SCOVT applies economic loss rule to bar product liability claims, holding no "special relationship" existed between user and supplier and that alleged misrepresentations by supplier did not justify exception to the rule.

PeakCM, LLC v. Mountainview Metal Systems, LLC , 2025 VT 50 [8/22/2025] (part two of two)

EATON, J.  In 2019, multiple siding panels fell off a newly constructed hotel in St. Albans, Vermont.  Plaintiff, PeakCM, LLC, the general contractor responsible for the hotel’s construction, sued the siding-panel installer, Mountainview Metal Systems, LLC.  Plaintiff amended its complaint to add a product-liability claim against the siding-panel manufacturer, ATAS International, Inc.  Plaintiff appeals from the trial court’s decision to grant ATAS summary judgment.   Plaintiff argues that the trial court erred in granting summary judgment to ATAS on plaintiff’s product-liability claim because both the “other-property” and “special-relationship” exceptions to the economic-loss rule apply.  Plaintiff also argues that the court improperly granted summary judgment to ATAS on Mountainview’s implied-indemnity claim.   We affirm

Product-Liability Claim and the Economic-Loss Rule..

 

The trial court granted ATAS’s motion for summary judgment on plaintiff’s product-liability claim because it concluded that the economic-loss rule barred the  claim.  Plaintiff argues that the trial court erred in granting summary judgment to ATAS because both the “other-property” and “special-relationship” exceptions to the economic-loss rule apply. 

 

Plaintiff does not contest that the economic-loss rule applies generally.  The economic-loss rule generally “prohibits recovery in tort for purely economic losses.”  Veljovic v. TD Bank, N.A., 2025 VT 38, ¶ 11 The economic-loss rule functions to separate claims that should be brought under contract law from those that should be brought under tort law. “Economic loss is defined as ‘damages other than physical harm to persons or property.’ ”  Id. ¶ 10   In the construction context, “the remedy for purely economic losses resulting from the reduced value or costs of repairs of . . . construction defects  sound [s] in contract rather than tort” law.  LongTrail House Condo. Ass’n, 2012 VT 80, ¶ 11  

 

This Court recognizes two exceptions to the economic-loss rule: the “other property” exception and the “special-relationship” exception.  See Walsh v. Cluba, 2015 VT 2, ¶ 28, 198 Vt. 453, 117 A.3d 789 (recognizing other-property exception); Veljovic, 2025 VT 38, ¶ 12 (describing special-relationship exception) Plaintiff argues that one or both of the exceptions to the rule allow plaintiff to bring its product-liability claim against ATAS.  We disagree. Plaintiff failed to demonstrate that either exception to the economic-loss rule applies here; accordingly, the economic-loss rule bars plaintiff’s product liability claim.  Thus, the trial court appropriately granted ATAS’s motion for summary judgment. 

 

 

 Under the other-property exception, the economic-loss rule does not apply if there has been some “accompanying physical harm” beyond purely economic loss.  Walsh , 2015 VT 2, ¶ 28 “The physical harm may be to property rather than persons, but injury to the product or property that is the subject of a contract is generally considered a disappointed economic expectation for which relief lies in contract rather than tort law.”  Id.  In the trial court, plaintiff argued that the other-property exception to the economic loss rule applied because the hotel was damaged in addition to the splice plates, and plaintiff was required to pay for the damage.  On appeal, rather than relying on damage to the hotel as it did in the trial court, plaintiff now argues for the first time that the other-property exception applies because there was minimal damage to “abutting properties”— namely, the neighboring building’s roof. This argument was not preserved, and we decline to consider it. 

 

 Under the special-relationship exception to the economic-loss rule a plaintiff asserting a negligence claim may be able to recover for purely economic losses where there is a special relationship between the plaintiff and the defendant.  The exception  typically involves  the defendant has assumed the responsibility not to violate a professional duty owed to the plaintiff.”  Facts other than a professional relationship  may support the establishment of a special relationship  Veljovic, 2025 VT 38, ¶ 14; Sutton v. Vt. Reg’l Ctr., 2019 VT 71A, ¶ 33, 212 Vt. 612, 238 A.3d 608).   Sutton is the sole case where this Court has held that a special relationship existed sufficient for the exception to apply.  In this case, unlike in Sutton, there is no evidence that plaintiff and ATAS had a “close relationship” where “exceptional oversight and management” was promised or performed.  Id. ¶ 33.  ATAS neither “personally solicited” the work, nor did it enter into an ongoing “individualized relationship[]” with plaintiff See  EBWS,LLC v. Britly Corp, 2007 VT 37, ¶ 32 (holding no special relationship existed even when defendant designed and built creamery for plaintiff because plaintiff “did not rely on the defendant to provide it with a professional service, and, consequently paid for the services of a contractor not a professional architect”); see also Restatement (Third) of Torts: Liab. for Econ. Harm § 4 (2020) (describing special-relationship exception justified by heightened standard of care and describing construction contractors and tradesmen as nonprofessionals).   

