Royal Insurance v. Whitaker Contracting ( 2001 )


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  •                                                                                    [PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FILED
    FOR THE ELEVENTH CIRCUIT                  U.S. COURT OF APPEALS
    ELEVENTH CIRCUIT
    JULY 02, 2002
    _______________
    THOMAS K. KAHN
    CLERK
    No. 99-12095
    _______________
    D. C. Docket No. 98-01704-CV-BU-S
    ROYAL INSURANCE COMPANY
    OF AMERICA, a.k.a. R.E. Grills
    Construction Co., Inc.,
    Plaintiff-Appellant,
    versus
    WHITAKER CONTRACTING CORP.,
    Defendant-Appellee.
    ______________________________
    Appeal from the United States District Court
    for the Northern District of Alabama
    ______________________________
    (July 2, 2002)
    Before BIRCH, BARKETT and ALARCON*, Circuit Judges.
    * Honorable Arthur L. Alarcon, U.S. Circuit Judge for the Ninth Circuit, sitting by designation.
    BIRCH, Circuit Judge:
    In this appeal, we must decide whether a paving subcontractor/indemnitor,
    defendant-appellee, Whitaker Contracting Corporation ("Whitaker"), must
    indemnify the insurer, plaintiff-appellant Royal Insurance Company of America
    ("Royal"), of the general contractor/indemnitee, R.E. Grills Construction
    Company, Inc. ("Grills"), which contracted with the State of Alabama for highway
    work because of a fatal automobile accident that occurred at the work site resulting
    from allegedly obstructive barricades.1 As liability insurer, Royal paid $400,000,
    which settled the claims against Grills, and sought indemnity from Whitaker
    pursuant to its indemnity agreement with Grills. Construing the indemnity-
    contract language against Grills, the drafter, the district judge granted summary
    judgment to Whitaker.2 Because Grills's state contract placed upon Grills a
    1
    Our previous opinion details the facts of this case. Royal Ins. Co. of America v.
    Whitaker Contracting Corp., 
    242 F.3d 1035
    , 1037-40 (11th Cir. 2001). Discovery revealed that
    obstructive barrels and barricades were placed and maintained by Grills under the supervision of
    the Alabama Department of Transportation; on the day of the automobile collision involving a
    fatality, the barrels and barricades did not comply with standard specifications or the specific site
    plan in placement from the highway being paved; and Whitaker was paving near the intersection
    when the accident occurred, although there was no evidence that Whitaker had moved any of the
    barrels or barricades after Grills had placed them.
    2
    The indemnity provision of the subcontract between Grills and Whitaker at issue in this
    case states: "The Subcontractor covenants to indemnify and save harmless and exonerate the
    Contractor and the Owner of and from all liability, claims and demands for bodily injury and
    property damage arising out of the Work undertaken by the Subcontractor, its employees, agents
    or its subcontractors, and arising out of any other operation no matter by whom performed for
    and on behalf of the Subcontractor, whether or not in whole or in part to conditions, acts or
    2
    nondelegable duty to maintain the safety of the roadway to motorists during the
    highway work, we certified the following question to the Supreme Court of
    Alabama:
    MUST AN INDEMNITY AGREEMENT SPECIFICALLY STATE
    THAT AN INDEMNITOR WILL INDEMNIFY THE INDEMNITEE
    FOR A NONDELEGABLE DUTY TO WHICH THE INDEMNITEE
    IS SUBJECT UNDER STATE LAW TO REQUIRE
    INDEMNIFICATION FOR THE FAILURE TO EXECUTE SUCH
    NONDELEGABLE DUTY, WHICH RESULTS IN THE
    UNDERLYING CAUSE OF ACTION FOR WHICH
    INDEMNIFICATION IS SOUGHT?
    Royal Ins. Co. of America v. Whitaker Contracting Corp., 
    242 F.3d 1035
    , 1044
    (11th Cir. 2001).
    The Alabama Supreme Court has answered our question in the negative and
    clarified that an indemnity agreement need not state specifically that an indemnitor
    indemnifies the indemnitee for a nondelegable duty to be enforceable. Royal Ins.
    Co. of America v. Whitaker Contracting Corp., __ So.2d __, __, 
    2002 WL 27985
    ,
    omissions done or permitted by the Contractor or Owner." R1-15-Exh. E at 2. The district judge
    found that the clause "whether or not in whole or in part to conditions, acts or omissions done or
    permitted by the Contractor or Owner" was nonsensical because it "modifies the word 'Work.'"
    R1-20-5-6. This interpretation results in liability for work done by Whitaker, the subcontractor,
    "to" actions or omissions done by Grills, the contractor. The district judge stated that "[i]t is
