Braye v. Archer-Daniels-Midland Co.
Annotate this Case
NOTICE: Under Supreme Court Rule 367 a party has 21 days after the filing of the opinion
to request a rehearing. Also, opinions are subject to modification, correction or withdrawal at
anytime prior to issuance of the mandate by the Clerk of the Court. Therefore, because the
following slip opinion is being made available prior to the Court's final action in this matter,
it cannot be considered the final decision of the Court. The official copy of the following
opinion will be published by the Supreme Court's Reporter of Decisions in the Official
Reports advance sheets following final action by the Court.
Docket No. 80383--Agenda 24--September 1996.
CURTIS BRAYE v. ARCHER-DANIELS-MIDLAND COMPANY, Appellant (All
Tri-R, Inc., Appellee).
Opinion filed February 6, 1997.
JUSTICE McMORROW delivered the opinion of the court:
This interlocutory appeal arises from two questions which were
certified by the circuit court pursuant to Supreme Court Rule 308
(155 Ill. 2d R. 308). First, we are asked to determine whether the
liability cap provided to an employer who has paid an injured
employee's workers' compensation benefits (Kotecki v. Cyclops
Welding Corp., 146 Ill. 2d 155 (1991)) may be waived by contract.
We also are asked to determine whether the alleged contractual
language at issue in the case at bar operates as a waiver of the
Kotecki cap or whether it is void for being in violation of the
Construction Contract Indemnification for Negligence Act (740 ILCS
35/0.01 et seq. (West 1994)).
BACKGROUND
On June 12, 1991, the plaintiff, Curtis Braye, sustained
injuries after falling from a motorized scaffold, while working as
a welder on a construction site at Archer-Daniels-Midland's (ADM)
manufacturing facility in Decatur, Illinois. Braye filed a workers'
compensation claim against his employer, All Tri-R, Inc., which was
settled for $172,000. In 1993, Braye filed an action against ADM
alleging violations of the Structural Work Act (Ill. Rev. Stat.
1989, ch. 48, par. 60 et seq. (subsequently 740 ILCS 150/0.01 et
seq. (West 1992)) (repealed by Pub. Act 89--2, eff. February 14,
1995)), and common law negligence.
In February of 1994, ADM filed its answer to Braye's complaint
as amended, denying the allegations. ADM also filed a third-party
action against All Tri-R, seeking contribution pursuant to the
Joint Tortfeasor Contribution Act (Ill. Rev. Stat. 1989, ch. 70,
par. 301 et seq.). In its initial prayer for relief, ADM sought
contribution in an amount commensurate with All Tri-R's relative
degree of culpability in proximately causing Braye's injuries, but
not to exceed All Tri-R's maximum liability under the Workers'
Compensation Act (820 ILCS 305/1 et seq. (West 1992)), consistent
with this court's decision in Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155 (1991). In Kotecki, this court held that an employer's
contribution liability to a third-party plaintiff is limited to the
amount of workers' compensation benefits paid to the injured
employee. Kotecki, 146 Ill. 2d 155.
In March of 1995, ADM filed a motion for leave to amend its
request for contribution from All Tri-R, now seeking an amount
commensurate with All Tri-R's relative degree of culpability and no
longer limited by All Tri-R's workers' compensation liability. ADM
premised its motion to amend on a purchase order which allegedly
governed the work in question. The purchase order states, in
pertinent part:
"If [All Tri-R's] work under the order involves
operations by [All Tri-R] on the premises of [ADM] or one
of its customers, [All Tri-R] shall take all necessary
precautions to prevent the occurrence of any injury to
person or damage to property during the progress of such
work and, except to the extent that any such injury or
damage is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All Tri-R]
shall pay [ADM] for all loss which may result in any way
from any act or omission of [All Tri-R], its agents,
employees or subcontractors."
ADM maintained that because this language evidenced All Tri-
R's intent to remain liable for all loss resulting from All Tri-R's
own negligence, ADM should be permitted to file its amended request
for contribution from All Tri-R without the limitation announced in
Kotecki. ADM argued that the purchase order established that All
Tri-R had bargained away any potential limit on its contribution
liability in a third-party action, including the limit set forth in
Kotecki. Additionally, ADM urged the circuit court to follow
Herington v. J.S. Alberici Construction Co., 266 Ill. App. 3d 489
(1994), where the court held that an employer is free to forgo the
protection of the Kotecki cap by virtue of a contract which
preceded the litigation.
All Tri-R responded to ADM's motion to amend by arguing that
the purchase order could be read as allowing indemnity for ADM's
own negligence and therefore was void and unenforceable under the
Construction Contract Indemnification for Negligence Act
(Indemnification Act) (740 ILCS 35/0.01 et seq. (West 1994)). All
Tri-R maintained that the purchase order was at best ambiguous. As
such, All Tri-R argued, the ambiguity must be construed against
ADM, which allegedly drafted the purchase order in question.
Finally, All Tri-R argued that even if the purchase order did not
violate the Indemnification Act, Herington was decided incorrectly.
Following a hearing on the motion, the circuit court concluded
that the language of the purchase order did not violate the
Indemnification Act. The court also determined that Herington
controlled its ruling because Herington recognized that an employer
may waive its right to assert Kotecki as a defense to a third-party
action for contribution. Accordingly, the court allowed ADM to file
an amended third-party complaint seeking contribution from All Tri-
R in an amount commensurate with its relative degree of
culpability. The court then certified the following questions
pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308):
"Whether the liability cap in third-party actions
provided to an employer who pays an injured employee's
worker['s] compensation benefits may be waived by
contract, and if so, whether a contract which states:
`If [All Tri-R's] work under the order
involves operations by [All Tri-R] on the premises
of [ADM] or one of its customers, [All Tri-R] shall
take all necessary precautions to prevent the
occurrence of any injury to person or damage to
property during the progress of such work and,
except to the extent that any such injury or damage
is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All
Tri-R] shall pay [ADM] for all loss which may
result in any way from any act or omission of [All
Tri-R], its agents, employees or subcontractors[ ]'
is an enforceable contract for contribution."
The appellate court answered the first question in the
affirmative, holding that an employer is free to decide whether to
forgo the Kotecki limit by virtue of a contract. 276 Ill. App. 3d
1066, 1070. However, the appellate court went on to find that the
language of the purchase order was void and unenforceable because
it violated the Indemnification Act. 276 Ill. App. 3d at 1070-71.
We granted ADM's petition for leave to appeal. 155 Ill. 2d R.
315(a).