 

We are unpersuaded by plaintiff’s argument that the relationship between itself and ATAS rose to the level of a special relationship for the purpose of this exception The purchase of the panels by plaintiff’s subcontractor, plaintiff’s brief in-person encounter and emails with ATAS representatives, and plaintiff’s reliance on web-based information produced by ATAS, did not create a special relationship between plaintiff and ATAS sufficient for the purpose of this exception to the economic-loss rule. 

 

 Plaintiff finally argues that ATAS owed plaintiff a duty to provide accurate information that plaintiff was intended to rely on, and that this intended reliance is sufficient to support the existence of a special relationship.  See Limoge v.People’s Tr. Co., 168 Vt. 265, 268-69, 719 A.2d 888, 890 (1998) (outlining requirements for negligent-misrepresentation[1]claim). 

Essentially, plaintiff attempts to use the duty outlined in negligent-misrepresentation claims to establish a special relationship between ATAS and plaintiff.  This interpretation would drastically expand the special-relationship exception to the point of swallowing the economic-loss rule.  It ignores the typical determining factor that there be a professional service provided in the relevant interaction between the parties—with a corresponding heightened standard of care

 

Implied Indemnity Claim

Finally, plaintiff argues that the trial court erred when it granted summary judgment to ATAS on Mountainview’s implied indemnity claim because equity requires implied indemnity in this case.  ATAS argues that plaintiff lacks standing to bring this claim on appeal.  We agree. “The plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties. Plaintiff does not explain how plaintiff—not Mountainview—has the right to appeal the trial court’s summary-judgment decision on Mountainview’s implied-indemnity claim.  On appeal, plaintiff does not contest the court’s ruling that nothing in the contract allows plaintiff to assume Mountainview’s claims, and plaintiff does not identify any other legal basis for it to do so.  Because plaintiff has not shown that it has the right to assert this argument on behalf of Mountainview, we decline to consider whether the trial court appropriately granted summary judgment on Mountainview’s implied-indemnity claim.  Ladd v. Valerio, 2005 VT 81, ¶ 3 (mem.) (holding “courts have no jurisdiction to grant the relief sought” when “the plaintiff lacks standing”). 

Affirmed.

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[1] SCOVT NOTE: Limoge  adopts Section 552(1) of the Restatement (Second) of Torts (1977), which provides:

• One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Section 5 of the Restatement (Third) of Torts: Liability for Economic Harm is "largely identical" to Restatement Second Torts § 552; but there are three substantive changes. First, the requirement that the defendant's advice concern a “business transaction” has been eliminated. . Second, the requirement that the plaintiff's reliance be “justifiable” has been replaced with a statement that conventional rules of comparative responsibility are applicable. Third, liability under this Section has been eliminated when the plaintiff's representation comes in the performance or negotiation of a contract with the defendant. See Reporter's Notes, Restatement (Third) of Torts: Liability for Economic Harm  § 5 (2020).    Section 5, like Like § 552 (1), specifically refers to "pecuniary loss" :

• Restatement (Third) of Torts: Liability for Economic Harm  § 5:
• 
  
• (1) An actor who, in the course of his or her business, profession, or employment, or in any transaction in which the actor has a pecuniary interest, supplies false information for the guidance of others is subject to liability for pecuniary loss caused to them by their reliance upon the information, if the actor fails to use reasonable care in obtaining or communicating it.
• (2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered:
  • (a) by the person or one of a limited group of persons for whose guidance the actor intends to supply the information, or for whose guidance the actor knows the recipient intends to supply it; and
  • (b) through reliance upon the information in a transaction that the actor intends to influence, or that the actor knows the recipient intends to influence, or in a substantially similar transaction.
• (3) The liability of one who is under a public duty to supply the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.
• (4) A plaintiff's recovery under this Section is subject to the same principles of comparative responsibility that apply to other claims of negligence.
• (5) This Section does not recognize liability for negligent misrepresentations made in the course of negotiating or performing a contract between the parties.

