worker, was injured in a fall from a ladder. He sued the owner-trustees, the tenant (Toys “R” Us), and the contractor. The jury found all three liable. The contractor appealed, arguing it should not be obligated to indemnify the owner and tenant. The New York Court of Appeals affirmed the order, holding that the contractor was obligated to indemnify the tenant and owner-trustees because the jury found the contractor negligent and the owner’s liability was vicarious. The contractual indemnification provision covered the tenant, and common-law indemnity principles extended the obligation to the owner-trustees.

    Facts

    Angelo fell from a ladder while working at a construction site. The ladder was not secured at the upper end, and no scaffolds were provided. Angelo sustained injuries as a result of the fall. He sued the owner-trustees of the property, the tenant, Toys “R” Us, and the contractor responsible for the work.

    Procedural History

    The trial court instructed the jury to consider the owner-trustees and tenant as a single unit for liability purposes. The jury found the owner-trustees, the tenant, and the contractor liable for Angelo’s injuries. The contractor appealed to the Appellate Division, which affirmed the trial court’s judgment. The contractor then appealed to the New York Court of Appeals.

    Issue(s)

    Whether the contractor is obligated to indemnify the tenant and owner-trustees for Angelo’s injuries, given the jury’s finding of the contractor’s negligence and the owner’s vicarious liability under Labor Law § 240(1), and a contractual indemnification agreement between the contractor and the tenant.

    Holding

    Yes, because the jury found that Angelo’s injuries were caused in part by the negligence of the contractor, the contractor was obligated under the indemnification provision of the contract to indemnify the tenant, and this obligation also extended to the owner-trustees, whose liability under Labor Law § 240(1) was vicarious.

    Court’s Reasoning

    The Court of Appeals affirmed the lower court’s decision based on several key points. First, the court noted that there was sufficient evidence for the jury to find the owner-trustees and tenant absolutely liable under Labor Law § 240(1) due to violations of state safety regulations regarding ladder securement and scaffold provision. Furthermore, the jury instructions, to which no pertinent objection was made, allowed the jury to consider these violations as evidence of the contractor’s negligence. Because the jury found that Angelo’s injuries were partly caused by the contractor’s negligence, the indemnification provision in the construction contract obligated the contractor to indemnify the tenant. The court treated the owner-trustees and tenant as a single unit, extending the indemnification obligation to the owner-trustees as well. Even if they were treated as separate entities, the court reasoned that the owner-trustees would be entitled to common-law indemnity from the tenant and contractor because their liability under Labor Law § 240(1) was vicarious. As the court stated, “inasmuch as their liability under subdivision 1 of section 240 was in this instance vicarious only.” The court cited Kemp v Lakelands Precast, 55 NY2d 1032 and Kelly v Diesel Constr. Div., 35 NY2d 1 in support of this principle. This vicarious liability, coupled with the contractor’s negligence, triggered the indemnification obligation. The decision underscores the importance of contractual indemnification clauses in construction contracts and clarifies their interaction with Labor Law § 240(1) in cases of vicarious liability.

  • Arcade Cleaning Contractors, Inc. v. Superintendent of Ins., 59 N.Y.2d 331 (1983): Security Fund Coverage and Employer Liability

    Arcade Cleaning Contractors, Inc. v. Superintendent of Ins., 59 N.Y.2d 331 (1983)

    The New York State Property and Liability Insurance Security Fund does not cover an insured’s claim against its insolvent liability insurer for contractual or common-law indemnity to a third party held liable for injury to the insured’s employee.

    Summary

    Arcade Cleaning Contractors sought reimbursement from the New York State Property and Liability Insurance Security Fund after its insurer, Consolidated Mutual Insurance Company, became insolvent. Arcade had a contract to indemnify the Daily News for injuries, including those to Arcade’s employees. An Arcade employee sued the Daily News, who then sought indemnification from Arcade. Consolidated initially defended Arcade, but after insolvency, the Insurance Department denied Security Fund coverage for any judgment against Arcade. The court held that the Security Fund, as defined by Insurance Law § 334, does not cover claims related to employer liability for employee injuries, whether based on common law, statute, or contract, as these fall under Insurance Law § 46(15), which is excluded from Security Fund coverage.

    Facts

    Arcade Cleaning Contractors had a contract with the New York Daily News to perform cleaning work, which included an indemnification clause holding the Daily News harmless from liability for injuries arising out of the contract, including injuries to Arcade’s employees. Jeanne Gerard, an Arcade employee, sued the Daily News for injuries sustained on their premises. The Daily News sought indemnification from Arcade based on both the contract and common-law principles. Arcade’s insurer, Consolidated Mutual Insurance Company, initially defended Arcade but became insolvent.

