New York Law Review

Tag: indemnification

  • Rogers v. Dorchester Assoc., 32 N.Y.2d 553 (1973): Indemnification and Apportionment of Damages

    Rogers v. Dorchester Assoc., 32 N.Y.2d 553 (1973)

    When a party delegates responsibility for an activity to another through contract, and an accident occurs related to that activity, the party to whom the duty was delegated may be fully liable and indemnification may apply, precluding apportionment of damages.

    Summary

    In this case, the New York Court of Appeals addressed a situation where a jury returned an inconsistent verdict, finding a property owner liable for negligence while simultaneously exonerating the contractor responsible for snow and ice removal at the property. The Court held that the jury’s verdict was inconsistent. If the property owner’s liability was based in tort, and the contractor had a contractual obligation to indemnify the property owner or had been delegated all responsibility for the activity causing the accident, there should be no apportionment of damages under Dole v. Dow Chemical Co. The Court reversed the Appellate Division’s order, reinstated the complaint, and granted a new trial.

    Facts

    Plaintiffs sued Humble Oil and Refining Co. (Humble) and Scarsdale Landscaping, Inc. (Scarsdale) for damages related to an accident. Humble had contracted with Scarsdale for snow and ice removal and sanding services. The contract included a clause where Scarsdale agreed to indemnify and hold Humble harmless from any loss or damage connected with the work performed. The jury found Humble liable for negligence but exonerated Scarsdale.

    Procedural History

    The case proceeded to trial, where the jury returned a verdict finding Humble liable but exonerating Scarsdale. Humble had filed a third-party complaint against Scarsdale, seeking indemnification. The Appellate Division affirmed the trial court’s judgment. The New York Court of Appeals reversed the Appellate Division’s order, reinstated the complaint, and ordered a new trial.

    Issue(s)

    Whether the jury verdict was inconsistent in holding Humble liable for negligence while exonerating Scarsdale, given Scarsdale’s contractual obligation to indemnify Humble or the delegation of responsibility for snow and ice removal.

    Holding

    Yes, because Scarsdale had a contractual obligation to indemnify Humble, or because Humble had delegated all responsibility for whatever caused the accident to Scarsdale. In such a situation, there should be no apportionment of damages.

    Court’s Reasoning

    The Court of Appeals found the jury’s verdict inconsistent. The court reasoned that if Humble’s liability to the plaintiffs was based on tort, then Scarsdale’s liability to Humble could be based on contract (the indemnity agreement) or tort (negligent performance of the delegated duty). The court cited Dole v. Dow Chemical Co. concerning apportionment of damages among tortfeasors. However, the court emphasized that Dole did not apply where Humble was entitled to recover from Scarsdale either based on the contractual indemnity clause or because Humble had delegated all responsibility for the condition that caused the accident to Scarsdale. In such cases, there should be no apportionment of damages; Scarsdale would be fully liable to indemnify Humble. The court directly referenced its prior decision in Rogers v. Dorchester Assoc., 32 Y 2d 553, 563, 565-566, noting the principles established therein. The court stated that the charge of the court, with respect to the rule of Dole v. Dow Chem. Co. (30 Y 2d 143), was error, because if Humble were entitled on its third-party complaint to recover either on contract indemnity or because it had delegated to Scarsdale all responsibility for whatever caused the accident, there would be no apportionment of damages.

  • Rogers v. Dorchester Associates, 32 N.Y.2d 553 (1973): Negligence of Elevator Maintenance Company Inferred from Malfunction Evidence

    Rogers v. Dorchester Associates, 32 N.Y.2d 553 (1973)

    An elevator maintenance company can be held liable for negligence based on circumstantial evidence of prior malfunctions and its exclusive maintenance contract, allowing a jury to infer a failure to properly inspect and repair the elevator.

    Summary

    Adele Rogers, a tenant, was injured by an elevator door in her apartment building. She sued the building owner, manager, and Otis Elevator Company, which had a maintenance contract. Evidence showed prior door malfunctions. The jury found all defendants liable, but the appellate division dismissed the claim against Otis. The Court of Appeals reinstated the judgment against Otis, holding that the prior malfunctions, combined with Otis’s exclusive maintenance contract, provided sufficient circumstantial evidence for the jury to infer negligence in inspection and repair. Because Otis had the sole duty for maintenance, the owner and manager were entitled to indemnification from Otis.