On their face, both Restatements allow recovery against professionals and non-professionals for economic loss due to negligent misrepresentation. Thus in Glassford v. Dufresne & Assocs. P.C., 2015 VT 77 the Court found it sufficient to analyze an economic loss claim under section 552, which is a self-contained rule.  The  Court has further  explained that the drafters of the current Restatement reject  "a broad rule precluding recovery for economic loss."   Sutton v. Vermont Regional Center, 2019 VT 71A ¶ 31 n. 7 (noting the "plethora of exceptions to the broad formulation of the economic-loss rule," has induced the drafters of the current restatement to articulate "'a more limited principle: not that liability for economic loss is generally precluded, but that duties of care with respect to economic loss . . .are recognized in specific circumstances'") (citing Restatement (Third) of Torts: Liability for Economic Harm  § 1 cut. b (2020)  In other words, recovery in tort for economic loss is not exceptional; there is no geneeral rule against it, 

Given the third Restatement's approch, the text of  section 552 and the specificerecognition in I that  Section 552  is among the" host of exceptions" to the tradiional  ecoonomic loss rule, Sutton, 2019 VT 71A ¶ 31(citing  Limoge),   it is difficult to understand the PeakCM, Court’s concern that section 552 might “swallow” the economic loss rule.  

The simple truth is that section 552 states a black-letter rule imposing liability for economic loss due to  negligent misrepresentation. As stated in Sutton, 2019 VT 7 ¶ 36,(amended and superceded by 2019 VT 71A)  "The economic-loss rule is not an impediment to this claim."

Legal malpractice. Successor attorney who committed alleged errors in resolving case not liable to predecessor attorney for indemnity or contribution

 

Haupt v. Triggs , 2022 VT 61 [filed December 16, 2022]

REIBER, C.J. This appeal stems from third-party claims in a legal-malpractice action. Plaintiffs filed suit against defendant, attorney Daniel S. Triggs, who represented plaintiffs in a property dispute for allowing 12 V.S.A. § 501’s statute of limitations for recovery of lands to run without filing an ejectment suit against neighbors. Triggs filed a third-party complaint for contribution and indemnification against the attorneys who succeeded Triggs as counsel to plaintiffs in the matter. The third-party complaint for indemnity and contribution, alleges that the underlying adverse-possession suit against plaintiffs was meritless and that third-party defendants should have obtained a merits judgment instead of settling the dispute. Third-party defendants filed a motion to dismiss Triggs’s complaint, and the civil division granted their motion. Triggs appeals this dismissal and urges this Court to overturn its longstanding precedent regarding contribution and indemnity. We decline to do so and affirm the civil division’s dismissal

In granting Third-party defendants filed a Vermont Rule of Civil Procedure (12)(b)(6) motion to dismiss the civil division concluded that Triggs had failed to allege any relationship between himself and third-party defendants that might give rise to an implied right of indemnity, and that his claim “is at best a claim for contribution among joint tortfeasors, which Vermont law does not recognize.”

“[A]lthough we are not ‘slavish adherents’ to [the doctrine of stare decisis], neither do we lightly overturn recent precedent, especially where the precedent could be changed easily by legislation at any time.” O’Connor v. City of Rutland, 172 Vt. 570, 570, 772 A.2d 551, 552 (2001) (mem.). To overturn precedent, “we generally require more than mere disagreement.” State v. Berini, 167 Vt. 565, 566, 701 A.2d 1055, 1056 (1997) (mem.

Triggs argues that Vermont’s no-contribution rule should not apply to claims brought by prior counsel against successor counsel in legal-malpractice suits. He cites cases from California, Illinois, Maine, Massachusetts, Maryland, Washington, and Wisconsin, where courts allowed contribution claims under similar circumstances, and he discusses the public-policy concerns underlying these cases. Unlike Vermont, however, those jurisdictions recognized contribution, either by statute or at common law, at the time these cases arose.

We have for decades declined to revisit our no-contribution rule, preferring not to substitute judicial fiat for legislative action. Triggs cites no Vermont authority supporting his argument that this Court should overturn its well-settled precedent regarding contribution, and, even if he did so, we are not inclined to weigh the comparative merits of competing public-policy arguments, which is a matter best left to the Legislature.

Because Triggs does not allege that third-party defendants expressly agreed to indemnify him, his indemnity claim will survive only if implied by a legally cognizable relationship. It is axiomatic that a party seeking implied equitable indemnity may recover only where its potential liability is vicariously derivative of the acts of the indemnitor and it is not independently culpable. Heco v. Foster Motors, 2015 VT 3, ¶ 10, 198 Vt. 377, 114 A.3d 902. Triggs does not allege that any legal relationship—contractual or otherwise— existed between him and third-party defendants. Instead, Triggs alleges that third-party defendants’ independent actions caused plaintiffs’ injury. This is not a basis for implied indemnity. Triggs has alleged no legally cognizable relationship linking him to third-party defendants and, therefore, his indemnification claim must fail as a matter of law.