    Procedural History

    After Consolidated’s insolvency, the Insurance Department’s Liquidation Bureau took over the defense but notified Arcade that the Security Fund would not cover any potential judgment. The Gerard action was settled, with Arcade paying $1,500 without prejudice to its claim against the Security Fund. Supreme Court referred Arcade’s claim to a referee, who recommended disallowance. Supreme Court reversed, allowing the claim, but the Appellate Division reversed again, denying coverage.

    Issue(s)

    Whether the New York State Property and Liability Insurance Security Fund, established under Insurance Law § 334, covers an insured’s claim against its insolvent liability insurer resulting from the insured’s contractual or common-law obligation to indemnify a third party held responsible for injury to the insured’s employee.

    Holding

    No, because Insurance Law § 334 excludes coverage for claims related to employer liability for employee injuries, as defined in Insurance Law § 46(15), from the Security Fund.

    Court’s Reasoning

    The court reasoned that while Insurance Law § 46(13) defines personal injury liability insurance broadly enough to include claims for contribution or indemnification, it expressly excludes insurance specified in § 46(15). Section 46(15), defining worker’s compensation and employer’s liability insurance, includes liability imposed by common law, statute, or contract for employee injuries. The court noted that the Superintendent of Insurance’s interpretation, which excludes § 46(15) claims from the Security Fund, is neither irrational nor unreasonable, considering the legislative intent and the overall structure of the Insurance Law and Workers’ Compensation Law. The court emphasized that “claims within subdivision 15 were not intended to be paid from the Security Fund” and there is no “irreconcilable inconsistency between subdivisions 13 and 15 of section 46.” Furthermore, the court rejected arguments that the legislative history mandated broader coverage, finding inconsistencies between the stated intent and the actual statutory language. The court stated, “at most we are dealing with a legislative omission that should not be supplied by us”.

  • County of St. Lawrence v. Travelers Ins. Cos., 54 N.Y.2d 482 (1981): Contribution is Not Indemnification Under Insurance Policy Exclusion

    County of St. Lawrence v. Travelers Ins. Cos., 54 N.Y.2d 482 (1981)

    An insurance policy exclusion for “any obligation of the insured to indemnify another” does not relieve the insurer of liability when the insured is sued for contribution under Dole v. Dow Chemical Co. because contribution and indemnification are distinct legal concepts.

    Summary

    St. Lawrence County was sued by a college and a tool manufacturer after a county employee was injured using a saw. The college and manufacturer sought contribution from the county. The county’s insurer, Travelers, disclaimed liability based on an exclusion for obligations to indemnify another for employee injuries. The Court of Appeals held that the exclusion did not apply to contribution claims because contribution and indemnification are distinct legal concepts. The court reasoned that insurance policies are construed against the drafter, and the exclusion’s language was unambiguous and did not encompass contribution.

    Facts

    George Donnelly, a St. Lawrence County employee, was injured while using a saw at a local college. Donnelly sued the college and Rockwell International Power Tools. The college and Rockwell then filed third-party actions against the county, seeking indemnification or contribution. St. Lawrence County had a general liability policy with Travelers Insurance Co. Travelers disclaimed liability based on Exclusion (j), which excluded coverage for “any obligation of the insured to indemnify another because of damages arising out of such injury” to an employee.

    Procedural History

    St. Lawrence County sued Travelers for a declaratory judgment, seeking a declaration that Travelers was obligated to defend and indemnify the county. The trial court ruled in favor of the county, finding the exclusion inapplicable to contribution claims. The Appellate Division, Third Department, reversed. The County appealed to the Court of Appeals.

    Issue(s)

    Whether an employer’s general liability policy containing an exclusion for “any obligation of the insured to indemnify another because of damages arising out of” personal injury to an employee relieves the carrier of liability when the employer is sued for contribution pursuant to Dole v Dow Chem. Co.

    Holding

    Yes. Because contribution and indemnification are distinct legal concepts, and insurance policies are construed against the insurer.

    Court’s Reasoning

    The court focused on the exclusion for “any obligation of the insured to indemnify another because of damages arising out of such injury”. The insurance companies argued that Dole v. Dow Chem. Co. established a right of “partial indemnification,” and the exclusion should include any obligation to reimburse a third party. The court stated, “Whatever confusion may have initially existed concerning the nature of a Dole apportionment was dispelled by the time the policies in the cases now before us were issued.”

