Court: Louisiana Court of Appeal; November 21, 1991; Louisiana; State Appellate Court
The case involves Donald J. McKinney and Joan B. McKinney suing South Central Bell Telephone Company (Bell) and Louisiana Power and Light Company (LP) for personal injuries sustained by McKinney while relocating a utility pole. The incident occurred on August 6, 1987, while McKinney was employed by Crescent Construction Company (Crescent), which had a master contract with Bell for utility pole work. Following the accident, LP filed a cross-claim against Bell, seeking indemnification for any fault attributed to Bell and asserting contractual liability under a joint use agreement with Bell. In turn, Bell filed a third-party demand against Crescent, invoking an indemnification clause in their master contract, which required Crescent to defend and indemnify Bell against any liabilities arising from its work.
While Crescent agreed to indemnify Bell for the tort claims made by LP, it contested the requirement to cover LP's contractual claims. Crescent subsequently filed for summary judgment to clarify the scope of its indemnification obligations. The trial court denied Crescent's motion and granted Bell's motion for summary judgment, ruling that Crescent was required to defend and indemnify Bell against LP's cross-claims. Crescent appealed this decision, leading to the consolidation of the appeals for review, with the central issue being whether the indemnity agreement mandated Crescent to cover Bell's liability regarding LP's contractual claims.
A motion for summary judgment is warranted when the evidence—including pleadings, depositions, interrogatory responses, admissions, and affidavits—demonstrates no genuine issue of material fact and the mover is entitled to judgment as a matter of law, per LSA-C.C.P. art. 966 B. The burden is on the mover to prove the absence of such issues, with any doubts resolved against granting the motion. Material facts are those essential to the plaintiff's cause of action and can influence recovery or the outcome of the case. The trial court’s role is not to assess the merits or weigh conflicting evidence but to determine if the presented documents sufficiently address all material issues. Summary judgment is appropriate only when reasonable minds can only agree on the outcome; any ambiguity favors trial.
The case at hand involves assessing whether the indemnification provisions in the master contract between Crescent and Bell cover LP's cross claims against Bell. The interpretation of an indemnity contract follows its explicit terms, aiming to reflect the parties' common intent. Indemnity agreements are strictly construed, with the burden of proof on the party enforcing them. The Louisiana Supreme Court, in Home Insurance Co. of Illinois v. National Tea Co., reaffirmed that indemnity contracts protecting against an indemnitee's own negligence must express such intent clearly and unequivocally.
Indemnity contracts are interpreted using the general rules applicable to all contracts, emphasizing that interpretations should avoid rendering any provision ineffective. Under Louisiana Civil Code articles, when ambiguity arises, the intent of the parties should guide the interpretation rather than a strict literal reading. If the intent to indemnify against negligence remains unclear after applying these rules, it is presumed that the parties did not intend to indemnify the indemnitee from such liability. In contrast, the case of Soverign Insurance Co. v. Texas Pipe Line Co. establishes that different standards apply when indemnity involves strict liability, requiring consideration of the contract's context and customary practices.
In the specific case involving National, the release clause in the lease explicitly frees National from liability for fire damages, regardless of fault. The lease demonstrates a clear intention to transfer the risk of fire loss to Lessor's fire insurer. The Lessor's only potential claims against National would derive from National's fault, but the release provision also discharges National's agents, indicating that claims against them would similarly arise from fault. Interpreting the release clause as ineffective would contradict the established rules of contract construction. Additionally, the requirement that the Lessor procure fire insurance reflects a negotiated agreement, underscoring that both parties had equitable bargaining power, further confirming the intent to shift the risk of fire loss to the Lessor.
The master contract between Bell and Crescent includes an indemnification clause (Article 9) requiring the Contractor (Crescent) to indemnify Bell and its associated personnel against all claims for loss, injury, or damage arising from work performed under the contract, regardless of fault. This includes defending Bell against any suits related to such claims. Furthermore, Article 10 mandates that the Contractor obtain and maintain liability insurance to cover personal injury and property damage claims associated with the contract's work, with coverage limits subject to Bell's approval.