ANALYSIS
I
We first address the question of whether the liability cap on
an employer's contribution liability in a third-party action may be
relinquished by contract. ADM submits that this court should adhere
to the holding and rationale in Herington v. J.S. Alberici
Construction Co., 266 Ill. App. 3d 489 (1994). In Herington, the
court held that in the context of a third-party action, an
employer's promise to pay for liability attributable to its own
negligence operated as a waiver of the limitation set forth in
Kotecki. Accord Liccardi v. Stolt Terminals (Chicago), Inc., 283
Ill. App. 3d 141 (1996). The court reasoned that because an
employer may waive the affirmative defense contained in section 11
of the Workers' Compensation Act in a direct action initiated by an
employee (Doyle v. Rhodes, 101 Ill. 2d 1 (1984)), it may also waive
the liability limitation announced in Kotecki in anticipation of
third-party litigation. ADM maintains that Herington does not
undermine Kotecki because it is consistent with the notion that an
employer should be able to contract for its potential liability.
ADM also contends that the rule in Herington advances two important
public policies: the policy which favors holding parties
responsible for their contractual obligations, and the policy which
favors the allocation of liability according to the parties'
relative fault in order to promote workplace safety.
All Tri-R counters, without citation to relevant authority,
that the rationale of Herington is flawed because the limitation on
an employer's contribution liability set forth in Kotecki cannot be
equated with an affirmative defense. All Tri-R further argues that
the rule announced in Herington contravenes the Workers'
Compensation Act as interpreted by Kotecki. Moreover, All Tri-R
contends that Herington was decided erroneously because the
Workers' Compensation Act is the sole measure of an employer's
liability, regardless of an employer's attempt to modify its rights
under the Act. See 820 ILCS 305/11 (West 1994).
We reject All Tri-R's argument that the Kotecki cap cannot by
waived by contract. In Doyle v. Rhodes, 101 Ill. 2d 1 (1984), this
court was called upon to determine whether the immunity of an
employer from an action at law by an injured employee provided by
sections 5(a) and 11 of the Workers' Compensation Act also bars an
action for contribution against the employer by a third party who
was partially responsible for the employee's injury. Section 11
provides, in relevant part, that the Act "shall be the measure of
the responsibility of any employer ***." 820 ILCS 305/11 (West
1994). This court determined that section 11 is an affirmative
defense to a common law action brought by an employee for a work-
related injury. Doyle, 101 Ill. 2d at 10; Robertson v. Travelers
Insurance Co., 95 Ill. 2d 441 (1983). As such, an employer's
potential for tort liability exists unless and until the defense of
the Workers' Compensation Act is established. Doyle, 101 Ill. 2d at
10-11. The court then construed the Contribution Act and held that
the legislature intended the Contribution Act to apply to an
employer in a third-party action regardless of an employer's
immunity from a direct action by the employee. Doyle, 101 Ill. 2d
at 13-14.
We agree with ADM's contention that Doyle is relevant to our
inquiry insofar as it recognized that an employer has the option to
determine whether to use the Workers' Compensation Act as a shield
from an action brought outside of the statutory scheme contemplated
by the Workers' Compensation Act. In the context of a direct action
brought by an employee, an employer generally may be expected to
avail itself of the protection afforded by the Workers'
Compensation Act. Geise v. Phoenix Co. of Chicago, Inc., 159 Ill. 2d 507, 514 (1994). However, an employer may choose not to invoke
the Act based on its expectation that the plaintiff's common law
negligence claim will fail. Geise, 159 Ill. 2d at 514. This choice
would enable the employer to evade liability completely. Geise, 159 Ill. 2d at 514; see, e.g., Rhodes v. Industrial Comm'n, 92 Ill. 2d 467 (1982) (employee's recovery in a common law action barred
further recovery from the employer under the Workers' Compensation
Act).
ADM maintains that just as an employer has the right to decide
whether to avail itself of the protections of the Workers'
Compensation Act in a direct action brought by an employee, the
employer also has the option to decide, in advance of potential
litigation by injured employees, whether to avail itself of the
Act's protections in a third-party action for contribution. In
essence, ADM simply maintains that if an employer determines it
advantageous to promise to assume liability for its own negligence,
it may not avoid its contractual agreement if it later perceives
the promise to be detrimental. According to ADM, neither the
Workers' Compensation Act nor our decision in Kotecki prohibits an
employer from entering into an agreement prior to the commencement
of litigation to assume full liability for damages commensurate
with its relative degree of fault. We agree.
Initially, we note that the Workers' Compensation Act does not
expressly preclude the operation of the basic tenets of contract
law where a workers' compensation claim is involved. Fredericks v.
Liberty Mutual Insurance Co., 255 Ill. App. 3d 1029 (1994). The
Workers' Compensation Act contemplates a trade off between an
employer and an employee in which the employee relinquishes his or
her right to recover damages for work-related injuries under a
common law negligence theory, while the employer forgoes common law
defenses in exchange for liability that is fixed according to a
statutory scheme. Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 180-81
(1978). This statutorily imposed bargain promotes the fundamental
purpose of the Act, which is to "afford protection to employees by
providing them with prompt and equitable compensation for their
injuries." Kelsay, 74 Ill. 2d at 180-81.
The equilibrium contemplated by the Workers' Compensation Act
may be disrupted when an employer pays benefits to an injured
employee and later is sued by a third party for contribution in an
action involving the same injured employee. Kotecki, 146 Ill. 2d 155. In Kotecki, this court restored the balance of the Workers'
Compensation Act, in light of the Joint Tortfeasor Contribution Act
(740 ILCS 100/1 et seq. (West 1992)), by weighing the competing
interests of the employer as a participant in the workers'
compensation system, and the equitable interest of the third-party
plaintiff in not being forced to pay more than its established
fault. Kotecki, 146 Ill. 2d at 164.
Kotecki confirmed Doyle's conclusion that "a negligent
employer is liable for contribution to a third party, regardless of
the Workers' Compensation Act." (Emphasis in original.) Kotecki,
146 Ill. 2d at 160. A third party's right of contribution exists
from the time that the person seeking recovery is injured. Rakowski
v. Lucente, 104 Ill. 2d 317 (1984). In holding that a third-party
plaintiff may seek contribution limited only by the amount of
workers' compensation benefits paid by the employer, this court
upheld a third-party defendant's right to contribution, while
preserving the employer's important right to rely on the protection
of the Workers' Compensation Act. Lannom v. Kosco, 158 Ill. 2d 535,
540 (1994).
