The vanishing doctrine of implied indemnity in maritime actions: maritime law has evolved to shape the needs of a changing society, and the Supreme Court has made serious inroads in simplifying the law.

• Author: Holland, Michael J.

LESS than sixty years ago, when the maritime industry was a strong economic force in America, the Supreme Court recognized the doctrines of implied contractual and tort indemnity in an attempt to achieve just results in an area of the law where a tortfeasor's liability was severely proscribed. This change shifted the burden of loss from the party who had been held vicariously or secondarily liable to the actual wrongdoer. Approximately half a century later, with the admiralty industry in decline, the courts sub silento abandoned the concept of implied indemnity and have allocated fault on a contribution theory, i.e., where each tortfeasor pays its own, and only its own, share of liability depending upon the percentage of fault as found by a jury. The creation and subsequent abandonment of the implied indemnity theories of law manifest how the common law stretches and contracts in order to meet the needs and goals of litigants and society and to foster a sense of fairness in allocating fault among the parties in the judicial process.

Indemnity is a shifting of the entire loss from one party to another and applies generally when one party, by virtue of his relationship with the injured person or the tortfeasor who actually caused the injury, has to answer in damages for wrongdoing which is the fault of another. The common law is rife with such relationships: master--servant, employer-employee, owner-operator. (1) While liability is imposed by law on the passive or vicariously liable tortfeasor in some cases (e.g., a vehicle and traffic law which makes an automobile owner liable for injuries caused to a pedestrian or other motorists when the vehicle is driven by an operator with the owner's consent), the common law has imposed such vicarious or passive liability in other situations. One such example is in the field of admiralty law, when the ship owner is generally held strictly liable under the unseaworthiness doctrine for injuries caused to persons aboard a ship or working on a vessel based on the ship owner's duty to ensure that the vessel is reasonably fit to be at sea. (2) While contractual indemnification clauses typically govern the rights of the ship owners and those with whom they contract, there were cases where a ship owner, who had hired a stevedoring company to handle the loading and unloading of its vessels, found itself facing liability where the stevedoring company negligently performed its work, causing injury to the stevedoring company's own employee. Because of the bar of the workmen's compensation statutes, (3) which prohibited the stevedoring employee from suing his own employer, the ship owner was frequently faced with defending an unseaworthiness claim, often based on conduct or activities over which the ship owner had little or no control.

To remedy this situation and to protect the ship owners in such cases where they had no ability or means to control the wrongful conduct for which they were being held liable, courts created the doctrine of implied contractual indemnity. The doctrine, best typified by the Supreme Court's decision in Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp. (4) holds that when a ship owner is found liable in negligence based on unseaworthiness for a violation over which the ship owner had no control (i.e., the ship owner's negligence, if any, was only passive or secondary), then the ship owner has an implied fight of indemnity against the stevedoring company whose actual wrong-doing caused the injury for breach of a contractually implied duty of workmanlike performance. Such an implied indemnity was permitted even in the absence of an express indemnification clause in the contractual arrangement between the ship owner and stevedoring company. The Supreme Court in Ryan said that this arrangement would place the loss squarely on the shoulders of the party whose wrongful conduct caused the injury.

Ryan gained acceptance among the lower courts and was expanded to include situations beyond the actual stevedoring ship owner context, for example, to non-stevedore maritime contractors such as repairmen, electricians, cleaners, and painters. (5) But the engrafting of Ryan to cases beyond its initial application created vexing problems for the courts. While the majority in Ryan talked of implied contractual indemnity based on breach of warranty of workmanlike performance of services, the Ryan dissenters talked about implied indemnity in terms of negligence concepts. In his dissent, Judge Black wrote that "common-law indemnity may sometimes arise where two people commit a tort or wrong which hurts the same person." (6) Cases following Ryan expanded the doctrine to permit tort indemnity where the vicariously liable wrongdoer was only "passively" or "secondarily" negligent while the indemnitor was "actively" or "primarily" negligent. What if the "passive" or "secondarily" liable ship owner was just a tiny bit negligent? Did that take away his fight of implied indemnification under Ryan? Could the ship owner still recover based on an implied indemnity theory if his wrongdoing, even to a small degree, caused the injury? This theory sounds much like the contribution doctrine, where tortfeasors contribute to the plaintiff's recovery based upon their own proportionate share of fault.

