Marquette Transportation Co. v. Louisiana MacHinery Co. ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
April 16, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 02-30949
MARQUETTE TRANSPORTATION COMPANY, INC.,
Plaintiff-Counter Defendant
Appellant-Appellee-Cross-Appellant,
BLUEGRASS MARINE, INC.; IOWA FLEETING SERVICE, INC.;
ZURICH AMERICAN INSURANCE COMPANY, INC.; THE WATER
QUALITY INSURANCE SYNDICATE
Plaintiffs-Appellants,
versus
LOUISIANA MACHINERY COMPANY INC., Etc; ET AL,
Defendants,
LOUISIANA MACHINERY COMPANY INC., doing business as Louisiana
Machinery Power Systems;
Defendant-Appellee,
QUALITY SHIPYARDS, INC.
Defendant-Counter Claimant
Appellee-Appellant-Cross-Appellee
--------------------
Appeals from the United States District Court
for the Eastern District of Louisiana
--------------------
Before HIGGINBOTHAM, SMITH, and WIENER, Circuit Judges.
WIENER, Circuit Judge:
The plaintiff-appellants in this maritime action were the
owners and operators of the M/V KAY ECKSTEIN (the “KAY”) and their
insurers (collectively, “Plaintiffs”). The KAY was a triple screw,
steel hulled push boat which was originally constructed in 1973.
In 1999, the KAY’s three Caterpillar 3606 engines, which had been
installed in 1992, were overhauled and other extensive renovations
were performed by defendant-appellant Quality Shipyards, Inc.
(“Quality”) and defendant Louisiana Machinery Company, Inc.
(collectively, “Defendants”). After the work was completed, the
KAY successfully underwent dock and sea trials and was returned to
Marquette, which operated the vessel for five weeks without
incident. Late in May 1999, however, a catastrophic engine-room
fire led to the KAY’s total loss.
Plaintiffs sued Defendants for maritime negligence and breach
of express and implied warranties of workmanlike service. Quality
counterclaimed seeking attorneys’ fees and court costs. After a
bench trial, the district court concluded that (1) Marquette had
not carried its burden of proof with regard to negligence and
causation, but (2) Quality’s counterclaim was without merit,
notwithstanding the repair agreement’s indemnity provision. Both
sides appealed. Although we see no reason to disturb the district
court’s disposition of the negligence and breach of contract
claims, we conclude that the trial court erred in interpreting the
indemnity provision here at issue and in denying Quality’s
counterclaim.
I. Facts and Proceedings
2
The KAY underwent extensive maintenance and repair work in
1998-99, including the overhauling of its three Caterpillar
engines; designing and fabricating kort nozzles and I struts around
its screws; removing, modifying, and reinstalling the screws,
rudders, and shaft lines; and testing and delivering the vessel.
The engine overhauls included installing new fuel and oil filters
and resealing and rebushing the oil pump. The contract price for
the work was $870,000.
None of the KAY’s crewmembers witnessed the start of the fire,
although one crewman had been in the engine room thirty minutes
prior to the fire’s estimated start time. The KAY lost engine
propulsion approximately thirty minutes after the fire was first
noticed, and sank shortly thereafter. After the KAY was raised
from the river approximately 10 days after it had sunk, Plaintiffs
discovered that the check valve fittings on the center main engine
were loose.
At trial, Plaintiffs’ primary contention was that Defendants
had improperly torqued (tightened) the check valve fittings on the
KAY’s center main engine. According to Plaintiffs’ theory, those
under-tightened fittings had been gradually loosened by engine
vibration, eventually allowing a fuel spray to develop. Plaintiffs
advanced several potential ignition sources, the most probable of
which —— according to Plaintiffs —— was the exhaust pipe of the
generator’s diesel engine. When the trial ended, the district
court concluded that Plaintiffs had not carried their burden of
3
proof with regard to either fault or causation, and held for
Defendants. Plaintiffs argue on appeal that the district court
erred as a matter of law by holding Plaintiffs to an improperly
high burden of proof.
Quality counterclaimed for the attorneys’ fees and costs it
incurred in defending the suit, basing its claims on the repair
agreement’s indemnification provision, which by its terms applies
to such expenses:
Each party agrees to defend, indemnify and hold harmless
the other party’s indemnitees free and harmless from and
against any and all suits, claims, or liabilities
(including, without limitation, the cost of defending any
suit and reasonable attorney’s fees).