    Facts

    Adele Rogers, a 71-year-old tenant, was injured by an automatic elevator door in her apartment building in Manhattan. The building was owned by Milstein Associates and managed by Milford Management Corp. Otis Elevator Company had a written agreement with Milford to service all elevators in the building. Rogers testified that the elevator door began to close as she entered, and despite touching the rubber safety edge, the door continued closing and knocked her down, resulting in pelvic fractures. Another tenant testified to frequent malfunctions of the door in the six months prior to the accident. Building employees were instructed to shut down malfunctioning elevators and call Otis, giving Otis exclusive control over elevator maintenance.

    Procedural History

    Rogers sued Milstein Associates (owner), Milford Management Corp. (manager), and Otis Elevator Company for negligence. A jury trial resulted in a verdict of $80,000 against all defendants. The owner and manager’s cross-claim against Otis was dismissed by the trial court. The Appellate Division modified the judgment by dismissing the complaint against Otis. Rogers, Milstein, and Milford appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether evidence of prior elevator door malfunctions, coupled with the elevator maintenance company’s undertaking to perform all inspection and maintenance, was sufficient to permit the jury to infer negligence by the elevator company.

    2. Whether the building owner and manager are entitled to indemnification from the elevator maintenance company for their liability to the plaintiff.

    Holding

    1. Yes, because circumstantial evidence of prior malfunctions and the elevator company’s exclusive maintenance contract provided a sufficient basis for the jury to infer negligence.

    2. Yes, because the elevator company assumed the full duty to maintain the elevator, and the owner and manager’s liability arose solely from their nondelegable duty, which was breached due to the elevator company’s negligence.

    Court’s Reasoning

    The Court of Appeals held that an elevator company that agrees to maintain an elevator in safe operating condition may be liable for failure to correct conditions of which it has knowledge or failure to use reasonable care to discover and correct a condition which it ought to have found. Even without direct evidence of negligence or application of res ipsa loquitur, circumstantial evidence can allow a jury to infer negligence. The court noted that Otis had undertaken, for a substantial fee, to handle exclusively all maintenance on the elevator. “There was evidence that the elevator door malfunctioned on this occasion and on prior occasions. It was Otis’ procedure to have an employee examine each of the nine elevators in the building, including the doors, at least two or three times a week. The door was designed to retract at the slightest pressure, yet there was evidence accepted by the jury that it did not stop, but struck plaintiff with sufficient force to knock her to the floor.” The court distinguished Koch v. Otis Elevator Co., where no cause was shown for the elevator malfunction. Here, there was evidence of prior similar malfunctions. Regarding indemnification, the court found that the owner and manager’s liability arose solely from their nondelegable duty, while Otis voluntarily undertook all maintenance and inspection. Consequently, the court reasoned, the negligence must have been attributable solely to Otis’s acts or omissions. The Court cited Beinhocker v. Barnes Development Corp., for the proposition that “between the owner and the company, the company assumed the full duty to maintain the elevator and the owner had no functions to perform, as between it and the elevator company.” The court also stated that a clause in the maintenance agreement purporting to limit Otis’s liability for consequential damages was void under General Obligations Law § 5-323. Finally, the court clarified that the rule of apportionment in Dole v. Dow Chem. Co. does not apply when one party is vicariously liable and the other is directly responsible for the negligence.

  • Cohn v. Lionel Corporation, 21 N.Y.2d 559 (1968): Principal’s Duty to Indemnify Agent

    Cohn v. Lionel Corporation, 21 N.Y.2d 559 (1968)

    A principal has a duty to indemnify an agent for damages or expenditures incurred as a proximate consequence of the agent’s good-faith execution of the agency, provided the act was not manifestly wrong.

    Summary

    Cohn, an officer of Lionel Corp., guaranteed a financial condition for a transaction at Lionel’s request. When the condition failed, Cohn was forced to pay on the guarantee. He sued Lionel for indemnification. The New York Court of Appeals held that Cohn’s complaint stated a cause of action for indemnity because he acted as Lionel’s agent in providing the guarantee. The court emphasized that a principal must indemnify an agent for losses incurred while acting in good faith on the principal’s behalf, as long as the act wasn’t obviously wrongful. This case illustrates the scope of a principal’s duty to protect their agents from liabilities incurred during authorized activities.

    Facts

    Lionel Corp. negotiated to acquire stock from the Steinthals, who required $800,000 in cash upon completion of the deal.

    Lionel agreed to register 30,500 shares of Lionel stock for the Steinthals to sell, but the Steinthals then demanded a guarantee that the sale of these shares would realize $800,000.