Affirmed

How cited

SCOVT note: 

Stare decisis. Compare Whippie v. O'Connor, 2011 VT 97 (mem.)(cotenant who excludes his cotenants from possession and enjoyment of the jointly owned property is entitled to contribution for necessary maintenance costs such as mortgage, taxes and insurance during the period of ouster, overruling Massey v. Hrostek, 2009 VT 70, as based on an incorrect statement of prior law).

Indemntiy: The opinion contains a restatement of Vermont law of implied indemnity, which it characterizes as requiring "a legally cognizable relationship" linking indemnitee and indemnitor:

According to our precedents, “indemnity is a right accruing to a party who, without active fault, has been compelled by some legal obligation, such as a finding of vicarious liability, to pay damages occasioned by the negligence of another.” Morris v. Am. Motors Corp., 142 Vt. 566, 576, 459 A.2d 968, 974 (1982). “Unlike contribution in which liability is shared by joint tortfeasors, the right of indemnity shifts the entire loss upon the real wrongdoer.” Peters, 159 Vt. at 428, 620 A.2d at 1270. In Vermont, indemnity arises in two ways: (1) through “an express agreement by one party to indemnify the other, or (2) [because] the circumstances are such that the law will imply such an undertaking.” Id. at 427, 620 A.2d at 1270. The latter, “[i]mplied indemnity[,] will apply only when the party seeking indemnity is vicariously or secondarily liable to the third person because of a legal relationship with the third person or because of the party’s failure to discover a dangerous condition caused by the indemnifying party.” Hemond v. Frontier Commc’ns of Am., Inc., 2015 VT 67, ¶ 11, 199 Vt. 272, 123 A.3d 1176 (quotation omitted). “[I]ndemnity is imputed only when equitable considerations concerning the nature of the parties’ obligations to one another or the significant difference in the kind or quality of their conduct demonstrate that it is fair to shift the entire loss occasioned by the injury from one party to another.” Hemond v. Frontier Commc’ns of Am., Inc, 2015 VT 66, ¶ 9, 199 Vt. 259, 122 A.3d 1205 (quotation omitted). Lastly, “[i]t is axiomatic that a party seeking implied equitable indemnity may recover only where its potential liability is vicariously derivative of the acts of the indemnitor and it is not independently culpable.” Heco v. Foster Motors, 2015 VT 3, ¶ 10, 198 Vt. 377, 114 A.3d 902. Because Triggs does not allege that third-party defendants expressly agreed to indemnify him, his indemnity claim will survive only if implied by a legally cognizable relationship. Triggs has alleged no legally cognizable relationship linking him to third-party Triggs has alleged no legally cognizable relationship linking him to third-party defendants and, therefore, his indemnification claim must fail as a matter of law.

Haupt v. Triggs , 2022 VT 61 ¶¶ 10, 11.

Indemnity. Dismissal of third party claim as “moot” affirmed, despite loss later sustained by appeal and settlement of primary claim.

The Stratton Corporation v. Engelberth Construction, Inc., 2015 VT75 [Filed May 29, 2015.]
SKOGLUND, J.,This appeal arises from dismissal of third-party claims in a construction contract dispute. Owner sued Engelberth Construction, Inc., the project's general contractor. Engelberth filed third-party complaints for indemnification against its subcontractors. The trial court granted summary judgment to Engelberth on Owner’s claims, finding the claims barred by the statute of limitations. Given its summary judgment ruling, and without objection, the court dismissed Engelberth's third-party claims as moot.

Owner’s appeal was also dismissed pursuant to the parties' stipulation. After notification that Owner and Engelberth had settled on appeal, the court issued an entry order on dismissing all claims of whatever sort asserted by any party in this matter. Engelberth sought to amend the dismissal order to provide that the third-party claims were dismissed without prejudice. The court denied its request, and Engelberth appeals. We affirm.

Engelberth maintains that its settlement with Owner after Owner appealed the summary judgment constituted a cognizable loss for which the third-party defendants were contractually responsible. We disagree.

 It is clear that Engelberth's claims were derivative of Owner’s claims against Engelberth. As we have stated, "[i]f the third-party plaintiff prevails against the principal plaintiff and incurs no liability, the third-party defendant in turn incurs no liability to the third-party plaintiff." Riblet Tramway Co. v. Marathon Elecs.-Avtek Drive Div., 159 Vt. 503, 506, 621 A.2d 1274, 1275 (1993). The trial court determined that Engelberth had no liability to Owner on the statute of limitations. At that point, the court reasonably concluded that Engelberth's third-party claims were moot and should be dismissed.