    The court reasoned that by 1977 and 1979, when the policies were issued, contribution was not recognized as a form of indemnification. The court cited Rock v. Reed-Prentice Div. of Package Mach. Co., 39 NY2d 34, where the court discussed the distinction between contribution and indemnity. The court dismissed the insurance companies’ arguments that the history of the clause showed that it was intended to exclude coverage for Dole recoveries. The court noted that “the intent of the insurance company is not controlling when, as here, the words used in the policy do not adequately convey that intent.”

    The court also rejected the argument that the average business person would consider “indemnify” synonymous with “reimburse.” If that were the intent, the court argued, it could easily have been stated in those terms. The court concluded that the carriers’ broad reading does not accurately state the law and, at best, reveals a potential ambiguity in the contract, which must be resolved against the insurance companies, which drafted the policy. The court directly references the principle of contra proferentem.

  • O’Connor v. Serge Elevator Co., 46 N.Y.2d 563 (1979): Scope of Indemnity for Injuries Arising Out of Contract Work

    O’Connor v. Serge Elevator Co., 46 N.Y.2d 563 (1979)

    An indemnity clause in a contract that covers personal injuries “arising out of the work which is the subject of this contract” extends to injuries sustained by a subcontractor’s employee while traveling to or from their designated workplace within the project site, as such movement is a necessary component of performing the contracted work.

    Summary

    Sean O’Connor, an employee of drywall installer A & M Wallboard, Inc., was injured by an elevator installed by Serge Elevator Company at a construction site. O’Connor sued Serge and the general contractor, K.W. Construction Corp. K.W. sought indemnification from Serge and A & M based on indemnity clauses in their respective contracts. The Court of Appeals held that K.W. was entitled to indemnity from A & M because O’Connor’s injury “arose out of the work” covered by the subcontract, as the injury occurred while O’Connor was traveling to his work area, a necessary part of performing the subcontract. However, the court dismissed the appeal against Serge Elevator because K.W. had been granted a new trial against Serge, and was therefore not “aggrieved” by the lower court’s order.

    Facts

    Sean O’Connor, an employee of A & M Wallboard, Inc. (a drywall subcontractor), was injured at a 32-story construction site in Manhattan. O’Connor was struck by an elevator installed by Serge Elevator Company (the elevator subcontractor) while he was leaving his workplace for lunch. K.W. Construction Corp. was the general contractor for the project.

    Procedural History

    O’Connor sued Serge and K.W. K.W. sought indemnification from Serge and A & M under their respective contracts’ indemnity clauses. The trial court ruled in favor of O’Connor against K.W. but dismissed K.W.’s indemnity claims against both Serge and A & M. The Appellate Division modified this ruling, reinstating K.W.’s cross-claim against Serge and ordering a new trial on that issue. K.W. appealed to the Court of Appeals.

    Issue(s)

    1. Whether K.W. was an aggrieved party entitled to appeal the Appellate Division’s order regarding Serge Elevator Company.
    2. Whether the indemnity clause in A & M’s contract covered O’Connor’s injuries.

    Holding

    1. No, because K.W. was granted a new trial against Serge, it was not an aggrieved party and could not appeal that portion of the order.
    2. Yes, because O’Connor’s injuries arose out of the work which was the subject of the contract between K.W. and A & M.

    Court’s Reasoning

    Regarding the appeal against Serge, the Court of Appeals found that K.W. was not “aggrieved” by the Appellate Division’s order because it had been granted a new trial against Serge. Thus, K.W. lacked the standing to appeal that portion of the order. The court cited Lee v. Gander, 271 N.Y. 568 and CPLR 5511.

    Regarding the indemnity claim against A & M, the court focused on the language of the indemnity clause, which covered personal injuries “arising out of the work which is the subject of this contract”. The court reasoned that A & M’s employees’ ability to reach and leave their workplaces was essential to performing the contract. Therefore, O’Connor’s injuries, which occurred while traveling to or from his work area, were deemed as a matter of law to have arisen out of the work. The court concluded that K.W. was entitled to indemnification from A & M. This decision emphasizes a practical and common-sense interpretation of indemnity clauses, recognizing that access to the worksite is integral to the completion of the contracted work. As the Court stated: “The contract could not be performed, of course, unless A & M’s employees could reach and leave their workplaces on the job site. The instant injuries, occurring during such a movement, must be deemed as a matter of law to have arisen out of the work. Thus, K. W. was entitled to indemnity from A & M.”

