Aluma Sys. Concrete Constr. of Cal. v. Nibbi Bros. Inc.

2 Cal.App.5th 620

206 Cal.Rptr.3d 394

ALUMA SYSTEMS CONCRETE CONSTRUCTION OF CALIFORNIA, Plaintiff and Appellant

v.NIBBI BROS. INC., et al., Defendants and Respondents.

A145734

Court of Appeal, First District, Division 5, California.

Filed August 16, 2016

Haight, Brown & Bonesteel, Vangi M. Johnson, Los Angeles; Yukevich, Cavanaugh, Steven D. Smelser, Los Angeles; Cantey Hanger, Al Kroemer, for Plaintiff and Appellant.

Wood, Smith, Henning & Berman, Steven R. Disharoon, Concord, Gregory P. Arakawa, Concord; Fisher & Kong, Raymond E. Kong, for Defendants and Respondents.

SIMONS, Acting P.J. Aluma Systems Concrete Construction of California, Inc. (hereafter, Contractor) was sued by employees of respondents Nibbi Bros. Inc., and Nibbi Bros. Associates, Inc. dba Nibbi Concrete (hereafter, Employer), for injuries sustained on the job. Subsequently, Contractor sued Employer for indemnification based on a specific provision in the parties' contract. The trial court sustained Employer's demurrer to Contractor's complaint, relying on the allegations in the underlying lawsuit that set forth claims only against Contractor and not against Employer. Because the allegations in the underlying lawsuit are not determinative of Contractor's claim for indemnity we reject that analysis, reverse and remand.

BACKGROUND¹

In March 2011, Contractor entered into an agreement with Employer to design and supply the materials for wall formwork and deck shoring at Employer's construction project (the Contract). The terms of the Contract included the following indemnification provision: “To the extent permitted by law, [Employer] shall defend, indemnify and hold harmless [Contractor] against any and all claims, actions, expenses, damages, losses and liabilities, including attorneys fees and expenses, for personal injuries (including death) and/or property damage arising from or in connection with this contract and/or [Contractor]'s equipment and services, except to the extent such claims, actions, expenses, damages, losses and liabilities are caused by the acts or omissions of [Contractor] or anyone directly or indirectly employed by [Contractor] or anyone for whose acts [Contractor] may be liable.”²

Subsequently, two lawsuits were filed by Employer's employees against Contractor (the Employee Lawsuits) alleging that in August 2011, the employees were injured after a shoring system designed by Contractor collapsed. The Employee Lawsuits alleged the collapse was due to Contractor's negligence. Contractor's answers alleged as affirmative defenses that the employees' injuries were proximately caused by the negligence of Employer and unnamed others. Contractor tendered the Employee Lawsuits to Employer for defense and indemnification, but received no response.

Contractor then filed the instant action against Employer for breach of contract, express indemnification, and declaratory relief.³ Employer demurred to the complaint. The demurrer argued the contractual indemnification provision does not apply because the Employee Lawsuits allege Contractor alone, not Employer, was negligent. The demurrer also argued that the complaint should be dismissed as to Nibbi Bros., Inc. because the Contract was with Nibbi Concrete only, and that the claim for declaratory relief is unnecessary because Contractor can determine its rights in the Employee Lawsuits.

The trial court sustained the demurrer without leave to amend. As to the breach of contract and express indemnification claims, the trial court found “the exception included in the Contract's indemnity provision plainly states that the [Employer's] duty to defend, indemnify, or hold harmless does not arise from acts caused by or omissions of the [Contractor].... The underlying complaints in this action allege negligence as to the [Contractor] only because the employees are required to pursue worker's compensation claims against the [Employer]. The acts and/or omissions for which [Contractor] seeks indemnity against arose from [Contractor's] alleged negligence and is barred by the plain language of the Contract.” The court sustained the demurrer as to the declaratory relief claim on the ground that Contractor can determine its rights in the Employee Lawsuits.

Contractor filed a motion for reconsideration, pointing in part to the fact that the Employee Lawsuits had now settled. The trial court denied the motion and entered judgment for Employer.

DISCUSSION

“On review from an order sustaining a demurrer, ‘we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose. [Citations.]’ [Citation.] We may also consider matters that have been judicially noticed.” (Committee for Green Foothills, supra, 48 Cal.4th at p. 42, 105 Cal.Rptr.3d 181, 224 P.3d 920.)

