Cecily Zamora
Common law indemnification is a legal concept that allows a party who has been held vicariously liable for the actions of another to shift the entire financial burden back to the actual wrongdoer. In other words, if a party is legally liable only because of the tort of another party, they can seek reimbursement for any damages they have paid to the injured party. This type of indemnification is typically implied by obligation of law in vicarious liability situations, such as employer-employee or principal-agent relationships, where one party's liability is solely based on the conduct of the other party. Common law indemnification is often asserted alongside contribution cross-claims, and it is good practice to include it in the answer.
| Characteristics | Values |
|---|---|
| Definition | Common law indemnification is a legal principle that allows a party who has been compelled to pay for another's wrong to recover damages from the wrongdoer. |
| Basis | Common law indemnification is based on the notion of fairness and equity between the parties. |
| Vicarious Liability | It applies when one party is held vicariously liable without actual fault due to their relationship with the wrongdoer or an obligation imposed by law. |
| Relationship | Specific relationships, such as employer-employee or principal-agent, are often involved in common law indemnification. |
| Negligence | It involves a party that is only "passively" or "secondarily" negligent against one that is "actively" or "primarily" negligent. |
| Reimbursement | The wrongdoer is obligated to provide full, not partial, reimbursement to the non-culpable party for any damages arising from their conduct. |
| Contractual Co-existence | Contractual indemnity and common law indemnity can coexist as long as both claims flow in the same direction. |
| Jurisdictional Variation | The availability of common law indemnification may vary across different jurisdictions, such as New York. |
| Active-Passive Test | The active-passive test determines negligence, but it has proven challenging to apply in practice, leading courts to re-examine equities. |
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What You'll Learn
Common law indemnification and contractual indemnity can coexist
Common-law indemnification, or implied indemnification, exists when "the law imposes liability on a party who has committed no actual wrong but who is held responsible for a loss". For example, an employer may be held vicariously liable for the wrongdoing of an employee, or a principal for the actions of its agent. In such cases, the non-culpable party has the right to seek reimbursement for any damages from the wrongdoer.
To be entitled to common-law indemnification, a party must show that it has been held vicariously liable without proof of any negligence or actual supervision on its part. The proposed indemnitor must be either negligent or have exercised actual supervision or control over the work that caused the injury.
Contractual indemnity, on the other hand, is based on an express contract between the parties. In the case of Lamela v. Verticon, Ltd., a construction contract was entered into between Lamela and Verticon, with a valid and enforceable indemnification provision flowing from Lamela to Verticon. The Court held that there could only be a one-way obligation to indemnify by Lamela and any reciprocal obligation was extinguished.
However, in the case of Hawthorne v. South Bronx Community Corp., the Court of Appeals found that principles of common-law and contractual indemnity could coexist for the contractually-benefitted parties. The insured had paid for coverage of its common-law liability and should not be deprived of that coverage because it also obtained coverage for contractual indemnity.
Therefore, both common-law and contractual indemnity can coexist as long as both claims for indemnity flow in the same way.
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Common law indemnification and active-passive test
Common law indemnification is a legal concept where a party held liable for a tort committed by another party can shift the entire loss back to the party that committed the tort. This is also known as "implied" indemnification, and it exists where "the law imposes liability on a party who has committed no actual wrong but who is held responsible for a loss".
In the context of common law indemnification, the "active-passive" test is used to determine whether a party is entitled to complete indemnification. A party can be completely indemnified if they are found to be only “passively” or “secondarily” negligent against a party that is determined to be “actively” or “primarily” negligent. This test was abandoned in New York with the introduction of the contribution principle in the Dole case (Dole v. Dow Chem. Co., 30 N.Y.2d 143 (1972)), which allows for the apportionment of liability among joint tortfeasors based on their relative responsibility.
The active-passive test has been criticised for being difficult to apply, as it requires courts to consider relative fault without making explicit value judgments about the degrees of culpability among wrongdoers. This test is still used in some states, such as Connecticut, while other states like New York and Illinois require a pre-existing relationship between the parties for indemnity to be implied.
To successfully obtain common law indemnification, the party seeking it must establish that they were not negligent and that the party from whom indemnification is sought was negligent or had the authority to direct, supervise and control the work that gave rise to the injury. This is often applied in cases involving general contractors and subcontractors, where the general contractor's negligence is found to be passive or vicarious, and the subcontractor is found to be actively negligent or solely responsible for the harm caused.
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Common law indemnification and vicarious liability
Common law indemnification is a legal concept that allows a party held liable for a tort (a civil wrong) committed by another party to shift the entire loss back to the actual wrongdoer. This typically arises in situations of vicarious liability, where one party is held responsible for the actions of another due to their relationship (e.g., employer-employee, principal-agent, or owner-driver). In such cases, the party held vicariously liable can seek indemnification from the actual wrongdoer.