Our concern for the employer in Kotecki centered on "whether
the employer will be forced to pay too much, thereby losing the
protection that the Workers' Compensation Act is supposed to
provide." (Emphasis added.) Kotecki, 146 Ill. 2d at 163. The law is
clear that an employer may not be compelled to forgo the
protections of the Workers' Compensation Act. However, the relief
sought by ADM in this case is premised upon an allegation that All
Tri-R voluntarily decided to forgo the protection of the Act by
virtue of its promise. We determine that nothing in Kotecki
prohibits an employer from agreeing to remain liable for its pro
rata share of damages proximately caused by its negligence,
notwithstanding the employer's ability to avail itself of the
Kotecki cap on its liability.
We further conclude that neither the language of the Workers'
Compensation Act nor public policy prohibits our determination that
an employer may waive the protection of the Workers' Compensation
Act. Section 23 of the Workers' Compensation Act provides that
"[n]o employee *** shall have power to waive any of the provisions
of this Act in regard to the amount of compensation which may be
payable to such employee *** except after approval by the
Commission ***." (Emphasis added.) 820 ILCS 305/23 (West 1994). In
enacting section 23 of the Workers' Compensation Act, the General
Assembly made an inherent determination regarding the relative
bargaining power between an employer and an employee. See generally
Checker Taxi Co. v. Industrial Comm'n, 343 Ill. 139 (1931)
(employer could not escape workers' compensation liability by
virtue of a contract with its employee). No similar prohibition
exists with respect to an employer's power to forgo its rights
under the Act.
This court held in Board of Education v. Chicago Teachers
Union, Local No. 1, 86 Ill. 2d 469 (1981), that the Workers'
Compensation Act does not prevent parties from agreeing to
supplement the benefits conferred by the Act. In Board of
Education, an employee sought to enforce provisions of a
collective-bargaining agreement between the Chicago board of
education and the Chicago Teacher's Union. Under the terms of the
agreement, the board had agreed to provide employees with certain
benefits in cases where a teacher had been assaulted. However, the
board sought to avoid its promise by arguing that enforcement of
the agreement would be contrary to provisions the Workers'
Compensation Act, which provide that the Act is the exclusive
remedy for employee claims. See Ill. Rev. Stat. 1977, ch. 48, pars.
138.5, 138.11.
This court rejected the board's arguments and determined that
the agreement at issue merely provided for supplemental benefits
for employees who were subjected to special dangers. Board of
Education, 86 Ill. 2d at 475. These benefits were contemplated
outside of and in addition to the benefits under the Workers'
Compensation Act. Finally, we concluded that the exclusive remedy
provision of the Workers' Compensation Act does not bar this type
of benefit. Board of Education, 86 Ill. 2d at 475.
The common thread in Doyle, Kotecki and Board of Education is
that an employer has the power to waive those protections afforded
by the Workers' Compensation Act which are intended to benefit the
employer. An employer's decision to invoke or relinquish the
protections of the Workers' Compensation Act may involve
considerations of business judgment. See generally Geise, 159 Ill. 2d at 514. Therefore, we conclude that the appellate court in
Herington properly followed Doyle to its logical conclusion by
determining that the decision to forgo the protection of the
Workers' Compensation Act is within the realm of discretionary
business decisions made by an employer and does not violate the
terms or policy of the Act. Indeed, our decision that an employer
may relinquish the liability limitation set forth in Kotecki, by
contract, is consistent with Illinois public policy which favors
freedom of contract. See Electrical Contractors' Ass'n v. A.S.
Schulman Electric Co., 391 Ill. 333 (1945).
We note that the dissenting justice in the appellate court
maintained that an alleged inequality of bargaining power between
All Tri-R and ADM would not permit the enforcement of a provision
in which All Tri-R purportedly waived the Kotecki cap. Disparity in
bargaining positions is often a factor considered in determining
whether a contract is unconscionable under the facts of a case.
Boatmen's National Bank v. Benton, 219 Ill. App. 3d 117 (1991). We
note that courts generally are reluctant to find a contract
unconscionable due to unequal bargaining power where both parties
are business entities. See, e.g., Dillman & Associates, Inc. v.
Capitol Leasing Co., 110 Ill. App. 3d 335 (1982). However, because
All Tri-R did not make such an argument before this court and
because nothing in the record at this early juncture in the
litigation supports the dissent's conclusion, we find it
inappropriate to address this issue further.
In response to the first question certified by the circuit
court in the case at bar, we hold that Illinois law and public
policy do not prohibit the enforcement of a contract whereby an
employer agrees to remain liable for the full amount of damages
attributable to its own negligence, notwithstanding the Kotecki
cap.
II
Because we hold that public policy is not violated by an
employer's decision to waive the protection afforded by the
Workers' Compensation Act, we now consider the second question
certified by the circuit court:
"whether a contract which states:
`If [All Tri-R's] work under the order involves
operations by [All Tri-R] on the premises of [ADM] or one
of its customers, [All Tri-R] shall take all necessary
precautions to prevent the occurrence of any injury to
person or damage to property during the progress of such
work and, except to the extent that any such injury or
damage is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All Tri-R]
shall pay [ADM] for all loss which may result in any way
from any act or omission of [All Tri-R], its agents,
employees or subcontractors[ ]'
is an enforceable contract for contribution."
The circuit court concluded that Herington controlled its
ruling, and therefore permitted ADM to amend its third-party
complaint to seek contribution from All Tri-R without the Kotecki
limit. The circuit court determined that the pertinent language of
the purchase order constituted more an agreement for contribution
than for indemnity, and held that the purchase order was not void
as being violative of section 1 the Indemnification Act (740 ILCS
35/0.01 (West 1994)). The appellate court agreed that Herington was
decided correctly, but reversed the circuit court on the basis that
the language of the purchase order violated section 1 of the
Indemnification Act and thus was void and unenforceable. 276 Ill.
App. 3d 1066.
On appeal, ADM argues that paragraph 12 of the purchase order
does not violate the Indemnification Act because it provides that
All Tri-R agreed to pay for "all" liability stemming from "any act
or omission of [All Tri-R], its agents, employees or
subcontractors," i.e., its own negligent conduct. ADM acknowledges
that it is prohibited from seeking indemnity from All Tri-R, and
maintains that its third-party action does not seek to enforce
paragraph 12 as a promise to indemnify. ADM argues that its third-
party complaint clearly states that it is seeking contribution
consistent with the Contribution Act. ADM contends that All Tri-R
cannot rely on Kotecki to alter the terms of the contract which
show All Tri-R's intent to accept "all" financial responsibility
for its own negligence.
