A Capehart Scatchard Blog

Based Upon Indemnification Agreement Between Defendant Contractor and Employer, Jury Should Have Been Allowed to Allocate Negligence Against Employer

By on November 13, 2015 in Blog with 0 Comments

The exclusive remedy provision of the Workers Compensation Act, N.J.S.A. 34:15-8, bars the employee from suing his or her employee for a workplace bodily injury based upon negligence. However, this provision does not preclude an employer from agreeing to contractually indemnify a third party for its negligence. Under those circumstances, an employer could be liable in a negligence action filed by the employee. In the recent decision of Estate of D’Avila v. Hugo Neu Schnitzer East, 442 N.J. Super. 80  (App. Div. 2015), an issue arose because the employer had a contractual indemnification with a contractor who was sued by the employee’s estate due to a workplace accident, yet the trial court refused to permit the jury to consider allocating any percentage of fault to the employer on the verdict form.

In D’Avila, the decedent, a subcontractor’s employee, was struck on the head by an unsecured metal ladder and became paralyzed. Following the injury, the employee received negligent medical treatment, was deprived of sufficient oxygen causing brain damage, and died 3 years later.

The employee’s estate sued the job site’s owner (Hugo Neu) that served as the general contractor, several of the employee’s medical providers, and various other parties. The owner filed claims for contractual indemnification against both the decedent’s employer (S&B) and against an installation subcontractor (Femco), alleging that each of them was responsible for the danger of the unsecured ladder.

The trial court did permit the employer to participate in the trial and arguments at the jury trial. However, the trial court refused to allow the jury to consider allocating any percentage of fault to the employer on the verdict sheet, despite the requests of several parties, including the employer. The jury returned a multi-million dollar verdict. The jury found that both Hugo Neu and Femco were liable for causing the accident and allocated negligence 75% against Femco and 25% against Hugo Neu. The jury found some of the medical defendants liable and the verdict was molded accordingly. The total award entered was about $8.5 million.

The Appellate Division found that the trial court erred in allowing the employer to participate in the trial but disallowing the jury from determining the employer’s percentage of fault, if any, on the verdict sheet. Thus, the total amount of the verdict was not to be disturbed but the case was remanded back for further proceedings relating to such potential allocation of fault to the decedent’s employer.

The Appellate Division recognized the thorny issue of determining an employer’s liability in situations in which an employer has agreed to indemnify a third party sued by one of its employees for a workplace accident.  While an employee cannot sue the employer directly, the third party can seek indemnification from the employer, based upon contract, for the employee’s damages. While the employee cannot sue the employer directly, nothing in the Workers Compensation Act precludes an employer from assuming a contractual duty to indemnify a third party by agreement.

Thus, in this case, it is permissible for Hugo Neu to seek indemnification from the employer S&B for any of plaintiff’s damages caused by S&B or Hugo Neu. The only legal bar to such a claim would be if the third party (Hugo Neu) were found to be 100% liable. The Legislature has disallowed indemnification provisions in construction agreements that seek to impose liability where damages were caused by the indemnitee’s sole negligence.

Thus, the appeals court held that the negligence and contractual issues should be tried together before the same jury who will determine both the negligence and contractual indemnification issues simultaneously. The verdict form must be carefully crafted to address the employer’s potential fault only when it is absolutely necessary to do so.

Hence, the jury must first be instructed to only consider the employer’s negligence if they first determine that the conduct of the defendant seeking indemnity is not the sole cause of the accident. The jury must not be given an “ultimate outcome” instruction divulging that the plaintiff cannot recover any damages from the employer. Further, the trial court must mold the verdict so that the plaintiff’s damages are not reduced by the employer’s percentage of fault, if any. Instead, the non-employer defendants must fully bear any liability owed to the plaintiff. Thus, if the jury finds any negligence of the employer, it would be divided up proportionately among the other defendants.

At that point, the indemnification owed between the employer and the third party can be resolved, if either the employer or the third party is found to be negligent.

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About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020 and 2021, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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