Indemnity, Duty to Defend, and Timing

The concept of indemnity gets a lot of press. With good reason, since an indemnity is one tool in the risk management shed. As a recent court decision shows, however, a duty to defend is different than an indemnity. And a party who seeks to establish either one early on a lawsuit may just be spinning its wheels if there are critical facts still unresolved. That was the situation in a Connecticut decision recently issued.

The city of Westport, CT installed a series of new sewer line connections, using pumps supplied (and perhaps installed) by Environment One. One family had an unfortunate discharge of sewage into their home when some element of the new system failed. The homeowners sued both the city and the contractor, and the city filed a cross-claim against the contractor seeking an indemnity and a defense from the homeowners’ claims. Early on in the lawsuit, when some but not all facts were on the table, both the city and the contractor filed motions against each other, seeking summary judgment relative to the duties to defend and to indemnify. The end result? Certain claims were dismissed for lack of jurisdiction – being premature – and the motions were otherwise denied.

The underlying facts included claims that a hose clamp on the contractor’s pump failed, and that the city was told to install backflow preventer valves but failed to do so. The city's cross-claim was for (a) contractual indemnity and defense, (b) breach of contract for failing to indemnify and defend, and (c) common law indemnification. And the city filed an early motion seeking a court determination on these cross-claims. The contractor filed its own countering motion, arguing that the claims under (b) and (c) were premature or barred by law, and the claim under (a) should be denied as there were issues of fact not yet determined.

The court acknowledged that a duty to defend is typically broader than a duty to indemnify; the former can be triggered by mere allegations, while the latter is ultimately based on the final facts. So the city’s argument about a defense had some merit on paper, since the homeowners’ complaint included allegations that would point to the contractor. But the city failed to read its own indemnity rights, which did not include a duty to defend. Thus, the early move for a defense was shot down. And the court noted that two countering facts – the potential clamp problem and the lack of recommended backflow valves – prevented a summary determination at this stage of the lawsuit.

Readers wanting more detail are urged to read the opinion – a LEXIS link is noted below. The critical point here is that both parties were premature in seeking a binding court decision establishing a duty to indemnify, or to defend, based on their own unilateral assertions as to the cause of the sewage backup. Until more facts are established, the right to an indemnity will not be finally determined. The case is Williams v. City of Westport, 2015 Conn. Super. LEXIS 3073 (Dec. 15, 2015), available here (subscription required).