  • Hogeland v. Sibley, Lindsay & Curr Co., 42 N.Y.2d 669 (1977): Enforceability of Indemnification Clauses in Leases

    42 N.Y.2d 669 (1977)

    A lease agreement containing an indemnification clause obligates the lessee to indemnify the lessor for any recovery obtained against it in a personal injury action, but does not necessarily require the lessee to provide a defense in that action unless explicitly stated in the agreement.

    Summary

    Hogeland involved a dispute over the interpretation of an indemnification clause in a lease agreement. The New York Court of Appeals held that the lessee, Bradley & Williams, Inc., was obligated to indemnify the lessor, Sibley, Lindsay & Curr Co., for any recovery obtained against it in an underlying personal injury action. However, the court clarified that the lease did not require the lessee to provide a legal defense for the lessor in that action. The court modified the Appellate Division’s order, granting summary judgment to the plaintiff (lessor) on indemnification but denying the requirement to defend, remitting the case for a judgment declaring the lessee’s indemnification obligation.

    Facts

    Sibley, Lindsay & Curr Co. (lessor) and Bradley & Williams, Inc. (lessee) entered into a lease agreement containing an indemnification clause. Defendant Palmeri sustained personal injuries on the premises. Palmeri then sued Sibley, Lindsay & Curr Co. Sibley, Lindsay & Curr Co. sought indemnification and a defense from Bradley & Williams, Inc. based on the lease agreement.

    Procedural History

    The Supreme Court initially ruled on the matter. The Appellate Division issued an order. The Court of Appeals reviewed the Appellate Division’s order, modifying it to deny summary judgment to the defendant Bradley & Williams, Inc., grant summary judgment to the plaintiff, and remit the case to the Supreme Court for entry of a judgment declaring the defendant’s obligation to indemnify but not to defend. The Court of Appeals affirmed the order as modified.

    Issue(s)

    1. Whether the indemnification clause in the lease agreement obligated the lessee to indemnify the lessor for any recovery obtained against it in the underlying personal injury action?

    2. Whether the lease agreement required the lessee to provide a legal defense for the lessor in the underlying personal injury action?

    Holding

    1. Yes, because the terms of the agreement constituted one of indemnification rather than exoneration, obligating the lessee to indemnify the lessor for any recovery obtained against it in the underlying personal injury action.

    2. No, because nothing in the language of the agreement required the lessee to provide a defense for the lessor in that action.

    Court’s Reasoning

    The Court of Appeals, referencing the dissenting memorandum at the Appellate Division, found that the lease agreement’s terms obligated the lessee to indemnify the lessor for any recovery in the personal injury action, citing Gross v. Sweet, 49 NY2d 102, 108. The court emphasized the distinction between indemnification and exoneration. The court reasoned that while the lessee was obligated to indemnify, the lease did not explicitly require the lessee to provide a legal defense. According to the court, “Nothing in the language of the agreement however requires the lessee to provide a defense for the lessor in that action. A breach of the obligation to provide insurance for the lessor would at most provide a predicate for an action for damages sustained as a result of the breach; it would not authorize the entry of what might be described as the equivalent of a decree of specific performance.” This highlights a crucial distinction: the duty to indemnify is separate from the duty to defend, and the latter must be explicitly stated in the agreement. The court’s decision underscores the importance of clear and specific language in contracts, particularly regarding the scope of obligations such as the duty to defend.

  • Vey v. Port Authority, 54 N.Y.2d 221 (1981): Enforceability of Broad Indemnification Clauses in Subcontracts

    Vey v. Port Authority of New York and New Jersey, 54 N.Y.2d 221 (1981)

    A broad indemnification clause in a subcontract, requiring the subcontractor to indemnify the contractor against all claims arising out of the work, is enforceable even when the contractor’s liability to a third party arises from a separate indemnification agreement.

    Summary

    This case concerns the enforceability of an indemnification clause in a subcontract. An employee of Ermco Erectors, Inc. (Ermco) was injured at a Port Authority construction site. The Port Authority had contracted with Grand Iron Works, Inc. (Grand Iron), who then subcontracted with Ermco. The employee sued the Port Authority, who then sought indemnification from Grand Iron based on their contract. Grand Iron, in turn, sought indemnification from Ermco based on a clause in their subcontract. The Court of Appeals held that the broad language of the indemnification clause in the Grand Iron-Ermco contract required Ermco to indemnify Grand Iron for all damages arising from Ermco’s work, regardless of how the original claim arose. This decision emphasizes the importance of clear and comprehensive language in indemnification agreements.

