From the desk of Smith Freed Eberhard: Although comparative fault and common-law indemnity have coexisted in Oregon since 1971, the Supreme Court has stated that common-law indemnity is not compatible with comparative negligence when both are plead simultaneously. In many instances, negligence claims trigger the pleading of third party claims that include both statutory contribution and common-law indemnity. If common-law indemnity is abolished for these types of actions, it will certainly simplify some aspects of third-party practice.
Claims Pointer: The Oregon Supreme Court held in this case that one defendant cannot recover from another for common-law indemnity when a jury had allocated fault such that the defendant seeking indemnity is not liable to the plaintiff in the first place. The most interesting part of this case is that the opinion states without reservation that common-law indemnity in negligence actions has been superseded by Oregon’s comparative fault system. This was not a conclusion that the court needed to make to resolve the issues in this case. Whether lower courts rely on this case as precedent remains to be seen. We anticipate that this case will generate increased motion practice where indemnity is involved. We will keep you updated on future cases and suggest that you use it to your advantage when possible.
Eclectic Investment, LLC v. Patterson, 357 Or 25 (2015).
Eclectic Investment, LLC hired a general contractor to expand its parking lot. In order to enlarge the parking lot, the contractor needed to remove dirt from the adjacent hillside. Neither the contractor nor Eclectic applied for necessary excavation permits before beginning work. The contractor later applied for a permit, which Jackson County (the County) denied. The contractor reapplied and the County granted a provisional permit pending final approval. After a site visit, county inspectors were concerned that the planned retaining wall would not adequately hold back the slope, as planned. The county nonetheless gave final approval. A year later, a rainstorm caused soil to spill over the retaining wall and parking lot and into a building, causing damage to Eclectic’s property.
Among others, Eclectic sued the contractor and the County, alleging that the contractor negligently constructed the slope and that the County was negligent in failing to require the contractor to address the problems identified in the inspection. Both the contractor and the County denied negligence. The County asked for Eclectic’s damages to be allocated according to ORS 31.610, which allows for the apportionment of fault based on the parties’ comparative fault. The County also cross-claimed against the contractor for common-law indemnity, arguing that the county’s negligence was “passive” while the contractor’s negligence was “active.” The parties agreed to address the indemnity claim separately from the negligence action.
At trial, the county requested an instruction under ORS 31.610. The jury found Eclectic more than 50 percent at fault, the County 7 percent at fault, and the contractor 4 percent at fault. Because Eclectic was more than 50 percent at fault, it was not entitled to any recovery and the trial court entered a judgment for the defense. The County and contractor then arbitrated the remaining indemnity claim. Even though the County did not owe damages to Eclectic, it sought recovery of its attorney’s fees and costs for defending the claim. The arbitrator found for the contractor; the County appealed to the trial court. The trial court ruled against the County. The Court of Appeals upheld the trial court ruling, and the County petitioned for Oregon Supreme Court review.
The Supreme Court held that because the jury allocated fault such that the County was not liable to Eclectic under ORS 31.610, there could be no common-law indemnity claim. The County had no liability to pass along to the contractor. The court spent little time discussing the factual issues. Instead, the Court focused on whether ORS 31.610 and the statutory comparative fault system can coexist with common-law indemnity when joint tortfeasors are involved.
The court examined the history of common-law indemnity in Oregon. Indemnity was created to relieve parties from the traditionally harsh common-law rule that “joint wrongdoers standing in pari delicto cannot compel contribution.” In other words, a tortfeasor could not seek recovery from another tortfeasor. Under that scheme, any person at fault would be responsible for the entire amount of damages regardless of the person’s degree of fault.
Common-law indemnity was developed to allow a tortfeasor to claim restitution from another tortfeasor who could also have been liable to the plaintiff. This was further developed in 1913 when the court in Astoria & Columbia River R. Co , introduced the principle of “active” and “passive” negligence.
The court pointed out that “common-law indemnity was developed before comparative responsibility and is inconsistent with its framework.” The court supported its conclusion by examining cases from other jurisdictions that have adopted comparative fault systems, further demonstrating that common law indemnity was inconsistent with the principle of comparative negligence.
Be aware that because the Supreme Court did not need to address the issue of whether indemnity fits into the comparative fault system and because neither party briefed the issue, the court’s statements may only be dicta, or an indication of how the court will rule in the future. That said, the court stated that while neither party recognized the inconsistency, “we cannot avoid the issue that that system now presents.”
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.