In Estes Exp. Lines, Inc. v. Chopper Exp., Inc., a Chopper
employee was injured while operating a truck leased from Estes. The employee
filed a personal injury action against Estes and a repair company on the
basis that their negligence was the proximate cause of his injuries. The
parties settled their claims and, Estes then requested that Chopper
reimburse it for the settlement amount and attorneys' fees in reaching
settlement pursuant to the indemnification clause in the lease agreement.
Chopper had agreed to indemnify Estes for:
C. Any and all loss, cost, claim, expense, cause of
action, loss of use and liability by reason of injury (including death) to
persons or damage to property arising out of the use, operation, ownership,
maintenance or control of a [leased] Vehicle whether covered by insurance or
not, including claims in excess of insurance limits and all claims
determined not to be covered by insurance irrespective of who, among
[Chopper] or its insurance carrier or others, may be the cause for such
failure of coverage or recovery in excess of coverage.
D. Any liability by reason of any claim asserted by an
agent or employee of [Chopper].
Chopper refused, and Estes filed suit.
The Virginia Supreme Court stated that indemnity
provisions, including those indemnifying a party against future liability
for personal injury caused by its own negligence, do not invoke the same
public policy concerns as pre-injury release agreements. The primary reason
for this distinction is that, unlike pre-injury release provisions,
indemnity provisions do not bar or even diminish an injury party's ability
to recover from a tortfeasor. The Court found that the indemnification was
enforceable even to the extent that it would entitle Estes to be reimbursed
for its own negligence.
On the same day as it rendered its Estes opinion, the
Virginia Supreme Court issued its opinion in W.R. Hall, Inc. v. Hampton
Roads Sanitation Dist. In this case, the Hampton Roads Sanitation District
(“HRSD”) hired W. R. Hall, Inc. to replace sewer lines. W. R. Hall's
employee was injured when a train hit him. The employee sued Belt Lines.
HRSD assumed Belt Line's defense pursuant to the utility line agreement
between them. HRSD then sought indemnity from W. R. Hall for its expenses
incurred in defending Belt Line under two indemnity provisions in favor of
HRSD.
Article 6.16 specified that W. R. Hall
Shall assume full responsibility for any damage to any
such land or area [on which the work is to be done], or to the owner or
occupant thereof. [W.R. Hall] shall indemnify and hold harmless [HRSD] from
and against all claims . . . brought by any such owner or occupant against
[district] to the extent caused by or based upon [W. R. Hall's] performance
of the Work.
Article 6.31 required W. R. Hall to indemnify and hold
harmless HRSD against any claim or loss for bodily injury “arising out of or
resulting from the performance of the Work,” provided that the claim or loss
was caused in whole or in part by any negligent act or omission of W. R.
Hall regardless of whether or not caused in part by any negligence or
omission of a person or entity indemnified. The Court noted that this
provision operates to place the ultimate burden for personal injury upon the
negligent party causing said injury.
The Virginia Supreme Court found both Articles
enforceable. The Court found that HRSD held harmless Belt Line against the
consequences of its operations. HRSD then sought to transfer that risk to
the entity actually performing the operations (i.e. W. R. Hall) using
Article 6.16. The Court held that this transfer of risk to the active party
is not repugnant to public policy. Similarly, Article 6.31 sought to place
the ultimate burden for a personal injury upon the negligent party causing
that injury, but only if the indemnitor was at least in part responsible for
the injury. Consistent with Estes, the Court held that a contractual
provision whereby a party is indemnified against losses incurred as a result
of personal injury caused by its own future negligence is enforceable and
does not violate public policy.
It is important to ensure that clients doing business in
the Commonwealth of Virginia are clear about the language of the agreements
in these cases and indemnification agreements in their own contracts. While
the indemnification language in these cases may not be suitable for the
needs of all clients, it provides an important foundation for creating
indemnification language in other contracts. Moreover, when a client is
faced with potential liability, an understanding of the language in these
cases proves important in recognizing whether a clients' current contract
will exempt them from (or expose them to) liability.
I find it important to note, however, that Virginia does
have a statutory limitation on indemnification of one's own negligence
specifically for construction contracts. Va. Code. Ann. § 11-4.1. Otherwise,
pursuant to Estes and W.R. Hall, there is no public policy in Virginia that
prohibits a party from negotiating away its own negligence in indemnity
agreements.
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