    Facts

    Clarence Vey, an employee of Ermco, was injured while working on a construction project at a bus terminal owned by the Port Authority. Vey fell into an open stairway. The Port Authority had contracted with Grand Iron to fabricate and erect structural steel. Grand Iron subcontracted the steel erection to Ermco. Vey and his wife sued the Port Authority, Carlin-Atlas Construction Co., Inc., and Empire City Iron Works. The defendants brought third-party actions against Grand Iron and Ermco.

    Procedural History

    The parties stipulated to damages of $1,200,000. The trial court determined that the Port Authority and Ermco were each 50% liable. The Port Authority sought indemnification from Grand Iron, who then sought indemnification from Ermco based on both the indemnification clause in their contract and common-law tort principles. The Supreme Court granted Grand Iron’s cross-claim. The Appellate Division modified, disallowing contractual indemnity, holding Ermco liable only for contribution based on its 50% tort liability. The Court of Appeals modified the Appellate Division’s order, reinstating Grand Iron’s judgment against Ermco.

    Issue(s)

    Whether a contractual provision requiring the subcontractor to indemnify the contractor against all claims arising out of the work covered by the contract requires indemnification when the contractor is held liable to the owner under an indemnification clause in a separate contract.

    Holding

    Yes, because the broad language of the indemnification provision in Grand Iron’s contract with Ermco demonstrates that the parties intended Grand Iron to be indemnified by Ermco against all liability arising out of Ermco’s work for Grand Iron at the Port Authority’s construction site.

    Court’s Reasoning

    The Court focused on the specific language of the indemnification clause, which required Ermco to indemnify Grand Iron for all “damages, claims or demands arising out of the work covered by this contract.” The Court reasoned that Vey’s injury occurred while he was performing work for Ermco, Grand Iron’s subcontractor. The fact that the Port Authority could seek indemnification only from Grand Iron did not prevent Grand Iron from seeking indemnification from Ermco, since the original claim arose from Ermco’s execution of its contract with Grand Iron.

    The Court also emphasized the broad language of the indemnification provision, stating that it “evidences a clear intent by the parties for Ermco to assume all liability arising out of their work at this construction site.” The provision did not limit the subcontractor’s liability to its own acts or omissions. Quoting Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153, the court implied that the specific mention of employees and the public in the provision indicates an intent to indemnify Grand Iron against all claims arising out of the work Ermco contracted to perform.

    The Court further noted that Grand Iron was never present at the construction site, having subcontracted the erection work to Ermco, which made Ermco responsible for ensuring the work was done safely. Therefore, the court found that the indemnification provision was intended to totally indemnify Grand Iron for any liability arising from the Ermco-Grand Iron contract, which was let pursuant to Grand Iron’s contractual responsibilities to the Port Authority. The court concluded, “We believe the clear language of the indemnification provision, strengthened by the surrounding facts and circumstances, demonstrates that the parties intended Grand Iron to be indemnified by Ermco against all liability arising out of Ermco’s work for Grand Iron at the Port Authority’s construction site.”

  • McDermott v. City of New York, 50 N.Y.2d 211 (1980): Statute of Limitations for Indemnification Claims

    McDermott v. City of New York, 50 N.Y.2d 211 (1980)

    An indemnification claim’s statute of limitations accrues when the party seeking indemnity suffers a loss, typically upon payment to the injured party, regardless of the underlying breach of duty.

    Summary

    Joseph McDermott, a sanitation worker, sued New York City after his arm was severed by a sanitation truck’s hopper. The city then filed a third-party claim against Heil Company, the truck’s manufacturer, seeking indemnification, alleging the injury was due to Heil’s breach of duty in providing an unfit and dangerous product. The trial court dismissed the third-party complaint as time-barred under the Uniform Commercial Code’s (UCC) four-year statute of limitations for breach of warranty, measured from the truck’s delivery date. The Court of Appeals reversed, holding that the indemnification claim accrued only when the city made payment to McDermott, making the action timely.

    Facts

    On February 5, 1969, New York City received a sanitation truck manufactured by Heil Company. On February 24, 1969, while using the truck, Joseph McDermott’s arm was severed by the hopper mechanism. McDermott and a coworker testified they did not activate the hopper, which was designed to activate only when a button was pressed. The City settled with McDermott for $150,000.

