Owner Retains Right of Indemnification;
Third-Party Defendant Found to Be 1/9 at Fault
Responsible for 1/9 of Non-Economic Loss

            On March 30, 2006, the Court of Appeals, in Frank v. Meadowlakes Development Corporation clarified the application of CPLR Article 16 [“Limited Liability of Persons Jointly Liable”].

            In the case, plaintiff, seriously injured in a construction accident, brought suit against Meadowlakes and the general contractor D.J.H. Enterprises.   Meadowlakes, in turn, brought a third-party action against Home Insulation and Supply, plaintiff’s employer.    After a bifurcated trial, the jury apportioned fault in the amount of 10% to Frank, 10% to Home, and 80% to D.J.H. The court also directed a verdict against Meadowlakes and D.J.H. based on a violation of Labor Law §240(1).

            Franks then settled with D.J.H. for $300,000.   One week later, Franks settled with Meadowlakes for $1,424,000.   Supreme Court then granted Meadowlakes’ motion for common law indemnification against Home in the sum of $1,552,160, which included accrued interest.

            Home appealed the judgment, arguing that Supreme Court erred in (1) denying its motion for a directed verdict to dismiss the third-party complaint against it because Home was not negligent and, thus, the jury’s 10% allocation of fault to Home should not stand; and (2) in granting Meadowlakes complete indemnification against Home, even if the 10% of fault remained undisturbed, because it should be liable only for its share of negligence.

            The Appellate Division held that Supreme Court properly denied the motion for a directed verdict dismissing the third-party complaint because Home’s contention that there was no basis to allocate fault was without merit.  The court held that CPLR Article 16 does not limit the owner’s right of indemnification because of the savings provision for indemnification claims set forth in CPLR §1602(2)(ii).  

            The Court of Appeals agreed that there was sufficient evidence in the record to support the jury’s determination.   Therefore, the motion for a directed verdict was properly denied.   The Court of Appeals, however, disagreed with respect to indemnification, holding that although Article 16 does not limit the right to indemnification, it does limit the amount that can be recovered when liability is 50% or less.   The court held that there is no irreconcilable conflict between CPLR 1602(1) and 1602(2)(ii).  

            The court pointed out, however, that the ruling does not entitle a party to 100% recovery.   Even though Meadowlakes retained its right to indemnification, Home, as a party found 10% liable, was limited to its proportionate share with respect to non-economic damages.   Thus, Home’s total indemnity to Meadowlakes will be all economic loss and 1/9 of non-economic loss encompassed within the settlement.