The contract clearly aims to shift the risk of loss from Bell to Crescent, indicating the parties' intent to protect Bell from liability stemming from the contract's performance. Any claim Crescent could potentially assert against Bell would be limited to instances of Bell's negligence related to utility poles. If the indemnification clause were interpreted as not relieving Bell from liability, it would undermine the clause's purpose, violating construction rules. Additionally, the requirement for Crescent to secure insurance for both parties further demonstrates their intent to allocate risk, which was a deliberate aspect of the contract negotiation. The document also references a 1978 joint use agreement between Bell and LP that outlines liability allocation for damages related to the shared use of utility poles.
Bell is responsible for all damages arising from its sole negligence, while LP holds the same responsibility for its own negligence. Each party is liable for damages to its own employees and property when both are at fault or when fault cannot be traced to either party's negligence. If damages result from concurrent negligence, Bell and LP will share the costs equally, regardless of individual fault. Crescent argues that the master contract with Bell does not include liability for damages shared with LP under their agreement. Although there is no Louisiana case law on this issue, the reasoning of the Fifth Circuit in Corbitt v. Diamond M. Drilling Co. is relevant. In Corbitt, Shell and Diamond had reciprocal indemnification agreements, but when Sladco was involved, the court ruled that Sladco was not required to indemnify Shell for its contractual obligations to Diamond, as the indemnification agreement did not explicitly state that Sladco would cover such liabilities. The court emphasized the need for clear notice within indemnity agreements regarding liability for third-party claims. Therefore, Sladco was not liable for indemnifying Shell’s liability to Diamond due to the lack of explicit language in the indemnity agreement.
Shell's liability to Diamond arises from an indemnification agreement within the workover contract, not from personal injury claims. In the case of Foreman v. Exxon Corporation, the court examined an indemnification provision where Offshore agreed to indemnify Exxon for claims related to its employees' injuries, regardless of Exxon's concurrent negligence. However, the court ruled that Offshore was not required to indemnify Exxon for amounts owed under Exxon's separate indemnity contract with Diamond, emphasizing that indemnification was limited to tort claims rather than contractual liabilities.
Bell argued that the case of Lirette v. Popich Bros. Water Transport, Inc. mandated indemnification for contractual liabilities even without specific language in the indemnity clause. However, the court distinguished Lirette by noting that it involved indemnification between parties directly linked by contract, unlike the current case where Crescent's agreement did not explicitly require indemnification for Bell’s contractual obligations to LP. Consequently, the court concluded that Crescent was not liable for Bell's contractual liabilities, resulting in the determination that the trial court erred in denying Crescent's motion for summary judgment and granting Bell's motion.
Crescent's writ application is granted, reversing the judgment that denied Crescent's motion for summary judgment. The court finds that Crescent did not agree to indemnify Bell for its contractual liability to LP, thus relieving Crescent of any liability to Bell. Additionally, the judgment granting Bell's summary judgment is reversed. The case is remanded to the trial court for further proceedings consistent with this ruling, and Bell is ordered to pay all costs.
The excerpt references Article XV of the joint use agreement, outlining liability among the parties. Each party is responsible for damages resulting solely from its own negligence and must indemnify the other for such losses. Concurrent negligence results in shared responsibility, with each party liable for its own property damage and employee injuries. In cases of concurrent negligence affecting third parties, liability is split equally between the parties.
Citing Corbitt v. Diamond M. Drilling Co., the excerpt emphasizes that indemnity contracts should only cover losses within the parties' contemplation and should not impose liability for negligence unless explicitly stated. The allocation of liability between Bell and LP depends on the percentage of fault; if both are concurrently at fault, they share damages equally. If Bell's fault exceeds 50%, Crescent pays half of Bell's liability, and LP covers the other half; conversely, if Bell is less than 50% at fault, Crescent pays according to its liability share, with Bell covering excess liability up to 50%, and LP responsible for half of the damages.