    Procedural History

    McDermott sued the City in 1969. In June 1975, the City brought a third-party action against Heil Company. The trial court dismissed the third-party complaint as time-barred under the UCC’s statute of limitations. The Appellate Division affirmed. The City appealed to the New York Court of Appeals.

    Issue(s)

    Whether the statute of limitations for an indemnification claim against a product manufacturer begins to run from the date of the product’s delivery or from the date the indemnitee (here, the City) makes payment to the injured party.

    Holding

    No, because an indemnification claim accrues when the party seeking indemnification suffers a loss, which occurs when payment is made to the injured party, making the City’s claim timely.

    Court’s Reasoning

    The Court of Appeals emphasized the distinction between contribution and indemnification. Contribution involves proportional reimbursement between joint tortfeasors, while indemnification, rooted in equity and contract (express or implied), seeks full reimbursement. The court stated: “The right to indemnity, as distinguished from contribution, is not dependent upon the legislative will. It springs from a contract, express or implied, and full, not partial, reimbursement is sought”.

    Implied indemnification is based on fairness, preventing unjust enrichment. The court reasoned that it is fundamentally unfair if “[a] person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity”.

    Because the indemnification action is quasi-contractual, the contract statute of limitations (six years in New York) applies. The cause of action accrues upon payment by the party seeking indemnity. The court stated, “Because the indemnity claim is a separate substantive cause of action, independent of the underlying wrong, this accrual rule remains the same, whatever the underlying breach of duty for which indemnification is sought.”

    The court rejected Heil’s argument that the indemnification claim, based on a defective product, should be treated differently. The court reasoned that recent developments in products liability law had eroded the theoretical underpinnings of earlier cases that refused to allow indemnification actions based on breach of warranty. The court also held that the City’s settlement with the plaintiff did not preclude the indemnity action under General Obligations Law § 15-108, as that section applies only to contribution claims.

    Finally, the Court found sufficient evidence to establish a prima facie case of products liability, based on testimony suggesting the hopper mechanism self-activated, allowing the fact finder to infer a defect existed at the time of delivery.

  • Bay Ridge Air Rights, Inc. v. State, 44 N.Y.2d 49 (1978): Accrual of Claim for Apportionment of Damages Against the State

    Bay Ridge Air Rights, Inc. v. State, 44 N.Y.2d 49 (1978)

    A claim for apportionment of damages (contribution) against the State generally accrues when the party seeking apportionment makes payment to the injured party, not when the underlying injury occurs or when the action is brought against the party seeking contribution.

    Summary

    Bay Ridge Air Rights, Inc. (Bay Ridge) was sued in federal court for negligently hiring a custodian who killed a tenant. Bay Ridge sought to bring a claim against the State of New York, alleging the State was responsible for the custodian’s premature release from psychiatric care. The New York Court of Appeals addressed when such a claim for apportionment of damages accrues for the purpose of filing a claim against the State. The Court held that the claim accrues when the party seeking apportionment (Bay Ridge) makes payment to the injured party (the tenant’s estate), aligning the accrual rule with that for indemnification claims. This means Bay Ridge’s claim was premature because no judgment had been entered or paid. The court acknowledged the potential prejudice to the State due to delayed notice but stated that legislative action is required to change the accrual rule.

    Facts

    A custodian employed by Bay Ridge killed a tenant on July 2, 1972.
    The tenant’s estate sued Bay Ridge in federal court on April 1, 1974, alleging negligent hiring, because the custodian had been under psychiatric care in state hospitals.
    Bay Ridge notified the Attorney General in December 1974 of its intent to seek apportionment of damages from the State if there was a recovery in the federal action.
    Bay Ridge’s third-party complaint against the State was dismissed by the federal court for lack of jurisdiction.</n

    Procedural History

    Bay Ridge served a notice of intention to file a claim and a proposed claim on the State on June 3, 1975.
    The State moved to dismiss the claim for untimeliness under Section 10 of the Court of Claims Act.
    The Court of Claims granted the State’s motion, holding that the cause of action accrued on the date of the killing.
    The Appellate Division modified the dismissal, holding that the claim accrues when there is a recovery against the party seeking apportionment, dismissing the claim without prejudice to refiling if a claim accrues.

    Issue(s)

    Whether a claim for apportionment of damages under Dole v. Dow Chemical Co. and CPLR Article 14 accrues on the date of the underlying injury, the date action is brought against the party seeking contribution, or the date judgment or settlement is recovered.

