Zahn v. KROGER CO. OF MICHIGAN

Cimarron Services, Inc.,1 appeals from a judgment in favor of F.H. Martin Construction Company2 requiring Cimarron to indemnify Martin for a share of a settlement that Martin had paid as the result of an injury to an employee in a construction accident. Cimarron alleges that the language of the contract does not control. Instead, Cimarron contends that MCL 600.2956 effectively limits the application of express contractual indemnification clauses, because the statute mandates that parties may only be held responsible for their own pro rata share of the negligence.3 The Court of Appeals rejected this argument and, in an unpublished opinion, held that MCL 600.2956 does not apply to contracts.4 We granted leave to appeal to review this issue and asked the parties to also address whether the exclusive remedy provision of the Worker’s Disability Compensation Act (WCDA), MCL 418.131(1), in any way precludes a third-party defendant employer from voluntarily subjecting itself to liability for negligence to an employee by virtue of an indemnification contract.5 *37We affirm the judgment of the Court of Appeals in favor of Martin and hold that MCL 600.2956 does not apply to contract actions, and that an employer may voluntarily subject itself to liability for damages to employees from which it would otherwise be insulated. We write briefly to address these issues and to clarify the law regarding indemnification contracts.

The underlying case arose from a construction site accident during the renovation of a Kroger store. Martin was the general contractor and Cimarron was a subcontractor for the project. A Cimarron employee, Timothy Zahn, was injured when he fell from scaffolding while installing drywall. Zahn brought a negligence action against the Kroger Company of Michigan and Martin. Kroger filed a third-party action against Martin for indemnification. Martin, in turn, filed a third-party action against Cimarron seeking indemnification pursuant to their subcontract agreement. Martin entered into a settlement with Zahn for $225,000 and resolved claims for indemnification with Kroger for $12,489.45. Martin then asked the trial court to enforce the terms of the indemnification clause in the subcontract agreement with Cimarron.

This appeal addresses the indemnification clauses in that subcontract. The pertinent contract clauses provide:

3. ... By acceptance of this subcontract, Subcontractor assumes every duty imposed upon Martin, to the extent related to the subject matter of this Subcontract.

17. Indemnity — To the fullest extent permitted by law, Subcontractor shall defend, indemnify and hold Martin, the Owner and Others (required by the Contract Documents) harmless from all claims for bodily injury and *38property damage that may arise from the performance of the Subcontract work to the extent of the negligence attributed to such acts or omissions by Subcontractor, or anyone employed or contracted by Subcontractor for whose acts any of them may be liable. In no event shall the indemnity contained herein be deemed to cover damages arising exclusively through the negligence of Martin.

The trial court conducted a bench trial on Martin’s third-party action for express contractual indemnity. The court ruled that Cimarron’s negligence was greater, as it had constructed the scaffolding and ordered Zahn to work on it even after he had protested that it was unsafe. The court ruled that Martin was also negligent, but to a lesser degree, for failing to inspect the scaffolding for safety rails or to take further steps to make the workplace safer for Zahn. The trial court concluded that Martin’s percentage share of the negligence was 20 percent and that Cimarron was 80 percent at fault. The trial court held that, pursuant to the terms of the contract, Cimarron was not required to indemnify Martin to the extent of Martin’s negligence, but was required to reimburse 80 percent of the settlement amounts back to Martin for its own share of the negligence.

We first address whether MCL 600.2956 renders such indemnification clauses effectively unenforceable. Ci-marron contends that the abolition of joint and several liability, as set forth in MCL 600.2956, requires an analysis beyond the language of the contract itself. It proffers that it cannot be held liable for Martin’s negligence because MCL 600.2956 requires that parties pay only for their own pro rata share of liability. It further contends that MCL 600.2956 limits indemnification clauses by operation of law and that we are to disregard the actual language of the contract. We find these arguments unpersuasive. Here, Cimarron volun*39tarily entered into an agreement with another business entity. These are business entities with equal bargaining power. The parties came to a mutually acceptable agreement to govern liability for construction site injuries. Such agreements are common in the construction industry. Importantly, neither party claims that the pertinent contractual clauses are ambiguous. To adopt the position that MCL 600.2956 renders express contractual indemnification clauses unenforceable would require that we negate the parties’ contract. We find no language in the statute, nor any compelling public policy, that would require us to do so.