In essence, ADM urges us to hold that if a determination of
relative liability between All Tri-R and ADM is made, and if the
percentage of fault attributed to All Tri-R's negligence equals a
sum greater than the $172,000 workers' compensation benefits, then
All Tri-R must pay the full amount of damages attributable to its
own negligence, notwithstanding Kotecki. ADM submits that paragraph
12 merely bars All Tri-R from attempting to limit its liability
because All Tri-R promised to "pay for all loss" stemming from its
own negligent acts, without qualification or reference to potential
limitations, such as the one set forth in Kotecki.
All Tri-R responds that the language of paragraph 12 is an
improper indemnification agreement because the clause which reads
"except to the extent that any such injury or damage is due solely
and directly to [ADM's] or its customer's negligence" suggests that
if there is concurrent fault between All Tri-R and ADM, then the
financial burden of a loss shifts to All Tri-R. On appeal, All Tri-
R argues that the language of paragraph 12 is clearly an indemnity
agreement. We note that at the trial court level, All Tri-R argued
that the language of the purchase order is at best ambiguous. On
appeal, All Tri-R contends that the language of the purchase order
does not embrace the concept of pro rata fault, and therefore
cannot be construed as evidence of All Tri-R's intent to waive
Kotecki and be bound only by the Joint Tortfeasor Contribution Act.
740 ILCS 100/2(b) (West 1992) (allows one joint tortfeasor to
obtain damages from another tortfeasor in an amount "paid by him in
excess of his pro rata share" of the common liability).
Section 1 of the Indemnification Act provides in relevant
part:
"With respect to contracts or agreements, either
public or private, for the construction, alteration,
repair or maintenance of a building structure, *** every
covenant, promise or agreement to indemnify or hold
harmless another person from that person's own negligence
is void as against public policy and wholly
unenforceable." 740 ILCS 35/1 (West 1994).
In order to evaluate the parties' contentions, we look to the
purpose of the Indemnification Act as well as cases in which the
Indemnification Act has been implicated or interpreted. We also
consider basic tenets of contract law and general principles
governing the right to contract.
We note that while courts will not enforce an agreement which
is contrary to public policy (O'Hara v. Ahlgren, Blumenfeld &
Kempster, 127 Ill. 2d 333 (1989); see also Rome v. Upton, 271 Ill.
App. 3d 517 (1995); Holstein v. Grossman, 246 Ill. App. 3d 719
(1993)), a contract should not be deemed illegal unless it is
expressly contrary to the law or public policy (Rome, 271 Ill. App.
3d at 520). The laws and the public policy of the state permit and
require freedom of contracting between competent parties.
Electrical Contractors' Ass'n v. A.S. Schulman Electric Co., 391 Ill. 333 (1945), citing Zeigler v. Illinois Trust & Savings Bank,
245 Ill. 180 (1910). Whether a contract is contrary to public
policy depends on the peculiar facts and circumstances of each
case, as well as the language of the contract itself. O'Hara, 127
Ill. 2d at 341-42; Electrical Contractors' Ass'n, 391 Ill. at 339.
On appeal, neither party argues that factual issues remain to
be determined with respect to the purchase order. The parties urge
this court to construe the provision at issue as a matter of law.
This court has previously considered the purpose of the
Indemnification Act. See Davis v. Commonwealth Edison Co., 61 Ill. 2d 494 (1975); Capua v. W.E. O'Neil Construction Co., 67 Ill. 2d 255 (1977). In Davis, this court reasoned:
"It is generally known that indemnity and hold-
harmless agreements are most widely used in the
construction industry. The legislature in enacting
section 1 may have considered that the widespread use of
these agreements in the industry may have removed or
reduced the incentives to protect workers and others from
injury. *** The statute would thwart attempts to avoid
the consequences of liability and thereby insure a
continuing motivation for persons responsible for
construction activities to take accident prevention
measures and provide safe working conditions." Davis, 61 Ill. 2d at 498-99.
The purposes of the Indemnification Act were again examined in
Capua, 67 Ill. 2d 255. There, sections 1 and 3 of the Act were
harmonized. Section 3 provides that the Act "does not apply to
construction bonds or insurance contracts or agreements." 740 ILCS
35/3 (West 1994). In Capua, this court confirmed the legislative
purpose set forth in Davis and further determined that section 3
deals with an additional protective interest--the interest of
construction workers, as well as members of the general public who
sustain construction related injuries, in supplemental sources of
compensation. Capua, 67 Ill. 2d at 260. Davis and Capua demonstrate
that as a matter of public policy, courts will not enforce promises
to indemnify contained in construction contracts because their
dominant aspect is the disincentive for the indemnitee to exercise
care. See Davis v. Commonwealth Edison Co., 61 Ill. 2d 494 (1975);
Capua v. W.E. O'Neil Construction Co., 67 Ill. 2d 255 (1977); see
also GTE North, Inc. v. Henkles & McCoy, Inc., 245 Ill. App. 3d
322, 329 (1993).
As a general principle of contract law, statutes and laws in
existence at the time a contract is executed are considered part of
the contract. Larned v. First Chicago Corp., 264 Ill. App. 3d 697
(1994). It is presumed that parties contract with knowledge of the
existing law. Monroe Dearborn Ltd. Partnership v. Board of
Education, 271 Ill. App. 3d 457 (1995). Additionally, we recognize
that a construction of a contract which renders the agreement
enforceable rather than void is preferred. Schiro v. W.E. Gould &
Co., 18 Ill. 2d 538 (1960).
At the time of the parties' contract in this case, ADM was
presumed to know that indemnity promises are void in violation of
public policy, and that a court would not enforce any contractual
language which would suggest such a promise. In fact, ADM concedes
that from the inception of the contract, any attempt to seek
indemnity from All Tri-R would be futile. Consequently, we cannot
conclude that paragraph 12 extinguished ADM's incentive to exercise
care with respect to the construction taking place on its premises.
Furthermore, it is not readily apparent that indemnity is the
dominant aspect of paragraph 12.
We hold that under the facts and circumstances of this case,
paragraph 12 is not void as being violative of the Indemnification
Act. We note that ADM's third-party complaint expressly states that
it seeks contribution pursuant to the Contribution Act. Thus, the
policies of the Contribution Act are not offended by ADM's prayer
for relief because the goals of achieving comparative fault and
encouraging good-faith settlement remain intact.
In summary, we hold that an employer may enter into a valid
and enforceable contractual agreement to waive the Kotecki
limitation on the employer's contribution liability. We further
hold that the purchase order in the case at bar is not void as
being violative of the Indemnification Act.
Certified questions answered;
Appellate court affirmed in part
and reversed in part;
circuit court affirmed;
cause remanded to the circuit court.
