Hatch Dev., LLC v. Solomon (6/21/16): Arizona Court of Appeals Division One holds that a common law indemnity claim does not require the indemnity plaintiff to establish that it has discharged a legal obligation owed to a third party if the indemnity defendant was actually at fault for the alleged harm.

A homeowner sued a developer and a construction company for damages caused by sewer and water line construction.  The homeowner’s complaint was dismissed for lack of prosecution and the relevant statute of limitations expired.  Nonetheless, the developer settled the claim with the homeowner and then filed a claim for common law indemnity against the construction company.

The court of appeals, based on the Restatement (First) of Restitution, reasoned that a duty to indemnify may arise in at least two circumstances: (1) when the indemnity plaintiff has satisfied an obligation owed by the indemnity defendant, or (2) when the indemnity plaintiff was not at fault for the alleged damages and the indemnity defendant was at fault for the alleged damages.  If the indemnity plaintiff’s obligation to pay arose from the fault of the indemnity defendant, the indemnity plaintiff is entitled to indemnity if it paid its obligation in the justifiable belief that it owed a duty to the injured party. 

The court then held that the developer could seek indemnity from the contractor because the contractor was undisputedly at fault for the homeowner’s damages and the developer’s own negligence, if any, was not the proximate cause of the homeowner’s damages.

The court further held that the expiration of the statute of limitations had no impact on the developer’s indemnity claim because the developer had a justifiable belief that the statute of limitations did not bar its obligation to the homeowner.

Judge Gemmill authored the opinion of the court in which Presiding Judge Johnsen and Judge Cattani joined.