No Indemnity for City’s Sole Negligence

Barry Zalma
Sep 18, 2023

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The City of Kansas City sought contractual indemnity against Occupational Health Centers of the Southwest, P.C. doing business as Concentra Medical Centers in the Circuit Court of Jackson County only to be refused by the trial court.

In City Of Kansas City, Missouri v. Occupational Health Centers Of The Southwest, P.C., d/b/a Concentra Medical Centers, No. WD85602, Court of Appeals of Missouri, Western District, Third Division (September 12, 2023) the City’s indemnity claim sought to shift to Concentra the costs associated with an employment discrimination claim which had been asserted against the City. The circuit court granted summary judgment to Concentra, and the City appealed.

FACTUAL BACKGROUND

In 2012, the City and Concentra executed Contract No. EV1227, for the performance of drug and alcohol testing on City employees. The City sent Shahidah Hazziez, a City employee, to a Concentra facility for a purportedly random drug screening. Hazziez later contended that she and other Muslim City employees had been disproportionately selected for such drug testing.

Concentra notified the City that Hazziez had refused to provide a compliant urine sample and had claimed that it was due to a bladder infection. After Hazziez was fired she sued the City, as well as a number of Concentra-affiliated entities and employees.

Hazziez settled her claims against the Concentra defendants. Thereafter a jury trial began against the City and defendants other than the City settled. After an eight-day trial, Hazziez asked the jury for damages because the City had discriminated against her. The only adverse employment action Hazziez identified was the termination of her employment with the City. The jury found in Hazziez’s favor and against the City on Hazziez’s claims for discrimination based on sex and a perceived disability. The jury awarded her compensatory damages of $172,000.00 but found that the City was not liable for punitive damages. The court subsequently awarded Hazziez attorney’s fees in the amount of $303,660.00, and costs of $10,130.85.

The Court of Appeal affirmed the judgment on appeal and also awarded Hazziez her attorney’s fees on appeal. On remand the circuit court determined that Hazziez’s reasonable appeal-related fees and expenses were $88,896.00. The City satisfied the judgment in November 2020.

The City filed a third-party petition against Concentra for indemnification under Concentra’s contract for drug and alcohol testing services. The circuit court entered its judgment on July 29, 2022, granting Concentra’s motion for summary judgment and denying the City’s cross-motion. Ultimately, the circuit court concluded that Hazziez’s claims against the City were not based in whole or in part on Concentra’s actions, but that the City’s liability to Hazziez was based on its own actions, for which Concentra had no indemnification obligation.

DISCUSSION

The Court of Appeal focused on the plain and ordinary meaning of the contract itself and did not look to extrinsic evidence unless the terms of the contract were ambiguous.

The City was held liable for its own actions. The claims for which the City was held liable did not arise out of or result from acts or omissions caused in whole or in part by Concentra.

Concentra was required to indemnify the City for liability arising from Concentra’s actions, but not liability resulting from the City’s own conduct. Because the City’s liability to Hazziez arose solely from its own actions, not in whole or in part from Concentra’s actions, the circuit court properly granted summary judgment to Concentra on the City’s contractual indemnity claim.
ZALMA OPINION

Insurance is designed to protect an insured for damages resulting from its negligence. Indemnity agreements, like that in the City’s contract with Concentra, is designed only to provide indemnity if the City was held liable for the actions of Concentra, the indemnitor. Since only the acts of the City caused damage to Hazziez it had no right to indemnity from Concentra and could only be indemnified by its own insurance.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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