JUSTICE BILANDIC took no part in the consideration or decision
of this case.
to request a rehearing. Also, opinions are subject to modification, correction or withdrawal at
anytime prior to issuance of the mandate by the Clerk of the Court. Therefore, because the
following slip opinion is being made available prior to the Court's final action in this matter,
it cannot be considered the final decision of the Court. The official copy of the following
opinion will be published by the Supreme Court's Reporter of Decisions in the Official
Reports advance sheets following final action by the Court.
Docket No. 80383--Agenda 24--September 1996.
CURTIS BRAYE v. ARCHER-DANIELS-MIDLAND COMPANY, Appellant (All
Tri-R, Inc., Appellee).
Opinion filed February 6, 1997.
JUSTICE McMORROW delivered the opinion of the court:
This interlocutory appeal arises from two questions which were
certified by the circuit court pursuant to Supreme Court Rule 308
(155 Ill. 2d R. 308). First, we are asked to determine whether the
liability cap provided to an employer who has paid an injured
employee's workers' compensation benefits (Kotecki v. Cyclops
Welding Corp., 146 Ill. 2d 155 (1991)) may be waived by contract.
We also are asked to determine whether the alleged contractual
language at issue in the case at bar operates as a waiver of the
Kotecki cap or whether it is void for being in violation of the
Construction Contract Indemnification for Negligence Act (740 ILCS
35/0.01 et seq. (West 1994)).
BACKGROUND
On June 12, 1991, the plaintiff, Curtis Braye, sustained
injuries after falling from a motorized scaffold, while working as
a welder on a construction site at Archer-Daniels-Midland's (ADM)
manufacturing facility in Decatur, Illinois. Braye filed a workers'
compensation claim against his employer, All Tri-R, Inc., which was
settled for $172,000. In 1993, Braye filed an action against ADM
alleging violations of the Structural Work Act (Ill. Rev. Stat.
1989, ch. 48, par. 60 et seq. (subsequently 740 ILCS 150/0.01 et
seq. (West 1992)) (repealed by Pub. Act 89--2, eff. February 14,
1995)), and common law negligence.
In February of 1994, ADM filed its answer to Braye's complaint
as amended, denying the allegations. ADM also filed a third-party
action against All Tri-R, seeking contribution pursuant to the
Joint Tortfeasor Contribution Act (Ill. Rev. Stat. 1989, ch. 70,
par. 301 et seq.). In its initial prayer for relief, ADM sought
contribution in an amount commensurate with All Tri-R's relative
degree of culpability in proximately causing Braye's injuries, but
not to exceed All Tri-R's maximum liability under the Workers'
Compensation Act (820 ILCS 305/1 et seq. (West 1992)), consistent
with this court's decision in Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155 (1991). In Kotecki, this court held that an employer's
contribution liability to a third-party plaintiff is limited to the
amount of workers' compensation benefits paid to the injured
employee. Kotecki, 146 Ill. 2d 155.
In March of 1995, ADM filed a motion for leave to amend its
request for contribution from All Tri-R, now seeking an amount
commensurate with All Tri-R's relative degree of culpability and no
longer limited by All Tri-R's workers' compensation liability. ADM
premised its motion to amend on a purchase order which allegedly
governed the work in question. The purchase order states, in
pertinent part:
"If [All Tri-R's] work under the order involves
operations by [All Tri-R] on the premises of [ADM] or one
of its customers, [All Tri-R] shall take all necessary
precautions to prevent the occurrence of any injury to
person or damage to property during the progress of such
work and, except to the extent that any such injury or
damage is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All Tri-R]
shall pay [ADM] for all loss which may result in any way
from any act or omission of [All Tri-R], its agents,
employees or subcontractors."
ADM maintained that because this language evidenced All Tri-
R's intent to remain liable for all loss resulting from All Tri-R's
own negligence, ADM should be permitted to file its amended request
for contribution from All Tri-R without the limitation announced in
Kotecki. ADM argued that the purchase order established that All
Tri-R had bargained away any potential limit on its contribution
liability in a third-party action, including the limit set forth in
Kotecki. Additionally, ADM urged the circuit court to follow
Herington v. J.S. Alberici Construction Co., 266 Ill. App. 3d 489
(1994), where the court held that an employer is free to forgo the
protection of the Kotecki cap by virtue of a contract which
preceded the litigation.
All Tri-R responded to ADM's motion to amend by arguing that
the purchase order could be read as allowing indemnity for ADM's
own negligence and therefore was void and unenforceable under the
Construction Contract Indemnification for Negligence Act
(Indemnification Act) (740 ILCS 35/0.01 et seq. (West 1994)). All
Tri-R maintained that the purchase order was at best ambiguous. As
such, All Tri-R argued, the ambiguity must be construed against
ADM, which allegedly drafted the purchase order in question.
Finally, All Tri-R argued that even if the purchase order did not
violate the Indemnification Act, Herington was decided incorrectly.
Following a hearing on the motion, the circuit court concluded
that the language of the purchase order did not violate the
Indemnification Act. The court also determined that Herington
controlled its ruling because Herington recognized that an employer
may waive its right to assert Kotecki as a defense to a third-party
action for contribution. Accordingly, the court allowed ADM to file
an amended third-party complaint seeking contribution from All Tri-
R in an amount commensurate with its relative degree of
culpability. The court then certified the following questions
pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308):
"Whether the liability cap in third-party actions
provided to an employer who pays an injured employee's
worker['s] compensation benefits may be waived by
contract, and if so, whether a contract which states:
`If [All Tri-R's] work under the order
involves operations by [All Tri-R] on the premises
of [ADM] or one of its customers, [All Tri-R] shall
take all necessary precautions to prevent the
occurrence of any injury to person or damage to
property during the progress of such work and,
except to the extent that any such injury or damage
is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All
Tri-R] shall pay [ADM] for all loss which may
result in any way from any act or omission of [All
Tri-R], its agents, employees or subcontractors[ ]'
is an enforceable contract for contribution."
The appellate court answered the first question in the
affirmative, holding that an employer is free to decide whether to
forgo the Kotecki limit by virtue of a contract. 276 Ill. App. 3d
1066, 1070. However, the appellate court went on to find that the
language of the purchase order was void and unenforceable because
it violated the Indemnification Act. 276 Ill. App. 3d at 1070-71.
We granted ADM's petition for leave to appeal. 155 Ill. 2d R.
315(a).
