Serna v. Kingston Enterprises , 2002 Colo. App. LEXIS 1690 ( 2002 )

Opinion by

Judge DAILEY.

In this indemnification action, plaintiff, Lisa Serna, appeals from a summary judgment and an award of attorney fees and costs to defendant, Kingston Enterprises. Defendant cross-appeals the trial court's determination that Serna's lawyers are not personally liable for its attorney fees. We affirm in part and reverse in part.

Serna was fifteen years old when defendant, her employer, instructed her to drive from one of its franchise locations to another. En route, Serna's car collided with another car, resulting in serious injury to the passengers of the other car.

The passengers sued both Serna and defendant, alleging that Serna was negligent and that, as her employer, defendant was liable based on a respondeat superior theory. The passengers, who initially failed to complete service of process on Serna, settled with defendant for $850,000. After serving process upon Serna, they also settled with her.

Under her settlement with the passengers, Serna agreed to: (1) allow entry of a $1.5 million judgment against her; (2) employ the passengers' attorneys to sue defendant in an indemnity action; (8) allow the passengers to make all decisions with respect to her lawsuit against defendant; (4) refuse to settle with defendant without the passengers' prior approval; and (5) pay monies recovered from defendant to the passengers. In return, the passengers accepted $40,000 from Serna's insurance carrier, agreed not to execute on the remainder of the $1.5 million judgment against Serna, and promised to pay Serna half of any monies recovered from defendant in excess of $1 million.

Pursuant to her settlement, Serna instituted the present action against defendant. The trial court, however, granted defendant's motion for summary judgment, holding that, as a matter of law, Serna's claim was barred by the exclusivity provision of the Workers' Compensation Act (WCA), § 8-40-101, et seq., C.R.98.2002, and by the Uniform Contribution Among Tortfeasors Act (UCATA), § 18-50.5-102, C.R.8.2002. The trial court awarded defendant attorney fees and costs under § 18-17-102, C.R.8.2002.

I. Summary Judgment

Serna contends that the trial court erred in dismissing her claims. We disagree, but base our decision on grounds somewhat different from those relied upon by the trial court.

Summary judgment is only appropriate if there is no genuine issue as to any material fact. Polk v. Hergert Land & Cattle Co., 5 P.3d 402, 404 (Colo.App.2000). On appeal, we review a summary judgment de novo. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, 901 P.2d 1251, 1256 (Colo.1995).

Because the material facts in this case are not in dispute, we can resolve this appeal as a matter of law.

A. Workers' Compensation

Initially, Serna contends that the trial court erred in determining that the WCA's exclusivity provision barred her claim. We agree.

The WCA is an employee's exclusive remedy for compensation by an employer for certain work-related injuries. See Colorado Compensation Insurance Authority v. Baker, 955 P.2d 86, 88 (Colo.App.1998)("if an injury comes within the coverage of the Act, an action for damages is barred even though a particular element of damages is not compensated for").

Under the WCA, an employee surrenders, as against his or her employer, "any cause of action, action at law, suit in equity, or statutory or common-law right, remedy, or proceeding for or on account of [his or her] personal injuries or death." - Section 8-41-104, C.R.S.2002 (emphasis added); see also § 8-41-102, C.R.S.2002 (abolishing employee's remedies against employer for or on account on employee's "death" or "personal injury"). '

Conversely, however, an employee does not, under the WCA, surrender any cause of action for injuries apart from "personal injuries." See Lord v. Souder, 748 A.2d 393, 403 (Del.2000)(workers' compensation "exclusivity provision does not apply to all injuries arising out of and in the course of employment but, rather, only to 'personal' injuries").

No Colorado appellate opinion has determined the precise meaning of the terms "personal injury" or "personal injuries" in §§ 8-41-102 and 8-41-104. Their meaning may, however, be discerned from the type of injuries for which the WCA provides a remedy. The express purpose of the WCA is to provide "quick and efficient delivery of disability and medical benefits," § 840-102(1), C.R.98.2002, for job-related physical or mental injuries. See §§ 8-41-801(2)(a) (mental impairment), 842-107 (physical injuries), C.R.8.2002; Lucero v. Climax Molybdenum Co., 782 P.2d 642, 647 (Colo.1987)(WCA provides compensation for "specified physical or mental injuries"). j

We conclude that, as used in the WCA, the terms "personal injury" and "personal injuries" refer to the job-related physical or mental injuries of an employee, see 3 Larson's Workers' Compensation Law ch. 55 at 55-1 (2002)(" 'Personal injury' includes any harmful change in the body"), and that, consequently, the WCA's exclusivity provision bars actions for or on account of such injuries of an employee.

