McCrary Construction Company v. Metal Deck Specialists, Inc., California Court of Appeal, First Appellate District, November 14, 2004

By Robert T. Sturgeon

In McCrary, a general contractor sought indemnity from two of its subcontractors for damages arising from the death of a construction worker who fell through a hole in the metal roof of the project. One subcontractor, Metal Deck Specialists, Inc., was responsible for installing the metal deck system on the roof, and had cut the hole in the roof and left it uncovered. The other subcontractor, Horizon Sheet Metal Co., covered the hole with plywood at the request of the general contractor, but failed to secure the plywood to the metal decking. The accident occurred when the worker lifted the plywood up, and not realizing there was hole beneath it, stepped into the hole and fell to his death.

The subcontracts between the general contractor and the two subcontractors each contained an indemnity provision which required the subcontractors to indemnify the general contractor for any damages arising from “claims, suits, or liability on account of, or related to, any act or omission, or alleged act or omission of the Subcontractor, or any of its officers, agents, employees or servants.” The indemnity provisions did not address the subcontractors’ obligation to indemnify the general contractor in the event of the general contractor’s own negligence.

The Court of Appeal found that the general contractor was not entitled to indemnity from either subcontractor. The court ruled that the indemnity clause should be classified as a “general indemnity clause,” which is a clause that does not address whether the indemnitor is required to indemnify the indemnitee for the latter’s own negligence. The court relied in part on MacDonald & Kruse v. San Jose Steel Co., 29 Cal. App. 3d 413 (1972), which had set forth a three-part system for classifying indemnity agreements into type I, type II and type III agreements, and which held that under a type III agreement of the sort at issue in McCrary, the indemnitee may not recover if it was either actively or passively negligent. The court also relied on Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Cal. 3d 622 (1975), for the proposition that under a general indemnity clause, the indemnitee is not entitled to be indemnified when it is actively negligent. The McCrary court concluded that the general contractor had been actively negligent because it had voluntarily assumed the duty to ensure that the holes in the roof were properly covered, but failed to do so. The court therefore held that the general contractor’s claim for indemnity was barred by its active negligence.

In Rossmoor Sanitation, the California Supreme Court had discussed the distinction between active and passive negligence in the indemnity context, and held that the “active-passive dichotomy” should not be not “wholly dispositive” when deciding indemnification issues. The Rossmoor court held that each case should be decided on a case-by-case basis based on an examination of the circumstances and the parties’ intent as to the scope of the indemnity agreement. The Rossmoor court stated:

    “[W]hile adhering to the underlying distinction between action and passive negligence which has long been accepted by the bench, the bar, and the insurance industry, . . . we hold that . . . the question whether an indemnity agreement covers a given case turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control. When the parties knowingly bargain for the protection at issue, the protection should be afforded. This requires an inquiry into the circumstances of the damage or injury and the language of the contract; of necessity, each case will turn on its own facts.”

Rossmoor, 13 Cal. 3d at 633.

Some cases subsequent to Rossmoor had held that the active-passive negligence distinction and the MacDonald & Kruse system of classifying indemnification agreements by type was “no longer tenable in light of Rossmoor.” See, e.g., Rodriguez v. McDonnell Douglas Corp., 87 Cal. App. 3d 626, 674 (1978) (holding that the MacDonald & Kruse classification system was no longer tenable). Following Rossmoor, these cases placed more emphasis on the circumstances of the injury and an analysis of the parties’ intent as to the scope of indemnification, rather than a more mechanical analysis based on whether the clause was a “general” clause or a type I, type II, or type III provision. For example, in Morton Thiokol, Inc. v. Metal Building Alteration Co., 193 Cal. App. 3d 1025 (1987), a construction project owner and the general contractor entered into a contract containing an indemnification provision that did not address the contractor’s obligation to indemnify the owner for the owner’s own active or passive negligence, which under McCrary would be a general indemnity clause. At trial, the jury found that the owner was actively negligent and the trial court denied the owner’s claim for indemnity on that basis. The Court of Appeal reversed, and found that despite its active negligence, the owner was still entitled to indemnity, based on the court’s finding that under the circumstances, the parties had intended that that the contractor would indemnify the owner for damages of the type that were at issue.

McCrary is notable in that it might be seen as somewhat of a return to courts interpreting indemnity agreements by classifying them by type rather than analyzing each on a case-by-case basis according to the circumstances of the injury and the parties’ intent. Whether other courts will follow the McCrary court’s lead remains to be seen, but it is an issue of which parties in the construction industry should be aware.

For more information please contact Robert Sturgeon. Robert Sturgeon is a senior attorney in the Construction, Environmental, Real Estate and Land Use Litigation practice group in the firm’s Los Angeles office.