When it first considered the indemnity provision, the district
court granted Quality’s motion to exclude parol evidence on the
question of the parties’ intent, holding that the terms of the
provision were unambiguous. The court denied Quality’s motion for
summary judgment on this claim, however, indicating that the
indemnification provision would not be enforceable if the
Defendants had acted with gross negligence. The district court
subsequently ruled that although Quality was not negligent in this
matter, the indemnity provision had to be interpreted in
conjunction with the other provisions of the repair agreement. As
the agreement required each party to obtain specified insurance
policies, concluded the district court, the proceeds of those
policies were intended to be the “primary payer” of the subject
damages, ahead of the contract’s indemnity obligations: “There is
4
no logical way to reconcile the indemnity provisions and the
mandatory insurance provisions ... other than to find that the
parties intended that the insurance coverages be exhausted prior to
the indemnity obligation being triggered.”1
In reaching this conclusion, the district court relied on Ogea
v. Loffland Brothers Company2 and Tullier v. Halliburton
Geophysical Services, Inc.,3 cases in which each party to an
indemnity agreement was required to name the other as an
“additional insured” under the mandated insurance policies.
Quality argues that because there was no requirement in the instant
contract to name the party opposite as an additional insured,
Marquette was not entitled to any benefit from the insurance
policies at issue. As such, insists Quality, it should be
reimbursed by Marquette under the terms of the indemnification
provision without regard to those insurance policies. The district
court took a “broader view,” finding that the “existence of
mandatory reciprocal insurance obligations” was determinative,
despite the fact that, unlike the situations in Ogea and Tullier,
the instant obligations did not require that the other party be
1
Marquette Transpo. Co., Inc., et al., v. Louisiana Mach.
Co., Inc., et al., 2002 WL 1809092 at *18 (Aug. 7, 2002).
2
622 F.2d 186 (5th Cir. 1980).
3
81 F.3d 552 (5th Cir. 1996). The district court also relied
on In Re Diamond Services, 2001 U.S. Dist LEXIS 6812 (May 16,
2001), a district court case that we affirmed in an unpublished
opinion.
5
named as an additional insured.4 Quality thus maintains that the
district court’s ruling constitutes an unwarranted extension of our
precedent.
II. Analysis
A. Standard of Review
We review the district court’s conclusions of law —— including
its contractual interpretations —— de novo. We review findings of
fact for clear error.5
B. Burden of Proof
Plaintiffs must show negligence and causation by a
preponderance of the evidence.6 Marquette correctly notes that in
a fire case, these elements frequently must be established by
circumstantial evidence because of the fire’s destruction of the
physical evidence.7 Even so, the evidence available must be
sufficient to find both negligence and causation.8 We address each
in turn.
1. Negligence
4
Marquette Transportation, 2002 WL 1809092 at *18.
5
See, e.g., Dow Chem. Co. v. M/V Roberta Tabor, 815 F.2d
1037, 1042 (5th Cir. 1987).
6
See, e.g., Boudreaux v. American Ins. Co., 262 La. 721, 762-
63 (La. 1972).
7
See Id.; Minerals & Chems. Philipp Corp. v. S.S. Nat’l
Trader, 445 F.2d 831 (2d. Cir. 1971).
8
See, e.g., Boudreaux, 262 La. at 761-63.
6
The district court correctly noted that, to assess whether
Defendants were negligent, the court first had to “determine
whether it is more probable than not that the couplings were loose
at the time the vessel left the shipyard or whether vibration or
heat from the fire likely loosened the fittings.”9 This task was
complicated by the fact that the KAY had been under water, exposed
to river currents and elements, for some 10 days before it was
raised and examined. Furthermore, when Plaintiffs’ representative
examined the KAY and reported that the check valve fittings at
issue were loose, he neglected to mark the fittings in any way that
would record for posterity just how loose they were. Instead,
Plaintiffs’ representative relied on “his degree of ‘gentle
shaking’ and his ability to rotate the fittings” to estimate their
condition at the time of the fire,10 but this “measurement” was
performed after the fittings had been subjected to (1) the extreme
heat of the fire and (2) the currents of the river.
Because of these factors, the district court relied on
circumstantial evidence to extrapolate the status of the fittings
as of the time that the KAY had left the shipyard. The court noted
that during the KAY’s five weeks of operation prior to the fire,
there had been no evidence of a loose check valve fitting; that is,
no crew member ever saw fuel seeping or spraying from the
9
Marquette Transportation, 2002 WL 1809092 at *6.
10
Id. at *5.
7
connection.11 Therefore, reasoned the district court, one important
question is “if the fittings were improperly tightened before the
vessel left the shipyard, would the fittings have leaked at some
point after the ship left the shipyard and prior to spraying fuel
on the date of the fire?”12 On this question, there was trial
testimony from more than one source that if the fittings were loose
because they had been improperly torqued, a leak likely would have
developed as soon as the engine was cranked and pressure built up.13
Further complicating Plaintiffs’ negligence theory is the fact
that it is not clear who reinstalled the fuel transfer line after
the engine mountings were drilled. First, there was no notation on
any written record indicating that Defendants’ employees had
performed that task.14 Neither did the check valve fittings
themselves need to be loosened for the fuel pump to be reinstalled.