While Ryan was frequently applied from the time of its decision in 1956, the crack in the Ryan armor was another Supreme Court decision, United States v. Reliable Transfer Co., Inc., 7 where the Court abandoned the century old "divided damages" rule in admiralty. The "divided damages" rule held that when two or more parties were found to be at fault in a collision involving property damage, each party paid an equal share of the damages. For example, where two vessels collided, each ship owner paid half of the damages, no matter which ship owner's fault was greater.

The abolition of the divided damages rule in Reliable Transfer led the courts to believe that the fairer way to allocate damages in maritime actions, rather than deciding whether one party was "actively" or only "passively" negligent, or whether there was a breach of an implied warranty of workmanlike performance so as to allow an implied indemnity claim, was to allocate liability among all of the tortfeasors based on their percentage of fault as found by a jury. This eliminated the old "active/passive" and "primarily/secondarily" incantations of negligence and substituted a more real-world approach to the calculus of determining liability among multiple tortfeasors in an admiralty action.

What Reliable Transfer initiated, McDermott, Inc. v AmClyde, (8) finished. In McDermott, the Supreme Court adopted a rule of contribution among tortfeasors in damage actions absent a contractual indemnification relationship among the parties. Each tortfeasor would pay only for his or her own share of the damages and the artificial distinctions of "active/passive" and "primary /secondary" liability were eliminated. Perhaps even more importantly, a tortfeasor who had settled the plaintiff's claim against it had truly "bought his peace" and could not be brought back into the litigation since suits for contribution against settling tortfeasors were neither required nor permitted.

What then of implied indemnity? As a Second Circuit case held, the death of Ryan was an interesting phenomenon. No statute overruled Ryan. No Supreme Court decision repudiated it. Ryan was emasculated first by amendments to the Longshore and Harbor Workers' Compensation Act, which specifically barred third-party claims by stevedores against ship owners, and then relegated to the judicial dustbin by the Supreme Court's decisions in Reliable Transfer and McDermott. The rise and fall of the implied indemnity doctrine is a good case study of how the courts, even in the absence of the legislative mandates, shape the needs of the law to a changing society.

1. The Ryan Doctrine

   In Ryan, the Supreme Court recognized, under the special circumstances of the ship owner-stevedore relationship, a right of implied non-contractual indemnity between them. Ryan Stevedoring had contracted with Pan-Atlantic to perform all cargo loading and unloading operations on Pan-Atlantic's vessels. A cargo worker employed by Ryan was injured while unloading a Pan-Atlantic ship in Brooklyn, allegedly because his co-employee in South Carolina had improperly stowed the cargo. Because the provisions of the Longshore and Harbor Workers' Compensation Act (LHWCA) (9) forbade the employee from suing his employer Ryan Stevedoring, the injured employee sued Pan-Atlantic Steamship, who in turn sued Ryan Stevedoring for indemnity. While the Ryan Stevedoring-Pan Atlantic agreement did not contain an express indemnity clause, the Supreme Court allowed an action for implied indemnity to proceed by Pan-Atlantic against Ryan, reasoning that the agreement by Ryan to perform all of Pan-Atlantic's stevedoring operations necessarily includes petitioner's obligation not only to stow the pulp rolls, but to stow them properly and safely. Competency and safety of stowage are inescapable elements of the service undertaken. This obligation is not a quasi-contractual obligation implied in law or arising out of a noncontractual relationship. It is of the essence of petitioner's stevedoring contract. It is petitioner's warranty of workmanlike service that is comparable to a manufacturer's warranty of the soundness of its manufactured product. The...