    Lionel refused to provide the guarantee due to potential tax implications.

    Lionel’s management requested Cohn, an officer and director, to provide the guarantee to facilitate the acquisition.

    Cohn provided the guarantee, and the Steinthals executed contracts with Lionel.

    The market value of Lionel shares declined, causing the Steinthals to enforce the guarantee against Cohn, resulting in a judgment against Cohn.

    Procedural History

    Cohn sued Lionel for indemnification.

    Lionel moved to dismiss the complaint for legal insufficiency under CPLR 3211(a)(7).

    Special Term granted the motion, and the Appellate Division affirmed.

    The Court of Appeals reversed the lower courts, reinstating Cohn’s third cause of action.

    Issue(s)

    Whether a principal is required to indemnify an agent for losses incurred by the agent while acting on behalf of the principal, specifically when the agent provides a guarantee at the principal’s request to facilitate a business transaction?

    Holding

    Yes, because where one is directed by another to do an act in his behalf, not manifestly wrong, the law implies a promise of indemnity by the principal for damages resulting from the good-faith execution of the agency.

    Court’s Reasoning

    The Court of Appeals focused on the legal sufficiency of Cohn’s complaint, construing the pleadings liberally in his favor and assuming the truth of his allegations.

    The court cited the general rule that a principal must indemnify an agent for damages or expenditures incurred as a proximate consequence of the good-faith execution of the agency.

    The court stated: “The general rule is that, where one is employed or directed, by another to do an act in his behalf, not manifestly wrong, the law implies a promise of indemnity by the principal for damages resulting from or expenditures incurred as a proximate consequence of the good faith execution of the agency.”

    The court found that Cohn’s complaint unequivocally asserted that he executed the guarantee agreement as an agent for Lionel, acting at Lionel’s special insistence and request.

    The court also noted that the fact Cohn’s act helped Lionel maintain a favorable tax advantage did not, by itself, establish that Cohn participated in an illegal act.

    The court acknowledged that Cohn’s third cause of action (agency) contradicted the theory of his first cause of action (officer indemnification), but it affirmed that a plaintiff can advance inconsistent theories in alleging a right to recovery.

  • Rogers v. Dorchester Associates, 32 N.Y.2d 553 (1973): Landlord’s Non-Delegable Duty and Indemnification

    Rogers v. Dorchester Associates, 32 N.Y.2d 553 (1973)

    A landlord has a non-delegable duty to provide safe ingress and egress for tenants, and this duty precludes indemnification from a contractor when the landlord’s own negligence contributes to the injury.

    Summary

    Plaintiff Rogers was injured while using a scaffold erected by a contractor, El-Mar Painting & Decorating Co., hired by the landlords, Dorchester Associates and Berman. Rogers sued both the contractor and the landlords. The Court of Appeals held that while Rogers was not contributorily negligent as a matter of law, the landlords were not entitled to indemnification from the contractor because the landlord had a nondelegable duty to use reasonable care in providing for a safe means of ingress to a tenant, and their failure to do so constituted negligence barring indemnity as joint tortfeasors.

    Facts

    Dorchester Associates and Berman (landlords) hired El-Mar Painting & Decorating Co. (contractor) to perform work on their property. Rogers (plaintiff) followed instructions from the painters (presumably employees of El-Mar) while mounting a scaffold. Rogers sustained injuries as a result of the incident.

    Procedural History

    Rogers sued both the landlords and the contractor. The trial court found in favor of Rogers against all defendants. The trial court also granted judgment in favor of the landlords on their cross-claim against the contractor, seeking indemnification for any liability they had to Rogers. The Court of Appeals reviewed the case to determine the validity of the judgment against the landlords, specifically concerning the indemnification claim.

    Issue(s)

    1. Whether the plaintiff was contributorily negligent as a matter of law.
    2. Whether the landlords were entitled to indemnification from the contractor for damages awarded to the plaintiff.

    Holding

    1. No, because the plaintiff followed the instructions of the painters in mounting the scaffold.
    2. No, because a landlord has a nondelegable duty to use reasonable care in providing for a safe means of ingress to a tenant, and failure to comply with that duty bars indemnity because the codefendants are joint tort-feasors.

    Court’s Reasoning

    Regarding the plaintiff’s negligence, the court summarily cited precedent (Zurich Gen. Acc. & Liab. Ins. Co. v. Childs Co., Meyer v. West End Equities, and Hamblet v. Buffalo Lib. Garage Co.) to support its conclusion that the plaintiff was not negligent as a matter of law because they followed the instructions of the painters.