Rule 41(b)(3) expressly provides that: unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision operates as an adjudication upon the merits. We do not address Engelberth's assertion, raised for the first time on appeal, that a dismissal on mootness grounds is not an adjudication on the merits under Rule 41. Engelberth sought to amend the dismissal order to be "without prejudice," but not for any of the reasons it now advances on appeal, Engelberth raised no timely objection to the dismissal of its claims. "[H]aving slept on its rights," we will not now do for Engelberth "what by orderly procedure it could have done for itself." U.S. v. Munsingwear, Inc., 340 U.S. 36, 41 (1950).

Given the absence of any appeal or any other modification of the underlying decision, it is the law of the case that Engelberth has no liability to Owner, and thus, Engelberth has no basis upon which to assert any third-party claims.

SCOVT note:

May a party who incurs attorney’s fees and defense costs who is not liable to the principal plaintiff recover against a third party on a theory of implied indemnity after prevailing against the plaintiff?

Insurers expressly agree to indemnify against groundless claims. Does the obligation of implied indemnity ever extend this far?

The opinion in Stratton v Engelberth suggests the answer is "no." It quotes Riblet Tramway Co. for a general rule that "If the third-party plaintiff prevails against the principal plaintiff and incurs no liability, the third-party defendant in turn incurs no liability to the third-party plaintiff.” Riblet Tramway Co. v. Marathon Elecs.-Avtek Drive Div., 159 Vt. at 506.

The actual holding of Riblet is based on res judicata.

In Riblet the third party plaintiff’s failure to appeal the court's dismissal of its third party claim became a final adjudication of the claim. The case is very similar factually to Stratton v Engelberth in that the defendant/ third party plaintiff prevailed against the plaintiff on grounds of statute of limitations, and then the court dismissed the third party claim. The Riblet Court said defendant should have opposed the dismissal and, if unsuccessful, appealed.

 The Riblet Court expressly said it had no views as to whether dismissal of the main claim mandated dismissal of the third party claim. 159 Vt. at __ n. 1.

Stratton v Engelberth, likewise, should not be viewed as merits ruling that a defending party who incurs no liability cannot recover fees and costs on a theory of implied indemnity. The ruling is grounded in the failure of Engelberth to raise timely objection to the dismissal of its claims and its failure to appeal.  See also Knappmiller v. Bove, 2012 VT 038 (mem.) (party exonerated on main claim who requested  indemnification for attorney’s fees did not preserve issue because it did not object to in instruction that jury was to reach indemnity claim only if plaintiff prevailed).

Indemnity denied where manufacturer did not assume responsibility for workplace safety and did not create the dangerous condition.

Hemond v. Frontier Communications of America, Inc., 2015 VT 67 (Hemond III)

REIBER, C.J.   Plaintiff alleged, among other things, negligence in the design, manufacture, installation, and construction of the substation, negligent selection and installation of the switch, and defective manufacture, design, and distribution of the switch. Defendant Frontier Communications of America, Inc. appeals decisions denying its cross-claims for indemnity against three codefendants, a consulting firm that provided services to Frontier in connection with the reconstruction of the Richford substation; the manufacturer of the switch; and the distributor of the switch. Frontier asserts that it is entitled to implied indemnification from all three codefendants, and that the court erred in granting summary judgment because there are disputed questions of fact. We affirm.

Implied indemnity will apply “only when the party seeking indemnity is vicariously liable to the third person because of a legal relationship or because of the party’s failure to discover a dangerous condition caused by the indemnifying party, ‘who is primarily responsible for the condition.’ ”  Hemond II, 2015 VT 66, ¶ 9 (quoting White, 170 Vt. at 29, 742 A.2d at 737).  Frontier has failed to meet the standard for implied indemnity because this case presents no facts that could demonstrate that its liability to plaintiffs was vicarious through Stantec, Turner, or Graybar, or that Frontier was not primarily responsible for creating the dangerous condition that caused the accident.  

Frontier asserts that it did not engage in “active” negligence, but rather that its negligence, if any, was in failing to discover that the switch was dangerous when used in a particular circumstance.  But Frontier has failed to demonstrate that those entities assumed the primary responsibility for ensuring safety.  As explained in Hemond II, it was Frontier’s responsibility to design a safe substation.  Frontier failed to show that any of the codefendants assumed primary responsibility for safely designing the substation or choosing the switch.  At most, the evidence highlighted by Frontier suggests that Frontier relied on Turner and Graybar to indicate whether the switch was suitable for its intended purpose.  Frontier has failed to show that it delegated primary responsibility over safety to any of its codefendants.