Here, Serna seeks redress from defendant not on account of physical or mental injuries she sustained, but, rather, on account of the economic lability she incurred after she injured others. Because this economic lability does not qualify as a compensable "personal injury" under the WCA, her indemnity action against defendant is not barred by the WCA. See, eg., Williams v. Caruso, 966 F.Supp. 287, 294 (D.Del.1997)("claims for injuries to [employee's] economic interests" were not preempted by Delaware's workers' compensation statute); Gomez v. Acquistapace, 50 Cal.App.4th 740, 749, 57 Cal.Rptr.2d 821, 826 (1996)("injuries which trigger application of the exclusive remedy rule are injuries 'to the worker's person, as opposed to his property? "), Lord v. Souder, supra, 748 A.2d at 403 (harm affecting "a proprietary or financial interest" is "not a 'personal injury' within the purview of the Workers' Compensation statute"); Cole v. Chandler, 752 A.2d 1189, 1196 (Me.2000)("economic or reputational injuries, if any, do not constitute personal injuries, as they are not physical or mental injuries," and "recovery of such damages is not precluded by the exclusivity provision").

Defendant cites United Cable Television of Jeffeo, Inc. v. Montgomery LC, Inc., 942 P.2d 1230, 1232-88 (Colo.App.1996), for the proposition that employers are immune under the WCA for common law indemnity claims. However, that case dealt with a third-party suit against an employer seeking indemnification for monies paid out in connection with an employee's physical injury. Further, the division in that case stated that "there is an exception to the [WCA's] exclusive remedy clause where an express contract or preexisting legal relationship exists." - United Cable Television of Jeffco, Inc. v. Montgomery LC, Inc., supra, 942 P.2d at 12838.

Here, defendant and Serna, as employer and employee, had a pre-existing legal relationship, which allowed Serna to bring her indemnity claim despite the WCA.

B. Contribution Among Joint Torifeasors

Serna next contends that the trial court erred in concluding that her indemnification action was barred by UCATA. We agree.

In dismissing Serna's indemnification claim, the trial court relied upon Brochner v. Western Insurance Co., 724 P.2d 1293, 1296 (Colo.1986), in which the supreme court held that UCATA had abrogated some indemnity actions, namely those which would require "one of two joint tortfeasors to reimburse the other for the entire amount paid by the other as damages to a party injured as the result of the negligence of both joint tortfeasors." Brochner v. Western Insurance Co., supra, 724 P.2d at 1299.

Here, in their initial complaint against defendant and Serna, the passengers alleged that defendant was liable based only on a theory of respondeat superior, not negligence. Therefore, defendant and Serna were not joint tortfeasors within the meaning of UCATA, and thus, UCATA would not bar Serna's indemnity action against defendant. See Arnold v. Colorado State Hospital, 910 P.2d 104, 107 (Colo.App.1995); McCall v. Roper, 685 P.2d 230, 232 (Colo.App.1984).

C. _ Common Low Indemnity

Defendant argues that, even if not barred by the WCA or UCATA, Serna's indemnity claim must nonetheless fail because there is no realistic prospect of the passengers executing on the judgment entered against her. We agree.

On appeal, a party may defend the judgment of the trial court on any ground supported by the record, regardless of whether that ground was relied upon or even contemplated by the trial court. People v. Eppens, 979 P.2d 14, 22 (Colo.1999); see also Olsen & Brown v. City of Englewood, 867 P.2d 96, 99 (Colo.App.1993)("A party may defend the trial court's judgment on grounds not decided by the trial court, as long as the party's rights are not increased."), aff'd, 889 P.2d 673 (Colo.1995).

Serna's indemnity claim is based not on contract, but on the common law duty of a principal to indemnify its agent for losses incurred by the agent while acting on the principal's behalf. See Johnson Realty v. Bender, 39 P.3d 1215, 1218 (Colo.App.2001).

"As a general rule, a cause of action for indemnity does not arise until the liability of the party seeking indemnity results in his damage, either through payment of a sum clearly owed or through the injured party's obtaining an enforceable judgment." Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214, 218 (Utah 1984).

