445 Mass. 675 | Mass. | 2006
We transferred this case here on our own motion to consider the correctness of certain pretrial decisions and related questions reserved and reported by a Superior Court judge to the Appeals Court. The report pertains to the validity and enforceability of an assignment of a general contractor’s claims (for contractual indemnification and breach of contract) against its subcontractor to an employee of the subcontractor who was injured on the job. We conclude that the assignment is valid and the assignees, here the plaintiffs, must prove their assigned claims and damages in full.
The parties have stipulated to the relevant facts, which we supplement with undisputed facts taken from the record. The plaintiff David J. Spellman, Sr. (Spellman), an employee of East Coast Fireproofing, Inc. (East Coast), a subcontractor, was injured on August 23, 1996, while working at a construction site. Spellman received workers’ compensation benefits from East Coast’s workers’ compensation insurer, and he, his wife, and two sons sued the general contractor, Shawmut Woodworking & Supply, Inc. (Shawmut), claiming that Spellman’s injuries were caused by Shawmut’s negligence
Prior to Spellman’s injuries, Shawmut and East Coast had entered into a subcontract. Among its provisions is the following indemnification provision:
“[T]o the fullest extent permitted by applicable law, Subcontractor [East Coast] agrees to defend, indemnify and hold harmless Owner, the Architect/Engineer, Contractor [Shawmut] and anyone else required by the Contract Documents, from and against any and all claims, damages or loss (including attorney’s fees) arising out of or resulting from any work of and caused in whole or in part by*677 an[y] negligent act or omissions of [East Coast] or those employed by it, or working under those employed by [it] at any level, regardless of whether [or] not caused by a party indemnified hereunder.”5
Shawmut filed an answer to the plaintiffs’ complaint, and then gave notice of its request for defense and indemnification to East Coast’s liability insurer, Pacific Insurance Co. Thereafter, Shawmut filed a third-party complaint against East Coast, claiming tl^t, in its subcontract with Shawmut, East Coast had expressly agreed to indemnify Shawmut, and asserting a breach of contract claim for East Coast’s failure to name Shawmut as an additional insured.
The parties engaged in discovery. A final pretrial conference occurred, and a'trial date was set and once rescheduled. A few weeks before the scheduled trial date, Shawmut and the plaintiffs entered into an agreement for judgment in the amount of $300,000 that contained a waiver of “all rights of appeal.” The agreement for judgment was filed with the court pursuant to Mass. R. Civ. P. 58 (a), as amended, 371 Mass. 908 (1977), and provides:
“By Agreement of the plaintiffs and [Shawmut], Judgment hereby enters in favor of [Spellman] in the amount of Two Hundred and Eighty Thousand Dollars on Count One, in favor of plaintiff Frances Spellman in the amount of Nineteen Thousand, Nine Hundred and Ninety-Eight Dollars on Count Two, and in favor of plaintiffs David J. and Anthony Spellman in the amount of Two Dollars in Count Three, the plaintiffs and [Shawmut] waiving all rights of appeal.”
East Coast unsuccessfully moved to strike the agreement for judgment. In connection with the proceedings on this motion, Shawmut and the plaintiffs disclosed that they, together with Shawmut’s insurer, approximately one month before filing the agreement for judgment, had entered into an “Assignment of
Neither Shawmut nor its insurer has paid anything to the plaintiffs to satisfy the agreement for judgment. Shawmut has incurred approximately $35,121 in attorney’s fees in defense of this matter.
Approximately ten months after East Coast’s motion to strike was denied, the plaintiffs sought leave to amend their complaint to add East Coast as a primary defendant so that, as recent assignees, they could “pursue the contractual indemnification [and breach of contract] claims that Shawmut had against East Coast.” East Coast opposed the motion to amend the complaint on the grounds that, among other issues, the motion was the product of undue delay and would prejudice East Coast, and that, based on the terms of the assignment, Shawmut incurred no liability or monetary exposure, an event that must occur
East Coast then filed a motion to dismiss Shawmut’s third-party complaint. In the motion, East Coast asserted that the plaintiffs cannot recover $300,000 from East Coast because, by reason of the plaintiffs’ agreement in the assignment not to collect the settlement amount from Shawmut, Shawmut has not incurred an actual loss and, as a consequence, the $300,000 amount is illusory. East Coast also alleged that enforcing the assignment would be prejudicial and would contravene both G. L. c. 149, § 29C, and G. L. c. 152. In their opposition, the plaintiffs challenged East Coast’s arguments and maintained that no actual loss is necessary under the indemnification provision.
The judge allowed the plaintiffs’ motion to amend, denied East Coast’s motion to dismiss Shawmut’s third-party complaint against East Coast, and reserved and reported the correctness of her decisions to the Appeals Court. In her reservation and report, she also submitted several questions of law for consideration. The judge stayed all further proceedings.
1. The correctness of the judge’s decisions (allowing the plaintiffs’ motion to amend and denying East Coast’s motion to dismiss Shawmut’s third-party complaint) turns on whether the assignment is valid and enforceable. We separately address each consideration, noting that we need not answer the reported questions “except to the extent that it is necessary to do so in resolving the basic issue.” See McStowe v. Bornstein, 377 Mass. 804, 805 n.2 (1979).
a. We have a situation where, because Spellman collected workers’ compensation benefits, the plaintiffs are barred by the exclusivity provision of the Workers’ Compensation Act from directly suing East Coast for negligence. See G. L. c. 152, § 23; Liberty Mut. Ins. Co. v. Westerlind, 374 Mass. 524, 526 (1978) (employer who pays workers’ compensation benefits that are collected by employee injured during the course of his employment is released under G. L. c. 152, § 23, from all possible resulting tort claims). At the same time, there is no question
East Coast correctly contends that, to recover under the indemnification provision, there must be a showing that Spell-man’s injury was caused, at least in part, by East Coast’s negligence. Under G. L. c. 149, § 29C,
With respect to the agreement for judgment and the covenant in the assignment not to pursue satisfaction of the agreement, we have held (following the majority rule), admittedly in different circumstances, that such devices do not operate to invalidate an otherwise valid assignment. See Campione v. Wilson, 422 Mass. 185, 190-192 (1996), and cases cited. This is so even where the assignee (here, Shawmut) suffers no tangible damages. Id. at 189-190.