    Holding

    No, because a claim for apportionment of damages, like a claim for indemnification, generally accrues when payment is made by the party seeking apportionment. Therefore, until Bay Ridge makes payment to the tenant’s estate, it need not serve notice of claim upon the State.

    Court’s Reasoning

    The Court reasoned that there’s insufficient support for the Court of Claims’ view that a claim for contribution accrues at the time of the underlying injury, because a defendant might lose their claim against the State if they are unaware of any right they have against the State before the applicable 90-day or 6-month time period expires.
    While the State argues that the onset of the main action should trigger the statutory time limitations, the court notes that there is nothing in Dole v. Dow Chem. Co. or CPLR article 14 that justifies distinguishing claims for apportionment from those for indemnity. The court stated, “It is not the role of the court, however, without benefit of legislative authority, to cut off abruptly a cause of action good until then under conventional law.”
    The court acknowledged the potential disadvantage to the State due to the delayed accrual date, but stated that the remedy lies with the Legislature, which could explore alternatives such as establishing an earlier accrual date, at least for notice of claim purposes. The court suggests allowing the State to be impleaded as a third party in the main action when the action is brought in the State courts, so that all claims could be tried in a single action.
    Under conventional principles, no judgment in the Federal action against Bay Ridge having been entered, let alone paid, its claim for indemnity and contribution has not yet accrued.

  • Barry v. Niagara Frontier Transit System, Inc., 35 N.Y.2d 632 (1974): Prior Notice Requirement for Claims Against Municipalities

    Barry v. Niagara Frontier Transit System, Inc., 35 N.Y.2d 632 (1974)

    A municipality cannot be held liable in a third-party action for contribution or indemnification relating to a defective street or sidewalk condition if the municipality did not receive prior written notice of the condition, as required by statute.

    Summary

    Dorothy Barry sued Niagara Frontier Transit System for injuries sustained while exiting a bus at a bus stop in the Village of Kenmore, alleging negligence in failing to provide a safe place to alight. Niagara Frontier then brought a third-party action against the Village, seeking contribution or indemnification should it be found liable to Barry. The Village moved to dismiss the third-party complaint, arguing that it had not received prior written notice of the defective condition as required by Village Law § 341-a. The New York Court of Appeals affirmed the dismissal, holding that allowing a third-party action without prior written notice would undermine the statute’s intent to limit municipal liability for nonfeasance.

    Facts

    Dorothy Barry allegedly sustained personal injuries on September 10, 1968, while alighting from a bus operated by Niagara Frontier Transit System at a bus stop within the Village of Kenmore. Barry sued Niagara Frontier, claiming negligence in operating the bus and failing to provide a safe place to alight. Niagara Frontier then filed a third-party complaint against the Village of Kenmore, seeking contribution or indemnification, arguing that if Barry’s injuries occurred as claimed and Niagara Frontier was found liable, the Village should be responsible for all or part of the judgment. It was conceded that the Village had not received prior written notice of the alleged defect.

    Procedural History

    The Special Term dismissed Niagara Frontier’s third-party complaint, relying on Village Law § 341-a, which requires prior written notice to the Village of any dangerous condition before an action can be maintained. The Appellate Division affirmed the Special Term’s decision. The Court of Appeals granted leave to appeal to consider the applicability of the notice requirement in the context of a third-party complaint for apportionment, following the principles established in Dole v. Dow Chem. Co., 30 N.Y.2d 143.

    Issue(s)

    Whether a third-party action for contribution or indemnification can be maintained against a village for personal injuries allegedly caused by a dangerous condition in a street or sidewalk when the village did not receive prior written notice of the condition, as required by Village Law § 341-a (now CPLR 9804).

    Holding

    No, because allowing a third-party action without prior written notice would undermine the legislative intent of Village Law § 341-a to restrict a village’s liability for nonfeasance regarding defective street and sidewalk conditions.