Further,  the undisputed facts show that Frontier’s own acts, not those of any other defendant, created the dangerous condition which led to plaintiff’s injury.  Implied indemnity is limited to circumstances where the violation of the duty was “ ‘the primary fault’ ” of the indemnitor. See Restatement (First) of Restitution § 95 (explaining that a party’s negligent failure to make safe a dangerous condition is excused only when the danger was caused by the act of another who, as between the two, is primarily responsible for the condition). 

The critical fact—undisputed by Frontier—is that Frontier retained responsibility for the safety of its equipment and its workplace, and that the injury was primarily caused by Frontier’s own actions in choosing, and installing the switch.

Indemnity denied where contractor did not assume responsibility for workers’ safety and did not create the dangerous condition.

Hemond v. Frontier Communications of America, Inc. 2015 VT 66 (Hemond II)

REIBER, C.J. This case involves an indemnity dispute between two defendants in a suit arising after plaintiff suffered a tragic electrocution injury while working on an electrical switch. Defendant Frontier Communications of America, Inc., who owned the electrical equipment on which the accident took place, claimed implied indemnity from Navigant Consulting Group, Inc., a contractor. Navigant cross-claimed for indemnification from Frontier based on express statements in the parties' contract. The court granted summary judgment to Navigant on Frontier's claim for implied indemnification. Frontier appeals, arguing that the court erred in concluding that the undisputed facts demonstrated that Frontier failed to meet the requirements for implied indemnification.. We affirm.

Usually an obligation too indemnity arises only when the party seeking indemnity is vicariously or secondarily liable to the third person because of a legal relationship with the third person or because of the party's failure to discover a dangerous condition caused by the indemnifying party, "who is primarily responsible for the condition.” Frontier alleged that it was entitled to implied indemnification because it claimed that Navigant was responsible for advising on the suitability of the electrical system and its negligence in failing to advise against use of Switch 14E caused the dangerous condition. Even if Frontier's version of these facts is accepted, no obligation to indemnify arises here because Frontier has failed to show that its liability to plaintiffs was simply vicarious or secondary, or that it was not primarily responsible for the condition which caused the accident.

Frontier would have to show that as between Navigant and Frontier, it was Navigant's duty to keep the work environment safe or that Navigant's misconduct created the dangerous condition. The undisputed facts support neither scenario. Frontier had a nondelegable duty to design a safe environment for foreseeable workers in the substation. See Knisely, 171 Vt. at 647, 769 A.2d at 9 (concluding hospital not entitled to indemnification from contractor where it had a nondelegable duty to provide safe work environment and violation of duty was not primary fault of contractor). Frontier submitted no facts to demonstrate that Navigant assumed this responsibility. Navigant was a consultant to assist in obtaining a certificate of public good (CPG).The scope of the parties' contract was limited to the reliability of the system for purposes of obtaining a CPG; it did not mention safety.

Nor has Frontier shown that Navigant was primarily responsible for creating the dangerous condition. Even if as part of its contracted work to assist in obtaining a CPG Navigant was negligent in its reliability assessment, its negligence did not create the dangerous condition that caused the injury. Any failure on Navigant's part to identify that Switch 14E threatened system reliability did not primarily create the condition that caused plaintiffs' injury.

Frontier further argues that there exists a question of fact to determine if it had an "active part" in causing plaintiffs' injury. According to Frontier, indemnity is precluded when the indemnitee knows of a hazardous condition and fails to address it, but not when an indemnitee should have known of the hazard but fails to discover it. Frontier misses the point. Frontier failed to demonstrate that its liability was for a dangerous condition created by Navigant's acts. It was Frontier's own independent acts that created the dangerous condition. The parties agree in their statement of facts that Frontier chose the switch, and installed the switches. Navigant's negligence, if any, was in failing to advise that the reliability of the system was reduced by use of Switch 14E. The undisputed facts fail to show that it was primarily Navigant's acts which created the dangerous condition.

Implied indemnity barred by indemnitee’s independent vicarious culpability, even though not “primary” or “active” negligence.

Heco v. Foster Motors, 2015 VT 3 (Filed January 9, 2015)

SKOGLUND, J. Auto dealer appeals from a superior court judgment in favor a component manufacturer on dealer's scross-claim for indemnification of compensation paid to plaintiff in settlement of a personal-injury action.  We affrim.