ANALYSIS
I
We first address the question of whether the liability cap on
an employer's contribution liability in a third-party action may be
relinquished by contract. ADM submits that this court should adhere
to the holding and rationale in Herington v. J.S. Alberici
Construction Co., 266 Ill. App. 3d 489 (1994). In Herington, the
court held that in the context of a third-party action, an
employer's promise to pay for liability attributable to its own
negligence operated as a waiver of the limitation set forth in
Kotecki. Accord Liccardi v. Stolt Terminals (Chicago), Inc., 283
Ill. App. 3d 141 (1996). The court reasoned that because an
employer may waive the affirmative defense contained in section 11
of the Workers' Compensation Act in a direct action initiated by an
employee (Doyle v. Rhodes, 101 Ill. 2d 1 (1984)), it may also waive
the liability limitation announced in Kotecki in anticipation of
third-party litigation. ADM maintains that Herington does not
undermine Kotecki because it is consistent with the notion that an
employer should be able to contract for its potential liability.
ADM also contends that the rule in Herington advances two important
public policies: the policy which favors holding parties
responsible for their contractual obligations, and the policy which
favors the allocation of liability according to the parties'
relative fault in order to promote workplace safety.
All Tri-R counters, without citation to relevant authority,
that the rationale of Herington is flawed because the limitation on
an employer's contribution liability set forth in Kotecki cannot be
equated with an affirmative defense. All Tri-R further argues that
the rule announced in Herington contravenes the Workers'
Compensation Act as interpreted by Kotecki. Moreover, All Tri-R
contends that Herington was decided erroneously because the
Workers' Compensation Act is the sole measure of an employer's
liability, regardless of an employer's attempt to modify its rights
under the Act. See 820 ILCS 305/11 (West 1994).
We reject All Tri-R's argument that the Kotecki cap cannot by
waived by contract. In Doyle v. Rhodes, 101 Ill. 2d 1 (1984), this
court was called upon to determine whether the immunity of an
employer from an action at law by an injured employee provided by
sections 5(a) and 11 of the Workers' Compensation Act also bars an
action for contribution against the employer by a third party who
was partially responsible for the employee's injury. Section 11
provides, in relevant part, that the Act "shall be the measure of
the responsibility of any employer ***." 820 ILCS 305/11 (West
1994). This court determined that section 11 is an affirmative
defense to a common law action brought by an employee for a work-
related injury. Doyle, 101 Ill. 2d at 10; Robertson v. Travelers
Insurance Co., 95 Ill. 2d 441 (1983). As such, an employer's
potential for tort liability exists unless and until the defense of
the Workers' Compensation Act is established. Doyle, 101 Ill. 2d at
10-11. The court then construed the Contribution Act and held that
the legislature intended the Contribution Act to apply to an
employer in a third-party action regardless of an employer's
immunity from a direct action by the employee. Doyle, 101 Ill. 2d
at 13-14.
We agree with ADM's contention that Doyle is relevant to our
inquiry insofar as it recognized that an employer has the option to
determine whether to use the Workers' Compensation Act as a shield
from an action brought outside of the statutory scheme contemplated
by the Workers' Compensation Act. In the context of a direct action
brought by an employee, an employer generally may be expected to
avail itself of the protection afforded by the Workers'
Compensation Act. Geise v. Phoenix Co. of Chicago, Inc., 159 Ill. 2d 507, 514 (1994). However, an employer may choose not to invoke
the Act based on its expectation that the plaintiff's common law
negligence claim will fail. Geise, 159 Ill. 2d at 514. This choice
would enable the employer to evade liability completely. Geise, 159 Ill. 2d at 514; see, e.g., Rhodes v. Industrial Comm'n, 92 Ill. 2d 467 (1982) (employee's recovery in a common law action barred
further recovery from the employer under the Workers' Compensation
Act).
ADM maintains that just as an employer has the right to decide
whether to avail itself of the protections of the Workers'
Compensation Act in a direct action brought by an employee, the
employer also has the option to decide, in advance of potential
litigation by injured employees, whether to avail itself of the
Act's protections in a third-party action for contribution. In
essence, ADM simply maintains that if an employer determines it
advantageous to promise to assume liability for its own negligence,
it may not avoid its contractual agreement if it later perceives
the promise to be detrimental. According to ADM, neither the
Workers' Compensation Act nor our decision in Kotecki prohibits an
employer from entering into an agreement prior to the commencement
of litigation to assume full liability for damages commensurate
with its relative degree of fault. We agree.
Initially, we note that the Workers' Compensation Act does not
expressly preclude the operation of the basic tenets of contract
law where a workers' compensation claim is involved. Fredericks v.
Liberty Mutual Insurance Co., 255 Ill. App. 3d 1029 (1994). The
Workers' Compensation Act contemplates a trade off between an
employer and an employee in which the employee relinquishes his or
her right to recover damages for work-related injuries under a
common law negligence theory, while the employer forgoes common law
defenses in exchange for liability that is fixed according to a
statutory scheme. Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 180-81
(1978). This statutorily imposed bargain promotes the fundamental
purpose of the Act, which is to "afford protection to employees by
providing them with prompt and equitable compensation for their
injuries." Kelsay, 74 Ill. 2d at 180-81.
The equilibrium contemplated by the Workers' Compensation Act
may be disrupted when an employer pays benefits to an injured
employee and later is sued by a third party for contribution in an
action involving the same injured employee. Kotecki, 146 Ill. 2d 155. In Kotecki, this court restored the balance of the Workers'
Compensation Act, in light of the Joint Tortfeasor Contribution Act
(740 ILCS 100/1 et seq. (West 1992)), by weighing the competing
interests of the employer as a participant in the workers'
compensation system, and the equitable interest of the third-party
plaintiff in not being forced to pay more than its established
fault. Kotecki, 146 Ill. 2d at 164.
Kotecki confirmed Doyle's conclusion that "a negligent
employer is liable for contribution to a third party, regardless of
the Workers' Compensation Act." (Emphasis in original.) Kotecki,
146 Ill. 2d at 160. A third party's right of contribution exists
from the time that the person seeking recovery is injured. Rakowski
v. Lucente, 104 Ill. 2d 317 (1984). In holding that a third-party
plaintiff may seek contribution limited only by the amount of
workers' compensation benefits paid by the employer, this court
upheld a third-party defendant's right to contribution, while
preserving the employer's important right to rely on the protection
of the Workers' Compensation Act. Lannom v. Kosco, 158 Ill. 2d 535,
540 (1994).