    Regarding the landlords’ claim for indemnification, the court emphasized the non-delegable duty of a landlord to provide safe access to tenants, citing Harrington v. 615 West Corp. The court further reasoned that the landlord employing the contractor must ensure precautions are taken to protect tenants, citing Sciolaro v. Asch and Dollard v. Roberts. The court stated, “To this duty is added the responsibility that the landlord, who employs the contractor to do work in a place where tenants are in the habit of passing, must see that necessary precautions are taken not to endanger the tenants.” The court reasoned that the landlord’s failure to meet this duty constitutes negligence, barring indemnification because both the landlord and the contractor participated in the wrong that caused the damage, making them joint tortfeasors. Citing Bush Term. Bldgs. Co. v. Luckenbach S. S. Co., the court reiterated that there is no right of indemnity where codefendants participated in the wrong. The dissent argued that the evidence was insufficient to establish any negligence by the landlords.

  • Associated Dry Goods Corp. v. Posillico Constr. Co., 31 N.Y.2d 308 (1972): Active vs. Passive Negligence and Indemnification

    Associated Dry Goods Corp. v. Posillico Constr. Co., 31 N.Y.2d 308 (1972)

    A party seeking indemnification for negligence must be passively, and not actively, negligent; active negligence involves more than a failure to discover a dangerous condition unless the party had actual notice and acquiesced in the condition’s continuation.

    Summary

    Associated Dry Goods Corp. (Lord & Taylor) sued Posillico Construction after a customer fell in their parking lot due to construction debris. Associated sought indemnification from Posillico, claiming Posillico’s work created the hazard. The jury found Posillico actively negligent and Associated passively negligent. The Appellate Division reversed the finding of passive negligence. The Court of Appeals reinstated the original judgment, holding that Associated’s negligence was passive because it was based on constructive, not actual, notice of the dangerous condition. This distinction is crucial for determining the right to indemnification.

    Facts

    Associated owned a department store with a parking lot across the street. Nassau County hired Posillico to widen the road, which involved work near Associated’s parking lot. Posillico transplanted hedges, leaving gravel and stones in the parking lot. A customer fell on the stones and sued both Associated and Posillico. Associated’s assistant manager testified he inspected the lot the morning of the accident and saw nothing unusual, but after the fall, he believed the stones were construction debris. Associated’s service manager also admitted to seeing the stones after the fall but not before.

    Procedural History

    The trial court found both Posillico and Associated liable to the plaintiff. The jury issued a special verdict finding Posillico actively negligent and Associated passively negligent, entitling Associated to indemnification. The Appellate Division affirmed the judgment against Posillico but reversed the finding of passive negligence against Associated and dismissed Associated’s cross-claim for indemnification. The Court of Appeals reversed the Appellate Division’s decision, reinstating the trial court’s judgment regarding indemnification.

    Issue(s)

    Whether Associated’s failure to maintain a safe parking lot constituted active negligence, barring its claim for indemnification from Posillico, who created the dangerous condition.

    Holding

    No, because Associated’s liability was based on constructive notice, not actual notice, of the dangerous condition. Therefore, Associated’s negligence was passive, and it is entitled to indemnification from Posillico.

    Court’s Reasoning

    The Court of Appeals focused on the distinction between active and passive negligence in determining the right to indemnification. The court stated, “the culpability of the party seeking indemnity determines whether recovery over will be permitted…that is, the party seeking indemnity must not be in pari delicto with the party against whom such recovery is sought.” The court emphasized that while active negligence can arise from both actions and omissions, a landowner’s failure to discover and remedy a condition created by another is generally passive negligence. However, a key exception exists: a party with actual notice of a dangerous condition who “acquiesced in the continuation of the condition” is considered in pari delicto and cannot seek indemnity. The court distinguished between actual and constructive notice, noting that “in a case where there is no actual notice but there is only constructive notice, because of failure to discover that which could reasonably have been discovered, the defendant cannot be charged with acquiescence in the dangerous condition as a bar to indemnity.” The court found that Associated was only charged with constructive notice and therefore their negligence was passive. The Appellate Division erred in finding active negligence based on a “merely casual inspection” because this still amounted to only constructive notice. Therefore, the court reinstated the trial court’s judgment, allowing Associated to seek indemnification from Posillico.