Plaintiff was severely injured when a vehicle she was driving was struck from behind by another vehicle.  She filed a personal-injury action against Midstate, the automobile dealer that sold her the vehicle, Chrysler Group LLC, successor-in-interest to the company that manufactured the vehicle, and JCI, the manufacturer of the vehicle’s driver’s seat. The complaint alleged Midstate sold a vehicle that was not “crashworthy”  not only because of a defective and inadequate seat system, but also because of  defective design and inadequate warning. Plaintiff thus  alleged not only that Midstate was vicariously liable for the allegedly defective seating system supplied by JCI, but was also vicariously liable for Chrysler's role in selling a vehicle that was not crashworthy.

Plaintiff’s settled, releasing Midstate  from "any and all claims, demands, damages and causes of action under any state or federal law whatever the nature, which are known or unknown, foreseeable or unforeseeable, past, present or future, arising directly or indirectly out of the Vehicle, the Incident or the Lawsuit.” After trial and judgment for plaintiff and against JCI in the amount of $36,948,123, the trial court also entered a final judgment in favor of JCI and against Midstate on the cross-claim for indemnity. This appeal by Midstate is of that judgment. 

In support of its motion for summary judgment on the cross claim JCI asserted that the settlement agreement with plaintiff discharged Midstate from potential vicarious liability quite separate and independent from JCI's potential liability, and that Midstate could not therefore compel JCI to compensate it for the Midstate's "own vicarious liability for the conduct of Chrysler Group and Chrysler" in no way attributable to JCI.  We agree.

It is axiomatic that a party seeking implied equitable indemnity may recover only where its potential liability is vicariously derivative of the acts of the indemnitor and it is not independently culpable. Gen. Motors Corp. v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249, 255 (Tex. 2006) ("Under the common law, a person is entitled to indemnity for products liability only if his liability is entirely vicarious and he is not himself independently culpable.")  This principle is carried forward in the current Restatement, which allows for noncontractual indemnity only where the indemnitee is "not liable except vicariously for the tort of the indemnitor," or where the indemnitee sells a product supplied by the indemnitor and the indemnitee is "not independently culpable." Restatement (Third) of Torts: Apportionment of Liability § 22(a)(2)(i) & (ii) (emphases added).

Such independent culpability need not arise exclusively from the primary or active negligence of the indemnitee. See, e.g., Hudiburg, 199 S.W.3d at 260. Midstate was sued based on its vicarious liability for the acts of both JCI and Chrysler Corporation, and  it chose to settle and compensate plaintiff in exchange for the discharge of any potential vicarious liability "arising directly or indirectly out of the Vehicle." Midstate's settlement discharged its potential vicarious liability not only for the acts of JCI, but also Chrysler, and as such Midstate may not assert equitable indemnity to compel JCI to reimburse it.

[SCOVT note: see also Restatement (Third) of Torts: Apportionment of Liability § 22, comment e (A vicariously liable person can obtain indemnity from the person whose negligence was imputed only if the vicariously liable person is not independently liable.)]

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.

No fee-shifting on theory of implied indemnity where putative indemnitor is exonerated of wrongdoing.

Knappmiller v. Bove,  2012 VT 038  (mem.)


Defendant Vaillancourt Tree and Landscape Service appeals a trial court decision denying its post-trial motion for attorney’s fees and costs under a theory of implied indemnification.  The issue on appeal is whether indemnity for attorney’s fees is appropriate where a jury has found the putative indemnitor not liable in the underlying suit.  We affirm.

The jury returned a verdict for both defendants, finding that plaintiff had not proven a claim for wrongful cutting of trees against the Boves or Vaillancourt.  Because the jury found no wrongful cutting on the part of the defendants, it never reached Vaillancourt’s indemnity cross-claim since the jury instructions and special verdict form required the jury to reach the issue only if Vaillancourt was found liable to plaintiff.  Vaillancourt filed a post-trial motion seeking litigation expenses, including attorney’s fees, under a theory of implied indemnity from the Boves.  The trial court denied Vaillancourt’s motion, stating that indemnity was not available absent any finding of wrongdoing on the part of the Boves. On appeal, Vaillancourt argues that our case law does not require a finding of wrongdoing before attorney’s fees and litigation expenses may be awarded based on a theory of implied indemnity.  

This Court has recognized that an award of fees is appropriate if “the wrongful act of one person has involved another in litigation with a third person or has made it necessary for that other person to incur expenses to protect his interests.”  Albright v. Fish, 138 Vt. 585, 591, 422 A.2d 250, 254 (1980).  Some underlying culpability must appear from the record before attorney’s fees can be awarded under the Albright exception. The party requesting indemnification for attorney’s fees has the burden to demonstrate the would-be indemnitor’s culpability.