Our concern for the employer in Kotecki centered on "whether
the employer will be forced to pay too much, thereby losing the
protection that the Workers' Compensation Act is supposed to
provide." (Emphasis added.) Kotecki, 146 Ill. 2d at 163. The law is
clear that an employer may not be compelled to forgo the
protections of the Workers' Compensation Act. However, the relief
sought by ADM in this case is premised upon an allegation that All
Tri-R voluntarily decided to forgo the protection of the Act by
virtue of its promise. We determine that nothing in Kotecki
prohibits an employer from agreeing to remain liable for its pro
rata share of damages proximately caused by its negligence,
notwithstanding the employer's ability to avail itself of the
Kotecki cap on its liability.
We further conclude that neither the language of the Workers'
Compensation Act nor public policy prohibits our determination that
an employer may waive the protection of the Workers' Compensation
Act. Section 23 of the Workers' Compensation Act provides that
"[n]o employee *** shall have power to waive any of the provisions
of this Act in regard to the amount of compensation which may be
payable to such employee *** except after approval by the
Commission ***." (Emphasis added.) 820 ILCS 305/23 (West 1994). In
enacting section 23 of the Workers' Compensation Act, the General
Assembly made an inherent determination regarding the relative
bargaining power between an employer and an employee. See generally
Checker Taxi Co. v. Industrial Comm'n, 343 Ill. 139 (1931)
(employer could not escape workers' compensation liability by
virtue of a contract with its employee). No similar prohibition
exists with respect to an employer's power to forgo its rights
under the Act.
This court held in Board of Education v. Chicago Teachers
Union, Local No. 1, 86 Ill. 2d 469 (1981), that the Workers'
Compensation Act does not prevent parties from agreeing to
supplement the benefits conferred by the Act. In Board of
Education, an employee sought to enforce provisions of a
collective-bargaining agreement between the Chicago board of
education and the Chicago Teacher's Union. Under the terms of the
agreement, the board had agreed to provide employees with certain
benefits in cases where a teacher had been assaulted. However, the
board sought to avoid its promise by arguing that enforcement of
the agreement would be contrary to provisions the Workers'
Compensation Act, which provide that the Act is the exclusive
remedy for employee claims. See Ill. Rev. Stat. 1977, ch. 48, pars.
138.5, 138.11.
This court rejected the board's arguments and determined that
the agreement at issue merely provided for supplemental benefits
for employees who were subjected to special dangers. Board of
Education, 86 Ill. 2d at 475. These benefits were contemplated
outside of and in addition to the benefits under the Workers'
Compensation Act. Finally, we concluded that the exclusive remedy
provision of the Workers' Compensation Act does not bar this type
of benefit. Board of Education, 86 Ill. 2d at 475.
The common thread in Doyle, Kotecki and Board of Education is
that an employer has the power to waive those protections afforded
by the Workers' Compensation Act which are intended to benefit the
employer. An employer's decision to invoke or relinquish the
protections of the Workers' Compensation Act may involve
considerations of business judgment. See generally Geise, 159 Ill. 2d at 514. Therefore, we conclude that the appellate court in
Herington properly followed Doyle to its logical conclusion by
determining that the decision to forgo the protection of the
Workers' Compensation Act is within the realm of discretionary
business decisions made by an employer and does not violate the
terms or policy of the Act. Indeed, our decision that an employer
may relinquish the liability limitation set forth in Kotecki, by
contract, is consistent with Illinois public policy which favors
freedom of contract. See Electrical Contractors' Ass'n v. A.S.
Schulman Electric Co., 391 Ill. 333 (1945).
We note that the dissenting justice in the appellate court
maintained that an alleged inequality of bargaining power between
All Tri-R and ADM would not permit the enforcement of a provision
in which All Tri-R purportedly waived the Kotecki cap. Disparity in
bargaining positions is often a factor considered in determining
whether a contract is unconscionable under the facts of a case.
Boatmen's National Bank v. Benton, 219 Ill. App. 3d 117 (1991). We
note that courts generally are reluctant to find a contract
unconscionable due to unequal bargaining power where both parties
are business entities. See, e.g., Dillman & Associates, Inc. v.
Capitol Leasing Co., 110 Ill. App. 3d 335 (1982). However, because
All Tri-R did not make such an argument before this court and
because nothing in the record at this early juncture in the
litigation supports the dissent's conclusion, we find it
inappropriate to address this issue further.
In response to the first question certified by the circuit
court in the case at bar, we hold that Illinois law and public
policy do not prohibit the enforcement of a contract whereby an
employer agrees to remain liable for the full amount of damages
attributable to its own negligence, notwithstanding the Kotecki
cap.
II
Because we hold that public policy is not violated by an
employer's decision to waive the protection afforded by the
Workers' Compensation Act, we now consider the second question
certified by the circuit court:
"whether a contract which states:
`If [All Tri-R's] work under the order involves
operations by [All Tri-R] on the premises of [ADM] or one
of its customers, [All Tri-R] shall take all necessary
precautions to prevent the occurrence of any injury to
person or damage to property during the progress of such
work and, except to the extent that any such injury or
damage is due solely and directly to [ADM's] or its
customer's negligence, as the case may be, [All Tri-R]
shall pay [ADM] for all loss which may result in any way
from any act or omission of [All Tri-R], its agents,
employees or subcontractors[ ]'
is an enforceable contract for contribution."
The circuit court concluded that Herington controlled its
ruling, and therefore permitted ADM to amend its third-party
complaint to seek contribution from All Tri-R without the Kotecki
limit. The circuit court determined that the pertinent language of
the purchase order constituted more an agreement for contribution
than for indemnity, and held that the purchase order was not void
as being violative of section 1 the Indemnification Act (740 ILCS
35/0.01 (West 1994)). The appellate court agreed that Herington was
decided correctly, but reversed the circuit court on the basis that
the language of the purchase order violated section 1 of the
Indemnification Act and thus was void and unenforceable. 276 Ill.
App. 3d 1066.
On appeal, ADM argues that paragraph 12 of the purchase order
does not violate the Indemnification Act because it provides that
All Tri-R agreed to pay for "all" liability stemming from "any act
or omission of [All Tri-R], its agents, employees or
subcontractors," i.e., its own negligent conduct. ADM acknowledges
that it is prohibited from seeking indemnity from All Tri-R, and
maintains that its third-party action does not seek to enforce
paragraph 12 as a promise to indemnify. ADM argues that its third-
party complaint clearly states that it is seeking contribution
consistent with the Contribution Act. ADM contends that All Tri-R
cannot rely on Kotecki to alter the terms of the contract which
show All Tri-R's intent to accept "all" financial responsibility
for its own negligence.
