Duty to defend under indemnification contract depends on factual allegations of underlying complaint.

 State v. Prison Health Services, Inc. 2013 VT 119  (20-Dec-2013)

SKOGLUND, J. The State appeals a declaratory judgment ruling that Prison Health Services, Inc. (PHS) is not contractually obligated to defend the State against certain claims brought by the estate of decedent, who died while in the custody of the Department of Corrections. The trial court granted PHS judgment on the pleadings sua sponte, finding that "[t]here are no allegations of wrongdoing by PHS personnel that form the basis for a claim, and thus the duty to defend is not triggered." We reverse, and conclude that PHS has a duty to defend.

In contractual duty-to-defend cases, an indemnitor's obligation to defend should be determined at the beginning of the case based on the pleadings. Insurance law principles, which would resolve all contractual ambiguities in favor of the insured, do not completely apply in cases involving a noninsurance contractual indemnity relationship. Rather, we interpret the indemnification provision of the contract to give effect to the intent of the parties as it is expressed in their writing.

The contract’s indemnification provision stated that PHS would “indemnify, defend and hold harmless the State and its officers and employees from liability and any claims, suits, judgments, and damages which arise as a result of [PHS]’s acts and/or omissions in the performance of services under this contract.” The critical question is whether the estate’s allegations against the State arise from PHS’s performance of the contract.

For a judgment on the pleadings, we assume all factual allegations in the nonmoving party's pleadings are true.  Goodby v. Vetpharm, Inc., 2009 VT 52, ¶ 3, 186 Vt. 63, 974 A.2d 1269.  In deciding whether the estate’s allegations against the State arise from PHS’s performance of the contract we focus on the “factual allegations in [the complaint] and not on the legal theories asserted.” TBH v. Meyer, 168 Vt. 149, 153, 716 A.2d 31, 35 (1998). Taking these factual allegations as true,  we conclude that the estate’s grievances arise from negligent conduct by both the State and PHS in its performance of contracted services. The estate’s claims contain allegations that arise as a result of PHS’s provision of medical services to inmates, and it must therefore defend the State against these claims.