The Court of Appeals addressed the identical legal challenge in reviewing a substantially similar express indemnification clause governing a construction site accident. See Essell v George W Auch Co.6 That Court noted, “Although novel, the argument is also contrived because it selectively implicates the underlying negligence complaint and ignores the substance of the cross-complaint, an action based in contract.”7 The Court opined:

However, defendants ignores [sic] the first sentence of MCL 600.2956, that limits its application to “an action based on tort or another legal theory seeking damages for personal injury, property damage, or wrongful death ... [.]” While the underlying complaint by Essel [sic] is a tort action seeking damages for personal injury, the action at issue in this cross-complaint is an action based on contract theory. Plaintiffs lawsuit seeks reimbursement for monies paid, not for its own personal injury, property damage, or wrongful death. There is no indication that the Legislature, by amending MCL 600.2956, sought to limit or eliminate the parties’ freedom of contract to allocate dam*40ages should a breach of contractual duty occur. Indeed, MCL 600.2956 contains the proviso that it applies to tort actions or actions where the legal theory results in damages for personal injury, property damage, or wrongful death. ISB, supra. If the Legislature had intended to include all other actions, including contract actions, it expressly would have done so and would not have placed any restricting language within the statute. [Id. at 5.]

We find the above analysis persuasive and hold that MCL 600.2956 does not apply to contract actions, and the language chosen by the parties as contained in the contract is controlling.8

We must next determine whether the indemnification clause the parties used was properly interpreted. An indemnity contract is to be construed in the same fashion as other contracts. Hubbell, Roth & Clark, Inc v Jay Dee Contractors, Inc, 249 Mich App 288, 291; 642 NW2d 700 (2002); Zurich Ins Co v CCR & Co (On Rehearing), 226 Mich App 599, 603; 576 NW2d 392 (1997); Triple E Produce Corp v Mastronardi Produce, Ltd, 209 Mich App 165, 172; 530 NW2d 772 (1995). The extent of the duty must be determined from the language of the contract itself. Grand Trunk W R, Inc v Auto Warehousing Co, 262 Mich App 345, 353; 686 NW2d 756 (2004). All contracts, including indemnity contracts, should be construed to ascertain and give *41effect to the intentions of the parties and should be interpreted to give a reasonable meaning to all of its provisions. Klever v Klever, 333 Mich 179, 186; 52 NW2d 653 (1952); MSI Constr Managers, Inc v Corvo Iron Works, Inc, 208 Mich App 340, 343; 527 NW2d 79 (1995). This Court has generally observed that if the language of the contract is clear and unambiguous, it is to be construed according to its plain sense and meaning. Grosse Pointe Park v Michigan Muni Liability & Prop Pool, 473 Mich 188, 198; 702 NW2d 106 (2005). Courts may not make a new contract for parties under the guise of a construction of the contract, if doing so will ignore the plain meaning of words chosen by the parties. Lintern v Michigan Mut Liability Co, 328 Mich 1, 4; 43 NW2d 42 (1950).

Here, the contract clearly preserved Martin’s right to seek indemnification from Cimarron for any injury arising from Cimarron’s negligence. The trial court adhered to the terms of the contract and made a determination of the respective negligence of the two parties. The court ruled that Cimarron was negligent and its pro rata share was 80 percent. The contract terms expressly provide for indemnification under these circumstances. The court ordered Cimarron to indemnify Martin for 80 percent of the settlement of the claim. The Court of Appeals affirmed. We find no error in the lower courts’ interpretation of the contract, and the judgment should stand.

Finally, we address whether the exclusive remedy provision of the WDCA9 precludes enforcement of an *42indemnification contract when the injured party is the employee of the entity being required to pay the indemnification amount. Cimarron suggests that an employer cannot be required to assume liability for a particular type of damages for negligence from which it is otherwise shielded as a matter of law. Although Cimarron cannot be held directly liable for negligence by its own employee by virtue of the WDCA, nothing in contract law precludes an employer from voluntarily assuming liability for negligence through a contractual arrangement. Similarly, nothing in the WDCA precludes parties from entering into such an agreement. Accordingly, we conclude that the contract language controls, and we affirm the judgment of the Court of Appeals.