Citing Windsor School District v. State, 2008 VT 27, 183 Vt. 452, 956 A.2d 528, and that, 2008 VT 27, ¶ 13, Vaillancourt’s argues that the trial court does not need to make a finding on fault, and that indemnity may be awarded “as a matter of comparative responsibility and fairness.” Vaillancourt asserts that the Boves are more responsible because, as the property owners, they should have been aware of, and alerted Vaillancourt to, the fact that the trees straddled the boundary line.  In Windsor, the town of Windsor bought land that was previously owned and polluted by the Department of Corrections (DOC).   We concluded that the town was entitled to attorney’s fees under Albright because the DOC alone polluted the property and the town was a mere purchaser,  concluding this was a significant difference in the “kind or quality of conduct.”  Id. ¶¶ 10-12, 18.  Contrary to Vaillancourt’s contention, Windsor does not abandon the wrongful act element, but merely explains that a finding of fault is not a necessary predicate to an award of attorney’s fees in the context of that case with its distinct premise of strict liability.  Id. ¶ 13.   We do not extend Windsor  to cases such as this where the jury specifically found no fault, no liability, and no underlying responsibility.

Even if we were to dispense with a requirement of finding fault on behalf of the Boves, Vaillancourt did not object to the jury charge or the special verdict form—both of which unequivocally instructed the jury to reach Vaillancourt’s indemnity claim only if Knappmiller prevailed.  We therefore cannot discern any support for an award of attorney’s fees, other than Vaillancourt’s conclusory allegations that the Boves knew the trees straddled the boundary line and had a duty to inform Vaillancourt of that fact.  The court’s exercise of discretion is affirmed.

Attorney’s fees. Indemnity agreement did not require award of fees incurred to enforce the indemnity clause. Case analogous to denial of fees for suits that establish insurance coverage.

Southwick v. City of Rutland, (II), 2011 VT 105 (Skoglund, J. )


After we held an indemnity clause applies to claims based on the City’s own negligence, Southwick v. City of Rutland, 2011 VT 53, the City filed a motion for attorney’s fees covering all legal expenses associated not only with its defense in the underlying Southwick action, but also for all expenses incurred through the litigation of the indemnity and third-party actions. The trial court entered judgment in favor of the City, awarding the entirety of its requested attorney’s fees. Because the plain language of the contract does not require VSA to pay attorney’s fees incurred by the City in pursuing either indemnity from VSA or other third-party actions, we reverse and remand.


The Agreement’s indemnity clause reads:


"Indemnification and Hold Harmless: [VSA] hereby agrees to defend, indemnify and hold harmless Rutland, . . . its officers, trustees, agents and employees from all claims for bodily injury or property damage arising from or out of the presence of [VSA], including its employees, agents, representatives, guests and others present because of the event or [VSA’s] activities in or about Whites Park, including the entrances, lobbies and exits thereof, the sidewalks, streets and approaches adjoining the campus or any portion of the campus used by [VSA] or any of the above stated. [VSA] shall be responsible for all costs of defense, including reasonable attorney’s fees, and shall pay all fines or recoveries against Rutland."


The costs contemplated in the Agreement do not include the City’s claim to enforce the indemnity clause against VSA, or its claims against P&C and Nautilus. Contrary to the trial court’s conclusion, the indemnification clause is not all encompassing: it limits VSA’s obligation to those costs associated with the City’s defense against claims for bodily injury or property damage. Therefore, there is no contractual basis for departing from the American Rule and awarding attorney’s fees for time expended on work other than for defense in the Southwick action. See Windsor Sch. Dist. v. State, 2008 VT 27, ¶ 28, 183 Vt. 452, 956 A.2d 528 (“An insured is not entitled to recover attorney’s fees incurred in a declaratory-relief action to establish the insurer’s duty to defend or indemnify.”); see also Concord Gen. Mut. Ins. Co. v. Woods, 2003 VT 33, ¶ 18, 175 Vt. 212, 824 A.2d 572 (denying insured attorney’s fees incurred in defense of insurer’s declaratory action).


The Southwicks’ action and the City’s third-party claims might have been set in motion by the same event, they are not based on a “common core of facts” within the rule of L’Esperance v.Benware, where plaintiffs’ lawsuit was not one “which can be viewed as a series of discrete claims so that the hours expended can be divided on a claim by claim basis.” 2003 VT 43, ¶ 24, 175 Vt. 292, 830 A.2d 675. Nor is there an equitable basis for awarding the City attorney’s fees related to its third-party actions under the urle of In re Gadhue, where we upheld an award of attorney’s fees on the basis of bad faith. 149 Vt. 322, 328-29, 544 A.2d 1151, 1154-55 (1987).