Vicarious liability is a principle of tort law that holds one party liable for the actions of another. This often occurs in specific relationships, such as between employers and employees, where the employer may be held responsible for the wrongdoing of their employee. In such cases, the employer, despite not committing any wrong, may be sued for the actions of their employee. Similarly, a principal may be held vicariously liable for the tortious actions of their agent, or an owner for the actions of their driver.
Common law indemnification allows the party held vicariously liable to shift the financial burden back to the actual wrongdoer. This is based on principles of equity, ensuring that the innocent party is not forced to bear the cost of another's wrongdoing. To obtain common law indemnification, the party seeking it must establish that they were not negligent and that the party from whom they are seeking indemnification was negligent or had control over the injury-causing work.
In certain cases, both contractual indemnity and common law indemnity may coexist. This was seen in the case of Hawthorne v. South Bronx Community Corp., where the Court of Appeals found that the principles of indemnity could coexist for the contractually benefited parties. However, as seen in the case of Lamela v. Verticon, Ltd., the court distinguished that the indemnity provision in the contract only flowed from Lamela to Verticon and not the other way around.
The right to common law indemnification may be implied by obligation of law in vicarious liability situations or created by an express contract. In Pope v. Supreme-K.R.W. Construction Corp., KRW and Supreme, the construction manager and general contractor, respectively, sought common law indemnification from Dynamic, their subcontractor, as their only liability was vicarious. The court ruled in their favour, demonstrating the applicability of common law indemnification in such scenarios.
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Common law indemnification and contribution
Common law indemnification permits a party that has been compelled to pay for the wrongdoing of another party to recover from that party the damages it paid to the injured party. This is also known as implied indemnification and exists where "the law imposes liability on a party who has committed no actual wrong but who is held responsible for a loss". For example, an employer may be held vicariously liable for the wrongdoing of an employee, or a principal may be held responsible for the actions of an agent.
In order to be entitled to common law indemnification, a party must show that it has been held vicariously liable without proof of any negligence or actual supervision on its part. The party must not have committed any actual wrongdoing itself. The right to indemnity "springs from a contract, express or implied, and full, not partial, reimbursement is sought".
In some cases, contractual indemnity and common law indemnity can coexist as long as both claims for indemnity flow in the same way. However, in other cases, courts have found that a contractual agreement to indemnify may supersede any common law right to indemnity.
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Common law indemnification and implied obligation
Common law indemnification, also known as implied indemnification, is a legal concept that allows a party who has been compelled to pay for the wrongdoing of another party to recover the damages from the actual wrongdoer. This is typically applicable in situations of vicarious liability, where one party is held responsible solely due to their relationship with the actual wrongdoer, despite not committing any wrongdoing themselves. For example, an employer may be held vicariously liable for the actions of their employee, or a principal for the actions of their agent.
The key principle of common law indemnification is to shift the entire liability to the party that is actively or primarily negligent. This is in contrast to contribution, where the liability is apportioned based on relative fault among joint tortfeasors. In the case of common law indemnification, the party seeking indemnification must demonstrate that they were held vicariously liable without any negligence or actual supervision on their part. Additionally, they must show that the proposed indemnitor was either negligent or had control over the injury-causing work.
The right to common law indemnification can arise from an express contract or be implied by the law. In certain cases, contractual indemnity and common law indemnity can coexist, as seen in the Hawthorne v. South Bronx Community Corp. case. However, it is important to note that the mere presence of the term "indemnify" in a contract does not guarantee a viable claim for contractual indemnification, as illustrated in the Greyhound case.
Common law indemnification is not available to a party that is alleged to be the actual wrongdoer. This was demonstrated in the case of GACE, where the court dismissed the common-law indemnification claim because the direct claims asserted that GACE was the actual wrongdoer. Therefore, it is essential to establish that the party seeking indemnification was non-culpable and held vicariously liable due to their relationship with the tortfeasor.
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Frequently asked questions
Common law indemnification is a legal concept that allows a party who has been compelled to pay for the wrongdoings of another party to recover the damages paid to the injured party from the wrongdoer.
To be entitled to common law indemnification, a party must show that they have been held vicariously liable without proof of any negligence or actual supervision on their part. Additionally, the proposed indemnitor must be either negligent or have exercised actual supervision or control over the injury-producing work.
Yes, contractual indemnity and common law indemnity can coexist as long as both claims for indemnity flow in the same direction. In the case of Lamela v. Verticon, Ltd., the court held that there could only be a one-way obligation to indemnify by Lamela, and any reciprocal obligation was extinguished.