    nonsense to state that a person could actively 'do' an omission or that another person could
    perform work 'to' that omission." Id. at 6. Accordingly, he concluded that "this construction of
    the indemnity clause would only permit indemnification for claims arising out of the negligence
    of the subcontractor, not based on the contractor's own negligence." Id.
    3
    at *6 (Ala. Jan. 11, 2002).3 While an indemnitee may be indemnified for its
    nondelegable duty, it nevertheless retains this duty:
    In the case, as here, of an independent contractor
    who undertakes a nondelegable duty owed by another, an
    agreement by the independent contractor to indemnify
    the other for a breach of the duty is beneficial and not
    harmful to those who may be injured by the breach.
    First, the indemnification obligation will motivate the
    independent contractor to perform the duty carefully in
    order to avoid causing an injury and owing money on the
    indemnification obligation. Second, the indemnification
    agreement does not deprive an injured plaintiff of any
    otherwise existing source of payment, for the party who
    owes the nondelegable duty remains liable for damages
    caused by its breach of that duty.
    Id. at *8 (Johnstone, J., concurring). Because Whitaker's indemnity agreement
    with Grills included Grills's nondelegable duty under its contract with the state of
    maintaining the safety of the roadway for the traveling public during the paving,
    Whitaker must reimburse Royal for the $400,000 plus interest, costs, and attorney's
    3
    The Alabama Supreme Court recognized that it has held that a party may enter into an
    indemnity agreement for its own negligence, provided "'"the parties knowingly, evenhandedly,
    and for valid consideration, intelligently"'" agreed, "'"including indemnity against the
    indemnitee's own wrongs"'" and this agreement was "'"expressed in clear and unequivocal
    language."'" Royal Ins. Co., __ So.2d at __, 
    2002 WL 27985
    , at *5 (quoting City of
    Montgomery v. JYD Int'l, Inc., 
    534 So.2d 592
    , 594 (Ala. 1988) (quoting Industrial Tile, Inc. v.
    Stewart, 
    388 So.2d 171
    , 176 (Ala. 1980)). Using this rationale, the court concluded that "the
    words 'nondelegable duty' need not be expressly included in an indemnity provision before an
    agreement to indemnify a party for a breach of its nondelegable duty will be enforceable." Id. at
    *6. The court stated, however, that the indemnitee has the burden of proof to establish its
    entitlement to indemnification under the agreement. Id.
    4
    fees that it paid to settle the suit on Grills's behalf for the death that resulted from
    barricades that obscured visibility on the area of the road being paved.4
    Accordingly, the district court's granting summary judgment for Whitaker and
    dismissing this case with prejudice is REVERSED, and we REMAND with
    instructions to enter judgment for Royal.
    4
    Alabama rules of contract construction permit supplying "due" in the challenged
    indemnity agreement to give the entire indemnity provision meaning rather than making this
    omission the basis of negating the indemnity agreement. See, e.g., Attorneys Ins. Mut. of Ala.,
    Inc. v. Smith, Blocker & Lowther, P.C., 
    703 So.2d 866
    , 870 (Ala. 1996) ("Insurance contracts,
    like other contracts, are construed so as to give effect to the intention of the parties, and, to
    determine this intent, a court must examine more than an isolated sentence or term; it must read
    each phrase in the context of all other provisions."); Green v. Merrill, 
    308 So.2d 702
    , 704 (Ala.
    1975) ("It is well settled that the terms of an insurance policy are to be given a rational and
    practical construction. . . . [P]rovisions of a policy which clearly indicate the parties' real intent
    are not to be given a strained construction to raise doubts where none exist." (citation omitted)).
    If "due" were inserted, as Royal has argued in this litigation, then the last clause of the indemnity
    agreement would read: "whether or not in whole or in part [due] to conditions, acts or omissions
    done or permitted by the Contractor or Owner." This interpretation rectifies the troublesome
    language in the indemnity agreement and honors the parties' intentions because Whitaker agreed
    to the broad indemnity provision in the indemnity agreement to obtain the paving subcontract
    from Grills.
    5
    

Document Info

Docket Number: 99-12095

Filed Date: 2/23/2001

Precedential Status: Precedential

Modified Date: 12/21/2014