Menu Close

Aluma Systems Concrete Construction of California entered into an agreement with Nibbi Bros. Inc. to design and supply the materials for wall formwork and deck shoring at Nibbi Bros. Inc. construction project.

The terms of the Contract included an indemnification provision that required Nibbi to defend, indemnify and hold harmless Aluma against any and all claims, actions, expenses, damages, losses and liabilities, including attorneys fees and expenses, for personal injuries rising from or in connection with this contract “except to the extent such claims, actions, expenses, damages, losses and liabilities are caused by the acts or omissions of [Contractor]…”

Subsequently, two lawsuits were filed by Nibbi employees against Aluma alleging that in August 2011, the employees were injured after a shoring system designed by Aluma collapsed. The Employee Lawsuits alleged the collapse was due to Aluma’s negligence. Aluma tendered the Employee Lawsuits to Nibbi for defense and indemnification, but received no response.

Subsequently, Aluma sued Nibbi for indemnification based on a specific provision in the parties’ contract. The trial court sustained Nibbi’s demurrer to Contractor’s complaint without leave to amend, relying on the allegations in the underlying lawsuit that set forth claims only against Aluma and not against Nibbi the employer. Thus they argued that the exception applied since the allegations claim only “acts or omissions” of Aluma.

The Court of Appeal reversed and remanded in the published case of Aluma Systems Concrete Construction v Nibbi Bros. Inc.

The parties agreed that pursuant to Labor Code section 3864, an employer is only liable to indemnify a contractor pursuant to the terms of the contract. 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 Aluma – applies to the Employee Lawsuits.

Nibbi argues the Employee Lawsuits allege solely Aluma’s negligence and the indemnification provision therefore does not apply. Aluma argues that the provision may apply because Aluma is jointly and severally liable for all economic damages in the Employee Lawsuits, including any attributable to the negligence of Nibbi or others, as long as Aluma’s negligence is partially responsible.

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. 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.

Here the indemnification provision applies to “claims: and the Employer argues this indicates the allegations of the Employee Lawsuits control the provision’s application. But the provision also requires indemnification for Contractor’s “damages” and “losses.”

The court of appeal concluded that there is “no basis to restrict the damages and losses so indemnified to the allegations of the Employee Lawsuits, rather than to the damages Contractor is ultimately found liable for.”