Chapman v. Hiland Partners GP Holdings, LLC

Citations: 49 F. Supp. 3d 649; 2014 U.S. Dist. LEXIS 128119; 2014 WL 4449826Docket: Case No. 1:13-cv-052

Court: District Court, D. North Dakota; September 10, 2014; Federal District Court

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B. B Heavy Haul, LLC filed a motion for partial summary judgment on March 6, 2014, concerning indemnification obligations related to a water hauling incident at Hiland Operating, LLC’s natural gas processing facility. Plaintiffs, Lenny and Tracy Chapman, sued Hiland after an explosion injured Lenny Chapman while he was working at the facility. Hiland filed a third-party complaint against Missouri Basin Well Service, Inc. and B. B for indemnification, asserting that both are contractually obligated to defend and indemnify it against the claims of negligence. Notably, the master service contract between Missouri Basin and B. B was never fully executed, as it lacked signatures from Missouri Basin representatives. B. B argues it is not required to indemnify Hiland for Hiland's negligence under the unsigned contract but admits it may have obligations for its own negligence. The Court reviews the motion under the summary judgment standard, determining whether any genuine issues of material fact exist that could affect the outcome of the case. The trial is set to begin on January 26, 2015. Ultimately, B. B’s motion for partial summary judgment is granted.

The Court evaluates whether evidence necessitates jury submission or if it overwhelmingly favors one party legally. The moving party must demonstrate the absence of genuine material fact issues, while the non-moving party must provide specific factual responses rather than mere allegations. The substantive standard of proof is pertinent during summary judgment motions.

In Hiland’s third-party complaint regarding indemnity, B. B's obligation to indemnify Hiland for its own negligence under an unsigned master service contract is scrutinized. North Dakota law dictates that tortfeasors are only severally liable unless acting in concert, meaning a plaintiff cannot recover more than the fault percentage attributed to a sued party. Consequently, Hiland cannot seek contribution from non-sued parties like B. B or Missouri Basin for their respective faults. The focus of the dispute is whether the master service contracts impose indemnification duties on B. B. Indemnity contracts follow standard contract interpretation rules, with ambiguities being a legal question resolved by the court based on the entire contract's intent, considering all clauses. Indemnity involves one party agreeing to cover the legal repercussions stemming from another party's actions or liabilities.

An indemnity agreement will not cover a party for the consequences of their own negligence unless explicitly stated. Ambiguities in indemnity provisions of non-insurance contracts are interpreted against the indemnified party. The unsigned master service contract between B. B and Missouri Basin includes provisions where the Carrier agrees to indemnify MBI and the Customer from various claims, including those arising from MBI's own negligence and any claims related to the Carrier’s presence on MBI's premises. The contract also mandates that B. B obtain insurance, specifying that all policies (except Worker’s Compensation) must list MBI and its affiliates as additional insured, ensuring primary coverage for liabilities arising from contract performance. Insurance policies must provide separate coverage for each insured and waive subrogation rights against MBI. The contract requires written notice of cancellation, specifies minimum policy limits, mandates that the Carrier pays all deductibles and self-insured retentions, and requires submission of Certificates of Insurance prior to work commencement, along with renewal certificates as necessary. Acceptance of an insurance certificate that does not comply with these requirements does not waive any obligations.

The unsigned master service contract indicates that B. B is to indemnify Missouri Basin for claims related to both B. B’s and Missouri Basin’s own negligence. Hiland is confirmed as a 'customer' under the contract. The Eighth Circuit Court references North Dakota case law, establishing that contracts with 'hold harmless' and insurance provisions typically intend for the indemnitee to be protected against its own negligence, as seen in Myers v. ANR Pipeline Co. and Bridston. In Bridston, the North Dakota Supreme Court affirmed that the lease agreement’s language supported indemnification for the indemnitee’s negligence based on several factors, including the presence of 'save harmless' language and a lack of limiting terms.

The current contract stipulates that B. B will 'save harmless' Missouri Basin from 'any and all claims,' which aligns with North Dakota's critical language for establishing indemnity. The indemnity clause does not limit B. B’s obligation and explicitly includes claims arising from Missouri Basin’s negligence, although it does not address the customer’s negligence. The term 'including' suggests a broad interpretation. The contract also mandates that B. B obtain liability insurance naming Missouri Basin and its affiliates as additional insureds, but it does not include customers in this requirement. The term 'affiliates' does not commonly refer to customers, which is significant in light of previous case law indicating that failure to name the indemnitee as an additional insured can negate indemnity for its own negligence. Consequently, the court concludes that the insurance provision in this context is insufficient.

Unmistakable intent in a contract is demonstrated by the presence of both hold harmless and insurance provisions. The unsigned master service contract suggests an intent for B. B to indemnify Missouri Basin for its own negligence; however, B. B's obligation to Hiland is ambiguous due to the absence of insurance requirements, despite the inclusion of 'save harmless' language. The Court concludes that the contract does not clearly indicate B. B's obligation to indemnify Hiland for its own negligence, and any ambiguity regarding indemnity must be interpreted against the indemnified party. The absence of extrinsic evidence to clarify the parties' intentions leads the Court to rule that B. B has no legal duty to indemnify Hiland. Furthermore, even if the contract were interpreted as requiring indemnification, such a requirement would be void under North Dakota’s anti-indemnity statute, which nullifies any clause in a motor carrier contract that indemnifies a promisee for damages resulting from the promisee’s own negligence during the carrier’s presence on the promisee’s property. Hiland's argument that Missouri Basin is the promisee is rejected, as Hiland would also be considered a promisee if B. B were found to owe an indemnity. The statute’s application prevents indirect circumvention of its prohibitions.

The Court determines that the term 'promisee' in Section 22-02-10 of the North Dakota Century Code includes third-party promisees. The unsigned master service contract in question is identified as a motor carrier transportation contract, with the accident occurring on Hiland's property. The Chapmans allege that Hiland was solely negligent and the cause of their injuries. Hiland claims indemnification from B. B under the unsigned contract for its own negligence; however, the Court finds that such a provision would render the contract void and unenforceable under North Dakota law.

In Hiland's third-party complaint, it seeks indemnification from Missouri Basin based on their signed master service contract. Conversely, Missouri Basin's cross-claim seeks indemnification from B. B under an unsigned master service contract for any damages the Chapmans may recover from Hiland. B. B contends that its contract does not require indemnification for Missouri Basin’s separate liabilities. The unsigned contract limits B. B’s indemnification to claims related to its performance of the contract.

The Court rejects the argument that the two master service contracts should be read together, as they involve different parties and were negotiated years apart. Missouri Basin argues that the unsigned contract is ambiguous, suggesting it was meant to indemnify Hiland from its own negligence, but fails to provide evidence to support this claim. The Court finds B. B is not legally obligated to indemnify Hiland for its own negligence, and therefore, Missouri Basin cannot transfer its indemnification obligations to B. B. 

As a result, the Court grants B. B Heavy Haul, LLC’s motion for partial summary judgment, dismisses Hiland's third-party complaint against B. B with prejudice, and dismisses Missouri Basin's cross-claim against B. B with prejudice.