    Court’s Reasoning

    The Court of Appeals reasoned that the rule of apportionment applies when tortfeasors share responsibility for an accident due to violations of duties they respectively owed to the injured person. In this case, the village’s duty of care to the plaintiff was to repair or remove any defect within a reasonable time after receiving written notice of the dangerous condition. Because no prior notice was given, no cause of action accrued against the village directly. The court emphasized that allowing a third-party action would permit indirectly what could not be done directly due to the failure to comply with the notice requirement. The court stated, “applies when two or more tort-feasors have shared, albeit in various degrees, in the responsibility by their conduct or omissions in causing an accident, in violation of the duties they respectively owed to the injured person.” The Court further explained that Village Law § 341-a was enacted to address municipal street and sidewalk liability and modified the general substantive law of torts by varying a village’s duty of care. The practical consequence of this requirement is to prevent any possibility of liability for nonfeasance, except where the village fails or refuses to remedy the condition within a reasonable time after receipt of notice. The Court noted that permitting a Dole claim to proceed without notice would undermine the legislative intent to restrict the village’s liability and potentially subject the village to significant financial burdens arising from unnoticed defects. As the Court argued, “To permit a Dole claim to go forward in the absence of notice would undermine the legislative design to restrict the village’s liability for nonfeasance and might subject the village to ultimate responsibility to pay a ‘catastrophe judgment’ arising from unnoticed defects.”

  • Kelly v. Diesel Constr. Co., 35 N.Y.2d 1 (1974): Indemnification Rights for Vicariously Liable Parties Under Labor Law

    Kelly v. Diesel Constr. Co., 35 N.Y.2d 1 (1974)

    A general contractor held vicariously liable under Labor Law §§ 240 and 241 for a subcontractor’s negligence is entitled to indemnification from the negligent subcontractor, aligning liability with fault and recognizing the prevalence of insurance in construction projects.

    Summary

    Harold Kelly, a steamfitter, was injured when a personnel hoist fell. He sued Diesel, the general contractor, and White, the hoist company responsible for maintenance. The jury found White solely negligent. However, the trial court held Diesel liable based on a nondelegable duty under Labor Law §§ 240 and 241, but also granted Diesel indemnification from White. The Court of Appeals affirmed, holding that Diesel, vicariously liable, was entitled to indemnification from White, the actively negligent party. The decision reflects a shift towards aligning liability with fault, especially considering the prevalence of insurance coverage in construction.

    Facts

    Diesel, as general contractor, was constructing a 40-story office building. Kelly, an employee of a subcontractor, Raisler Corporation, was injured when a personnel hoist, provided for all workers, fell 20 floors. Diesel contracted with White to supply and maintain the hoist, including its brakes and safety devices. White regularly inspected the hoist.

    Procedural History

    The liability issue was tried before a jury, which found White solely liable to Kelly. The trial court initially set aside the verdict in favor of Diesel and directed a verdict against Diesel as a matter of law, imputing White’s negligence to Diesel based on a “nondelegable duty” under Labor Law §§ 240 and 241. The court then awarded Diesel full indemnification from White under the rule of Dole v. Dow Chem. Co. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a general contractor, held liable to an injured subcontractor’s employee under Labor Law §§ 240 and 241 due to the negligence of a hoist company, is entitled to common-law indemnification or contribution from the negligent hoist company, absent an indemnification agreement.

    Holding

    Yes, because the general contractor’s liability was solely vicarious, arising from the hoist company’s negligence, and modern legal doctrine favors apportioning damages based on fault, especially considering the prevalence of insurance coverage.

    Court’s Reasoning

    The court reasoned that historically, Labor Law §§ 240 and 241 had been interpreted to impose nondelegable duties on owners and general contractors, denying them indemnification even if a joint tortfeasor was solely responsible. This was based on the policy of promoting safety. However, the court recognized this policy was undermined by the fact that liability could be shifted through insurance or indemnification agreements. The court moved away from the “active-passive” tortfeasor distinction established in cases like Semanchuck v. Fifth Ave. & 37th St. Corp., in favor of the principles of Dole v. Dow Chem. Co., which promote apportionment of damages based on fault. It emphasized that Diesel’s liability was vicarious, imputed from White’s negligence. The court stated, “There is no good reason to continue the artificial policy involved in denying an owner or contractor, liable vicariously only under the applicable sections of the Labor Law, from obtaining indemnification under common-law principles.” The court noted the universality of insurance coverage, arguing that the focus should be on which insurance carrier bears the cost, aligning liability with the party at fault to incentivize safety. The court clarified that Labor Law §§ 240 and 241 still serve the important function of mandating first instance liability on the owner or general contractor to ensure the injured workman’s recovery but should not bar common-law indemnification from the party that caused the accident. The Court stated, “The statutes mandate first instance liability on the owner or general contractor so that, with respect to the injured workman, the owner or general contractor cannot escape liability for accidents caused by his subcontractor or supplier.” Ultimately, the court concluded that the one who should pay ultimately for his actual fault is primarily liable, and the one who must pay because of first instance liability to third parties but who ought to be able to recover from one guilty of actual fault, is secondarily liable.