SOVEREIGN IMMUNITY, INDEMNITY AGREEMENTS, MUNICIPALITIES, COMPARATIVE FAULT SET OFF
Michael J. Roper
PGIT Panel Attorney
Bell, Leeper, & Roper, P.A.

On July 7, 2005, the Supreme Court of Florida issued an important decision regarding sovereign immunity in American Home Assurance Co., et al. v. National Railroad Passenger Corp., et al., 2005 WL 1580639 (Fla.).   The issue presented for the   Court’s consideration was whether a governmental entity, in this specific instance, a municipal authority, had the requisite authority to enter into a contract of indemnity with a private entity, whereby the governmental entity was required to indemnify and   hold   harmless the private entity, for any and all claims, whether in tort or in contract, including   claims arising out of   the private entity’s own negligence.   In the above suit, the governmental entity had entered into such a contract of indemnification, and was seeking to avoid the enforcement of that agreement, arguing that the agreement amounted to an impermissible and thus unenforceable waiver of its sovereign immunity.

The Court held that §768.28, Fla. Stat., was not applicable to the indemnity agreement   between the   governmental entity and the private party, because that statute applied   only when the governmental entity was being sued in tort, and hence was not applicable   to   a   claim based   on contract.   Secondly, the Court concluded that a municipality, pursuant to the Home Rule Powers Act has broad authority to contract and that the indemnification provision was part and parcel of a contract which was “fairly authorized” by Florida law.   The Court held as follows:   “Accordingly, we conclude that a municipal agency .   .   . has the inherent authority to contract with private parties and enter into an indemnification agreement as part of a contract with a private party and may not invoke sovereign immunity to defeat its obligations under the contract.”

Although the specific holdings in this case are limited in scope, this decision is likely to have far reaching implications for the doctrine of sovereign immunity in Florida, well beyond the conclusions outlined above.   First of all, this decision represents yet a further erosion of the concept of sovereign immunity in Florida by the Supreme Court.   This continues the recent trend by this Court.   Secondly, the Court went to great lengths to recognize a dichotomy between a municipality’s entitlement to sovereign immunity under   Florida law,   as contrasted   with   sovereign immunity which has traditionally been enjoyed by the state and its agencies.   Heretofore, this distinction has not been   expressly   recognized in the recent sovereign immunity cases throughout the state, the majority of which have involved claims against municipalities.

In reaching its decision in this case, the   Court   did not directly rule on whether the state and its agencies are authorized to enter into   indemnity contracts   with private entities.   The Court did, by implication, suggest that absent a specific grant of statutory authority, the state and its agencies, would not be entitled to enter into contracts, including presumably contracts of indemnity with private entities.   However, the circumstances under which the state, its agencies, counties or other non- municipal   public entities   may enter into contracts of indemnity, remain unsettled under Florida law.

However, perhaps the most troubling aspect of this decision was Justice Cantero’s concurring opinion in which he stated that §768.28, Fla. Stat., should be construed in favor of granting immunity to the state and its agencies, but against granting immunity to municipalities.   He appears to base his decision to restrict the sovereign immunity of municipalities, in part, upon the consideration that the state would not   be   responsible   to pay any judgments rendered against a municipality.   Justice Cantero appears unconcerned that this ruling will have an adverse financial impact upon municipalities, which the majority decision equated to “. . . a large business institution”, because “the state will not pay a dime. ”.   It is doubtful that the citizens and taxpayers of municipalities throughout the state will share the Court’s seemingly cavalier dismissal of the financial burdens which have been imposed on the public treasury, by this decision.  

Thankfully the Court did at least acknowledge that municipalities are still entitled to the protection of §768.28, Fla. Stat., by virtue of the Legislature’s clear expression of intent to include said entities within the protections of that statute. However, given Justice Cantero’s announcement that said statute should be construed strictly against granting sovereign immunity to a municipality, it is reasonable to expect numerous future challenges to the sovereign immunity of municipalities and their agencies, in many different arenas.   We may well see a stark divergence in the   future case law   between sovereign immunity   afforded the state and counties and that available to municipalities and their agencies.    Decisions that previously were   resolved in   favor   of   granting sovereign immunity to municipalities, will now likely be construed   strictly in favor of denying sovereign immunity.   Accordingly, this decision is likely to herald a commensurate increase in the tort liability exposure for municipalities throughout the state.   Perhaps that spectre will encourage the Legislature to amend §768.28, Fla. Stat., to include a specific prohibition against all governmental entities agreeing to indemnify private parties.   The statute currently does include a comparable provision, disallowing one governmental entity from indemnifying another, for the other party’s negligence.   See, §768.28(18), Fla. Stat.

Only Justice Quince, who wrote a dissenting opinion, accepted the argument that all governmental entities should be precluded   from entering into indemnity contracts with private entities.   She expressed concern that the majority’s ruling would allow governmental entities to waive the state’s sovereign immunity by entering into contracts, thus achieving through contract a result they would be precluded from achieving through ordinance or resolution.

Finally, in the above decision the Court resolved a comparative negligence issue and held that a vicariously liable   party   should   have the negligence of the active tortfeasor apportioned to it under §768.81, Fla. Stat., such that recovery of its own damages is correspondingly reduced   by the percentage of fault attributable to the active tortfeasor.