The parties agree that pursuant to Labor Code section 3864, Employer is only liable to indemnify Contractor pursuant to the terms of the Contract.⁴ They dispute whether the indemnity provision—which applies to claims and damages in connection with the Contract “except to the extent” they are “caused by the acts or omissions of [Contractor]”—applies to the Employee Lawsuits. Employer argues the Employee Lawsuits allege solely Contractor's negligence and the indemnification provision therefore does not apply. Contractor argues that the provision may apply because Contractor is jointly and severally liable for all economic damages in the Employee Lawsuits, including any attributable to the negligence of Employer or others, as long as Contractor's negligence is partially responsible.

As an initial matter, Contractor argues the indemnification provision provides for proportionate liability: Employer must indemnify Contractor for any portion of economic damages attributable to the negligence of Employer and/or others, but is not obligated to indemnify Contractor for any portion of damages attributable to Contractor's negligence. Employer does not contest this interpretation, which we think is a reasonable construction of the Contract's language. “ ‘When reviewing whether a plaintiff has properly stated a cause of action for breach of contract, we must determine whether the alleged agreement is ‘reasonably susceptible’ to the meaning ascribed to it in the complaint. [Citation.] “ ‘So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the meaning of the agreement.’ ” ' ” ( Marzec v. Public Employees' Retirement System (2015) 236 Cal.App.4th 889, 909, 187 Cal.Rptr.3d 452 (Marzec ).) We therefore accept Contractor's interpretation for purposes of this appeal.

We next turn to relevant principles of workers' compensation and tort law. Because the employees were working for Employer at the time of their injuries, they cannot sue Employer for damages but must pursue benefits through the workers' compensation system. (DaFonte v. Up–Right, Inc. (1992) 2 Cal.4th 593, 598, 7 Cal.Rptr.2d 238, 828 P.2d 140 (DaFonte ) [“[A]n employer cannot be sued in tort for the work-related injury of an employee. The employer's sole liability is for benefits payable, regardless of fault, under the workers' compensation law.”].) This limitation on Employer's liability does not extend to third parties, however, and the employees may sue Contractor for damages caused by its negligence. (Ibid. [“the employee may sue any other responsible person for ‘all damages proximately resulting’ from the injury”]; see also Lab. Code, § 3852 [“The claim of an employee ... for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer.”].)

If a factfinder found Contractor's negligence was a proximate cause of the employees' injuries—even if Contractor's negligence was one of two or more proximate causes—Contractor would be liable to the employees for 100 percent of their economic damages. (DaFonte, supra, 2 Cal.4th at p. 600, 7 Cal.Rptr.2d 238, 828 P.2d 140 [tort law provides for “the joint liability of all tortfeasors, regardless of their respective shares of fault, with respect to all objectively provable expenses and monetary losses”].) As for noneconomic damages, Contractor is only liable to the employees for its proportionate share. “[Civil Code] section 1431.2^[ [^{5 ]} plainly limits a defendant's share of noneconomic damages to his or her own proportionate share of comparative fault.” (DaFonte, at p. 604, 7 Cal.Rptr.2d 238, 828 P.2d 140.) These tort law principles apply in suits by injured employees against third parties. (Ibid. )

Employer argues that Proposition 51, codifying these joint and several liability principles, does not apply because it derives from equitable principles and this case is governed by the Contract. The argument is unpersuasive. To be sure, Contractor's indemnification claim against Employer is properly based on the Contract, not on principles of equitable indemnity. (Lab. Code, § 3864.) But Proposition 51 is relevant to Contractor's liability to the employees in the Employee Lawsuits and does apply in those actions. (DaFonte, supra, 2 Cal.4th at p. 604, 7 Cal.Rptr.2d 238, 828 P.2d 140 [rejecting argument that Proposition 51 does not apply in cases brought by injured employees against third parties, reasoning “[t]he statute states or implies no exception for third party suits by injured employees” and “[n]o compelling reason appears to infer such an exception in derogation of the measure's literal words”].)

Employer argued below that the availability of an offset for workers' compensation benefits obviates the need for indemnification. We disagree. Contractor, like all third parties so sued, may be entitled to offset part or all of the workers' compensation benefits received by the employees if Employer...