As in the Campione decision, we do not overlook the possibility of collusion or fraud. These risks, however, are mitigated by “[p]lacing with the plaintiffs the responsibility of proving their assigned claims in full,” as well as damages, and by permitting defendants, such as East Coast, “to suggest the issue of collusion, and if a satisfactory basis exists, to argue it to the fact finder.” Id. at 193. The risk of fraud and collusion also is offset by important policy considerations such as encouraging settlement agreements, see Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 765 (1993); by settled law that most contract claims are assignable, see Rubenstein v. Royal Ins. Co., 45 Mass. App. Ct. 244, 246 (1998); by settled law that contracts not to sue (or, by analogy, contracts not to satisfy judgments)
By upholding the assignment, the plaintiffs step into the shoes of Shawmut and may assert against East Coast only those claims that Shawmut had against East Coast, namely claims for contractual indemnification and breach of contract. See Grise v. White, 355 Mass. 698, 701 (1969). We agree that “[tjhere is nothing that prohibits or prevents a party from contractually agreeing to greater liability than would have been provided by law.” Byrne v. Sealy & Co., 742 So. 2d 668, 671 (La. Ct. App. 1999). The assignment does not change East Coast’s potential exposure; it only affects the party to whom payment must be made if liability and damages are proved.
b. The enforceability of the assignment is not limited by the
Our decision in Fireside Motors, Inc. v. Nissan Motor Corp. in U.S.A., 395 Mass. 366 (1985), does not require a different result. In that case, a customer alleged that she was injured when the seat belt system in her automobile, that she purchased from Fireside Motors, Inc. (Fireside), failed during a collision. Id. at 368. She sued Fireside and the distributor. Id. at 367. Fireside settled with the customer and then brought an indemnification action against the distributor and manufacturer under various theories, but not pursuant to an “explicit contractual right to indemnification. ’’ Id. at 369 n.2.
In connection with Fireside’s claim for common-law tort indemnification, the court rejected the defendants’ claim that the action was barred because Fireside failed to give them timely notice of the underlying action involving the original plaintiff. Id. at 371. We concluded that the failure to give timely notice “merely imposes on the person seeking indemnity the burden of litigating the facts supporting the indemnitor’s primary liability to the original plaintiff and giving rise to the indemnity relationship itself,” and “imposes on the indemnitee the burden of proving that the original settlement was reasonable in all the circumstances.” Id. at 371, 372. We reject Shawmut’s contention that it necessarily follows that, if proper notice is given to
2. The assignment is valid. Consequently, the plaintiffs’ motion to amend was properly allowed. However, the plaintiffs and Shawmut should not both be able to assert the same claims (contractual indemnification and breach of contract) against East Coast. Because the assignment is valid, the assignees, the plaintiffs, may properly assert those claims in their amended complaint, and East Coast’s motion to dismiss Shawmut’s third-party complaint against it is to be allowed.
3. The case is remanded to the Superior Court for further proceedings consistent with this opinion.
So ordered.
The plaintiffs allege that Shawmut Woodworking & Supply, Inc. (Shawmut), failed to exercise reasonable care in taking all necessary precautions for ensuring the safety of the employees working at the construction site, including a failure properly to supervise, manage, and direct its subcontractors in observing, executing, and enforcing all Federal, State, and private contractual obligations pertaining to job site safety and accident or injury precaution.
In their amended complaint, the plaintiffs allege that, in its subcontract with Shawmut, East Coast Fireproofing, Inc. (East Coast), agreed to obtain certain insurance to protect Shawmut for any work performed under the contract documents and to name Shawmut as an additional insured.
East Coast stipulated to the amount for purposes of the reservation and report only, and reserved the right to challenge the amount in any future proceedings.
General Laws c. 149, § 29C, provides in relevant part:
“Any provision for or in connection with a contract for construction . . . which requires a subcontractor to indemnify any party for injury to persons . . . not caused by the subcontractor or its employees . . . shall be void.”
“The language of G. L. c. 149, § 29C, no longer requires a finding of the subcontractor’s negligence in order to trigger a subcontractor’s liability under an indemnity provision in a construction subcontract.” Johnson v. Modem Continental Constr. Co., 49 Mass. App. Ct. 545, 547 (2000). The statute in no way “prohibit[s] contractual indemnity arrangements whereby the subcontractor agrees to assume indemnity obligations for the entire liability when both the subcontractor and the general contractor or owner are causally negligent,” Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 788 (1996), or, under the current standard, “brought about or provoked the mishap,” Johnson v. Modem Continental Constr. Co., supra.
We are cognizant of the significant financial exposure faced by subcontractors. As noted by one respected commentator, several States have enacted legislation prohibiting a right of “recovery-over” against an employer, including by indemnity, in the absence of a written agreement made prior to any injury. 7 A. Larson, Workers’ Compensation Law § 121.04[4] (2005). Any changes affording greater protection to subcontractors in this area involve
We reject East Coast’s suggestion that damages should be limited to Shawmut’s defense costs. By its terms, liability under the indemnification provision is not limited to actual losses but, rather, extends to “claims, damages or loss (including attorney’s fees)” (emphasis added).