In this case, Serna has not paid the judgment against her, and, under the terms of her agreement with the passengers, there is no reason to believe that she ever will. Her settlement agreement stipulated that the passengers would not "execute on any portion of the judgment exceeding the $40,000 tendered through [Serna's insurance provider] so long as [Serna) proceeds with her legal remedies" against defendant. The passengers even agreed to "pay all costs associate{d] with prosecuting Serna's claim, including any attorney's fees incurred."

Serna asserts that her agreement is of a type permitted under Bashor v. Northland Insurance Co., 29 Colo.App. 81, 83-84, 480 P.2d 864, 866 (1970), aff'd, 177 Colo. 463, 494 P.2d 1292 (1972). A Bashor agreement is "a settlement reached between opposing parties after a judgment has been obtained," wherein the "prevailing party agrees not to execute on the judgment in exchange for the defendant's agreement not to appeal the judgment and instead to pursue claims against third parties (and share any recovery with the original plaintiff)." Stone v. Satriana, 41 P.3d 705, 708 n.2 (Colo.2002).

In the reported Colorado cases to date, Bashor agreements have been used only in cases involving allegations of a breach of an insurer's contractual duty to indemnify an insured. See Stone v. Satriana, supro; Daugherty v. Allstate Insurance Co., 55 P.3d 224, 2002 WL 464801 (Colo.App. No. 01CA0130, Mar. 28, 2002); Pike v. American States Preferred Insurance Co., 55 P.3d 212, 2002 WL 282494 (Colo.App. No. 00CA0A4O00, Feb. 28, 2002); Bernhard v. Farmers Insurance Exchange, 885 P.2d 265, 270-71 (Colo. App.1994), affd, 915 P.2d 1285 (Colo.1996). Further, the "shared recovery" contemplated by Bashor agreements encompasses only the return, on a full or pro rata basis, of the amount of money a Bashor defendant had already paid to the injured party. See Bashor v. Northland Insurance Co., supra, 29 Colo.App. at 88, 480 P.2d at 866.

Here, any duty on defendant's part to indemnify Serna arose not under contract but under common law. Further, Serna's agreement with the passengers was more akin to a profit-sharing agreement; her share of any recovery against defendant was not limited to recouping only the losses she or her insurance company sustained. Indeed, under the agreement, the passengers promised to give Serna half of any monies recovered from defendant in exeess of $1 million. If, then, she were able to obtain a $1.5 million dollar judgment against defendant, she would be entitled to $250,000.

Finally, and perhaps most important, unlike the Bashkor situation, there has never been a judgment enforceable against Serna; indeed, the only judgment against her is one to which she stipulated, along with conditions virtually ensuring her that it would never be enforced against her.

Because, under the particular cireum-stances of this case, we discern no danger that Serna will ever sustain a monetary loss or otherwise be subjected to an enforceable judgment against her, we affirm the trial court's dismissal of her indemnification claim against defendant. See Midwest Commerce Banking Co. v. Elkhart City Centre, 4 F.3d 521, 526 (7th Cir.1998)(one cannot "seek indemnity ... without any basis for supposing that there will ever be any indemnifiable loss").

II. Attorney Fees and Costs

Next, Serna contends that the trial court erred in awarding attorney fees and costs. We agree.

Initially, we note that the trial court awarded fees and costs not only against Ser-na, but also against the passengers. Because the passengers are not parties to this appeal, we have no occasion to consider or disturb the award against them.

Section 1817-102 requires that the trial court award reasonable attorney fees and costs in any case when a party's claim lacks "substantial justification," meaning the claim is substantially frivolous, groundless, or vexatious. However, where there is a rational basis grounded in law and evidence for a party's position, the trial court's finding that the position was substantially frivolous is not sustainable. Hart & Trinen v. Surplus Electronics Corp., 7I2 P.2d 491, 498 (Colo.App.1985).

Having concluded that Serna's indemnity claim was not barred by the WCA or UCA-TA, we must necessarily conclude that "substantial justification" existed for the positions she took with respect to those issues. Thus, we cannot sustain the trial court's award of attorney fees and costs against Serna.

Because we reverse that award, we need not consider defendant's cross-appeal.

Accordingly, the judgment is affirmed, except that the award of attorney fees and costs against Serna is reversed.

PLANK ^*, J., concurs. TAUBMAN, J., specially concurs.