What is “contribution and indemnity”?

“Contribution and indemnity” sort out which defendant is liable for how much of a plaintiff’s injuries in a personal injury or other tort case.

In a personal injury case, more than one person or company may be responsible for the injuries the plaintiff suffered. When there are multiple defendants in the case and each is partly responsible for the injuries, the court may hold all the defendants jointly or severally liable. Several liability holds each defendant responsible only for the specific part of the injury he caused, while joint liability makes each defendant responsible for the entire cost of the injury. Usually, liability is sorted out by the judge or jury during the damages phase of a trial.

When multiple defendants are held jointly liable for a plaintiff’s injuries, the court usually instructs each defendant to pay an equal share of the total damages amount, regardless of the amount of damage each defendant actually caused. Defendants who pay equal shares of a damages amount may apply contribution and indemnity rules to get back the amounts they “overpaid” that should actually have been paid by another defendant.

For example, suppose that a truck driver becomes distracted by his phone and doesn’t notice the light at the intersection just ahead has turned red. At the last second, he looks up and sees the red light. He slams on the brakes, but the brakes aren’t working properly due to a defective part inserted by the repair shop. Instead of managing to stop at the light, the driver careens through the light and hits a car stopped at the light on the other side of the intersection. The other car’s driver is injured in the accident.

The car’s driver sues the truck driver, for failing to pay attention to the road; the truck driver’s employer, for letting the driver take a truck with defective brakes; and the repair shop, for botching the repair job. At trial, the jury finds that all three defendants are liable for the plaintiff’s injuries, and each defendant pays the plaintiff one-third of the total damages amount.

After the damages payments have been made, the truck driver, the trucking company, and the repair shop may use contribution and indemnity to recover from one another. For instance, suppose that even though all three defendants paid the plaintiff 33% of the total damages amount, the repair shop was really 60% responsible for the accident, the truck driver was 30% responsible, and the trucking company was 10% responsible.

Therefore, the truck driver overpaid the plaintiff by 3% and the trucking company overpaid by 23%, while the repair shop underpaid by 26%. The truck driver and the trucking company may both seek contribution from the repair shop to recover the overpayments each made that are really owed by the repair shop.

Indemnity occurs when a defendant is entitled to recover from a third party the total amount of damages he had to pay the plaintiff. “Partial indemnity” does not exist: Either another party is responsible for the damages amount, or it is not. In the example above, suppose that the accident occurred as described but the truck driver was not negligently distracted. Instead, the driver was using reasonable care, but nevertheless ran the red light and hit the plaintiff’s car due to the faulty brakes in his truck, which his employer knew about but failed to tell him. In this case, the truck driver may be able to seek indemnity from his employer if he is found liable.

Indemnity is usually only available if a certain type of relationship exists between the parties. Relationships that allow one person to collect indemnity from another include:

• When the two parties have an express agreement that one will indemnify the other;
• When a contract makes one party responsible for indemnifying another;
• When tort law creates a right of indemnity. For instance, sellers of defective products are often allowed to seek indemnity from the product’s manufacturer under tort law.

Contribution and indemnity should not be confused with comparative negligence or contributory negligence. In these cases, the jury or judge may calculate which party was responsible for which percentage of the injuries. However, this calculation is used to determine whether the plaintiff may receive damages and whether that amount should be reduced. It is not used to determine who should pay what portion of the damages. Defendants may, however, consider comparative or contributory negligence calculations when deciding whether and how to seek contribution and/or indemnity.