Plaintiffs, contractor and insurer, appealed from a judgment entered by the Superior Court of Orange County (California), which dismissed plaintiffs’ complaint alleging that they were entitled to indemnity from defendant city for sums paid in satisfaction of judgments obtained by two individuals in separate tort actions.

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Overview

Plaintiff contractor entered into a contract with defendant city to build certain public improvements. The contract required plaintiff contractor to indemnify defendant against any claims arising out of the performance of the work. A trench that was dug to reach a sewer line collapsed on two workers. One was injured and one was killed. The injured worker and the deceased’s estate filed suit and obtained a judgment against plaintiff contractor and defendant. Defendant filed suit against plaintiffs, contractor and insurer, for indemnity. Plaintiffs prevailed in the action and then filed suit against defendant for indemnity. The trial court dismissed plaintiffs’ complaint. The court reversed, finding that plaintiffs’ claim was not a compulsory counterclaim in defendants’ action because plaintiffs’ claim did not accrue until they paid the judgments, which was after defendant brought its action. The court also held that plaintiffs stated a claim for equitable indemnity because the contractual indemnity provision did not apply to claims arising from defendant’s active negligence and it was previously determined that the accident was caused by defendant’s active negligence.

Outcome

The court reversed the judgment dismissing the complaint by plaintiffs, contractor and insurer, for indemnification because the claim was not a compulsory counterclaim in defendant city’s previous action for indemnity and plaintiffs stated a claim for equitable indemnity.