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Common Law Indemnification Is Not For Everyone (PA)

August 25, 2023

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In <em><a href="">Roamingwood Sewer And Water Association v. National Diversified Sales Inc.</a>,</em> the Third-Party Defendant O’Hara” filed a motion to dismiss the second amended joinder complaint filed by the Third-Party Plaintiff National Diversified Sales, Inc.  <em>See</em> No. 1:20-CV-00640, 2023 WL 5017973, at *1 (M.D. Pa. Aug. 7, 2023).

The underlying action was filed by plaintiff to recover for defective valves. National was the manufacturer of the valves, and O’Harra had been hired to install the vales in a sewer renovation in a residential community in the Poconos. After plaintiff had filed suit, National joined O’Harra as a Third-Party defendant. <em>Id</em>. Thereafter, National and O’Harra agreed to a stipulation for National to file a second amended complaint as a Third-Party plaintiff.

National’s second amended complaint “acknowledges Roamingwood’s allegations” that National’s valves failed when they were installed. Id. Further National alleged that O’Harra was responsible for “hydrostatically testing the sewer system in which” Nationals valves were used but failed to do so. <em>Id</em>. National therefore alleged that O’Harra was jointly and severally liable for any damages that National would have been found to be liable to Roamingwood. <em>Id</em>.

The court granted partial motions of Roamingwood and National for summary judgment. <em>Id</em>. at *2. Specifically, Roamingwood was granted judgment on claims against National for strict liability and breach of implied warranty of merchantability. <em>Id</em>. National was granted summary judgment on the issue of Roamingwood’s claim under the consumer protection statute of Pennsylvania. <em>Id</em>. O’Harra however, had filed a motion to dismiss the second amended complaint of National. <em>Id</em>.

The basis of O’Hara’s  motion to dismiss, or alternatively summary judgment, was that indemnification was unavailable to National, because “under Pennsylvania law, common law indemnification is ‘only available to a party that is without fault.’” Id. As the court stated, “[i]t is an ‘equitable remedy that shifts the entire responsibility for damages from a party who, without any fault, has been required to pay because of a legal relationship to the party at fault.’” <em>Id</em>. (quoting <em>EQT Prod. Co. v. Terra Servs.</em>, 179 F. Supp. 3d 486, 493 (W.D. Pa. 2016)). In other words, indemnification applies when “a person who, without active fault on his own part, has been compelled, by reason of some legal obligation, to pay damages occasioned by the initial negligence of another, and for which he himself is only secondarily liable.” <em>Id</em>. Further, the court emphasized the words of the Pennsylvania Supreme Court that “secondary, as opposed to primary liability, ‘rests upon a fault that is imputed or constructive only.’”

O’Hara  argued that for National to succeed in its claim for indemnification, National would need to show that O’Harra was at fault and that National was without fault. National, however, asserted that the court had only recognized that National “was liable because the valves malfunctioned and did not pass the consumer expectation test.”

Ultimately, the court decided that National’s claims in its second amended complaint were “insufficient to state a claim for common law indemnification.”

The court based its decision by reasoning that National had alleged no facts from which the court could reasonably infer that National was without fault. “For example, the second amended third-party complaint provides no factual allegations from which the court could reasonably infer that anything other than [National’s] own conduct caused the failure of its valves.” <em>Id</em>. The court also made its decision in favor of O’Harra because National’s second amended third-party complaint did not provide any allegations in support of the argument that National’s only source of liability was from “some legal obligation to pay damages occasioned by the initial negligence of another, and for which [National] is only secondarily liable.” <em>Id</em>. (internal quotation marks omitted). The court noted that “[a]t best, [National’s] allegations are that O’Harra was negligent by failing to hydrostatically test [National’s] valves.” <em>Id</em>. Thus, because National was not without fault, it was denied common law indemnification from O’Harra.

Defendants/third party plaintiffs seeking to impose common law indemnification on a third-party defendant, must not only show that the third-party defendant was liable, but must also show that the defendant/third-party plaintiff was not primarily liable; in other words, any liability on their part must only be based on the legal relationship between the defendant/third-party plaintiff and the third-party defendant.

Thanks to Ryan Hunsicker for his assistance with this post. Should you have any questions, please contact <a href="">Tom Bracken</a>.

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