In essence, ADM urges us to hold that if a determination of
relative liability between All Tri-R and ADM is made, and if the
percentage of fault attributed to All Tri-R's negligence equals a
sum greater than the $172,000 workers' compensation benefits, then
All Tri-R must pay the full amount of damages attributable to its
own negligence, notwithstanding Kotecki. ADM submits that paragraph
12 merely bars All Tri-R from attempting to limit its liability
because All Tri-R promised to "pay for all loss" stemming from its
own negligent acts, without qualification or reference to potential
limitations, such as the one set forth in Kotecki.
All Tri-R responds that the language of paragraph 12 is an
improper indemnification agreement because the clause which reads
"except to the extent that any such injury or damage is due solely
and directly to [ADM's] or its customer's negligence" suggests that
if there is concurrent fault between All Tri-R and ADM, then the
financial burden of a loss shifts to All Tri-R. On appeal, All Tri-
R argues that the language of paragraph 12 is clearly an indemnity
agreement. We note that at the trial court level, All Tri-R argued
that the language of the purchase order is at best ambiguous. On
appeal, All Tri-R contends that the language of the purchase order
does not embrace the concept of pro rata fault, and therefore
cannot be construed as evidence of All Tri-R's intent to waive
Kotecki and be bound only by the Joint Tortfeasor Contribution Act.
740 ILCS 100/2(b) (West 1992) (allows one joint tortfeasor to
obtain damages from another tortfeasor in an amount "paid by him in
excess of his pro rata share" of the common liability).
Section 1 of the Indemnification Act provides in relevant
part:
"With respect to contracts or agreements, either
public or private, for the construction, alteration,
repair or maintenance of a building structure, *** every
covenant, promise or agreement to indemnify or hold
harmless another person from that person's own negligence
is void as against public policy and wholly
unenforceable." 740 ILCS 35/1 (West 1994).
In order to evaluate the parties' contentions, we look to the
purpose of the Indemnification Act as well as cases in which the
Indemnification Act has been implicated or interpreted. We also
consider basic tenets of contract law and general principles
governing the right to contract.
We note that while courts will not enforce an agreement which
is contrary to public policy (O'Hara v. Ahlgren, Blumenfeld &
Kempster, 127 Ill. 2d 333 (1989); see also Rome v. Upton, 271 Ill.
App. 3d 517 (1995); Holstein v. Grossman, 246 Ill. App. 3d 719
(1993)), a contract should not be deemed illegal unless it is
expressly contrary to the law or public policy (Rome, 271 Ill. App.
3d at 520). The laws and the public policy of the state permit and
require freedom of contracting between competent parties.
Electrical Contractors' Ass'n v. A.S. Schulman Electric Co., 391 Ill. 333 (1945), citing Zeigler v. Illinois Trust & Savings Bank,
245 Ill. 180 (1910). Whether a contract is contrary to public
policy depends on the peculiar facts and circumstances of each
case, as well as the language of the contract itself. O'Hara, 127
Ill. 2d at 341-42; Electrical Contractors' Ass'n, 391 Ill. at 339.
On appeal, neither party argues that factual issues remain to
be determined with respect to the purchase order. The parties urge
this court to construe the provision at issue as a matter of law.
This court has previously considered the purpose of the
Indemnification Act. See Davis v. Commonwealth Edison Co., 61 Ill. 2d 494 (1975); Capua v. W.E. O'Neil Construction Co., 67 Ill. 2d 255 (1977). In Davis, this court reasoned:
"It is generally known that indemnity and hold-
harmless agreements are most widely used in the
construction industry. The legislature in enacting
section 1 may have considered that the widespread use of
these agreements in the industry may have removed or
reduced the incentives to protect workers and others from
injury. *** The statute would thwart attempts to avoid
the consequences of liability and thereby insure a
continuing motivation for persons responsible for
construction activities to take accident prevention
measures and provide safe working conditions." Davis, 61 Ill. 2d at 498-99.
The purposes of the Indemnification Act were again examined in
Capua, 67 Ill. 2d 255. There, sections 1 and 3 of the Act were
harmonized. Section 3 provides that the Act "does not apply to
construction bonds or insurance contracts or agreements." 740 ILCS
35/3 (West 1994). In Capua, this court confirmed the legislative
purpose set forth in Davis and further determined that section 3
deals with an additional protective interest--the interest of
construction workers, as well as members of the general public who
sustain construction related injuries, in supplemental sources of
compensation. Capua, 67 Ill. 2d at 260. Davis and Capua demonstrate
that as a matter of public policy, courts will not enforce promises
to indemnify contained in construction contracts because their
dominant aspect is the disincentive for the indemnitee to exercise
care. See Davis v. Commonwealth Edison Co., 61 Ill. 2d 494 (1975);
Capua v. W.E. O'Neil Construction Co., 67 Ill. 2d 255 (1977); see
also GTE North, Inc. v. Henkles & McCoy, Inc., 245 Ill. App. 3d
322, 329 (1993).
As a general principle of contract law, statutes and laws in
existence at the time a contract is executed are considered part of
the contract. Larned v. First Chicago Corp., 264 Ill. App. 3d 697
(1994). It is presumed that parties contract with knowledge of the
existing law. Monroe Dearborn Ltd. Partnership v. Board of
Education, 271 Ill. App. 3d 457 (1995). Additionally, we recognize
that a construction of a contract which renders the agreement
enforceable rather than void is preferred. Schiro v. W.E. Gould &
Co., 18 Ill. 2d 538 (1960).
At the time of the parties' contract in this case, ADM was
presumed to know that indemnity promises are void in violation of
public policy, and that a court would not enforce any contractual
language which would suggest such a promise. In fact, ADM concedes
that from the inception of the contract, any attempt to seek
indemnity from All Tri-R would be futile. Consequently, we cannot
conclude that paragraph 12 extinguished ADM's incentive to exercise
care with respect to the construction taking place on its premises.
Furthermore, it is not readily apparent that indemnity is the
dominant aspect of paragraph 12.
We hold that under the facts and circumstances of this case,
paragraph 12 is not void as being violative of the Indemnification
Act. We note that ADM's third-party complaint expressly states that
it seeks contribution pursuant to the Contribution Act. Thus, the
policies of the Contribution Act are not offended by ADM's prayer
for relief because the goals of achieving comparative fault and
encouraging good-faith settlement remain intact.
In summary, we hold that an employer may enter into a valid
and enforceable contractual agreement to waive the Kotecki
limitation on the employer's contribution liability. We further
hold that the purchase order in the case at bar is not void as
being violative of the Indemnification Act.
Certified questions answered;
Appellate court affirmed in part
and reversed in part;
circuit court affirmed;
cause remanded to the circuit court.
JUSTICE BILANDIC took no part in the consideration or decision
of this case.
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