Finally, record evidence indicates that Marquette personnel ——
including an engineer —— were at the site when the work was
completed. As those employees had previously performed some work
on the engine, it is at least possible that Plaintiffs’ own
11
This was so despite hourly engine-room inspections on the
day of the fire, including one just 30 minutes before the fire
broke out. Previously, however, one of the KAY’s crewmembers had
found a loose check valve fitting on the port engine, which he
tightened to avoid complications. See Marquette Transportation,
2002 WL 1809092 at *6-7.
12
Id. at *6.
13
See Id. at *8, *10.
14
See Id. at *3.
8
employees participated in the reinstallation of the pump. Given
the lack of evidence suggesting that the check valve fittings were
loose when the KAY left the shipyard, and the lack of evidence that
Defendants’ employees alone were responsible for improperly
torquing the fittings if they were in fact loose, the district
court concluded that “Plaintiffs have not proved by a preponderance
of the evidence that there was any contractual breach or maritime
negligence by either defendant.”15
2. Causation
The district court was equally unimpressed by Plaintiffs’
causation theory. Experts on both sides testified that, over time,
engine vibration could further loosen an improperly torqued
fitting, eventually leading to a spray of fuel; and that it was
hard to know how long it might take for such a spray to develop.
Defendants, however, produced experts with significant experience
working with the flared valve fittings here at issue (experience
the Plaintiffs’ experts did not have), who ventured that it would
be “highly improbable” for loose fittings to move from no leak to
a full-blown spray within the 30-minute period involved in this
case.16
Defendants created a model of the center main engine to
demonstrate that even a check valve fitting improperly torqued to
15
Id. at *15.
16
Id. at *8.
9
the degree alleged by Plaintiffs would not produce a fuel spray
that could reach what Plaintiffs identified as the most likely
source of ignition —— the diesel generator exhaust pipe.17
Defendants also produced a fire expert who stated that the absence
of a specific “flash pattern” indicated that the fire did not start
in the area alleged by Plaintiffs.18 In other words, even if the
check valve fittings were loose when the KAY left the shipyard, it
is unclear that those fittings could have caused the fire under
these circumstances, much less that in fact they did so. The
district court found for Defendants on this issue, concluding that
“Plaintiffs have also not met their burden of proof with respect to
causation.”19
3. Plaintiffs’ contentions on appeal
On appeal, Plaintiffs argue that the circumstantial evidence
they produced was sufficient for a finding of liability by a
preponderance of the evidence, given how that standard has been
interpreted in the applicable case law. The district court, argue
Plaintiffs, held them to an inappropriately high burden of proof on
negligence and causation. For support, Plaintiffs cite cases
17
Id. at *12-13. Again, the model dealt with the degree of
improper torquing alleged by Plaintiffs; because the check valve
fittings were not marked after Plaintiffs’ original inspection, it
was impossible to say how loose the fittings were when the KAY was
raised from the river, much less how loose they might have been at
the time the fire started.
18
See Id. at *10.
19
Id. at *15.
10
discussing the burden of proof in fire cases, which stand for the
propositions that (1) circumstantial evidence may support a finding
of negligence and causation,20 (2) a plaintiff’s proof need not
exclude or eliminate every other possible cause of the fire,21 and
(3) a plaintiff need not establish the method or point of ignition,
but only sufficient circumstances implicating the defendant.22
Plaintiffs’ arguments on this issue ultimately fail, as all
the cases that they cite contain circumstances allowing for strong
inferences of negligence and causation —— circumstances not present
in the instant case. In Boudreaux v. American Insurance Company,23
for example, the restaurant that burned down was under the
exclusive control of the defendants on the evening of the fire,
which started after hours. Similarly, in Hanover Insurance Company
v. Jacobson-Young, Inc.,24 a fire broke out because Jacobson-Young
employees had improperly stored flammable materials in an area
where only Jacobson-Young employees were allowed. The other cases
20
See, e.g., Boudreaux v. American Ins. Co., 262 La. 721 (La.
1972); Valiant Ins. Co. v. City of Lafayette, 574 So. 2d 505 (La.
App. 3 Cir. 1991).
21
See Universe Tankships, Inc., v. Pyrate Tank Cleaners, Inc.,
152 F.Supp 903, 922 (S.D.N.Y. 1957).
22
See, e.g., Hanover Ins. Co. v. Jacobson-Young, Inc., 294
So. 2d 564, 567 (La. App. 4 Cir. 1974).
23
262 La. 721 (La. 1972).
24
294 So. 2d 564, 568 (La. App. 4 Cir. 1974).
11
cited by Marquette are similarly distinguishable.25 Additionally,
all the cases ultimately detail the same burden of proof, which the
plaintiff meets when “the inferences from the testimony are such as
to persuade that the occurrence of an essential fact was more
likely or probable than its non-occurrence.”26
In the cases cited by Plaintiffs, the fact patterns were such
that the circumstantial evidence was sufficient to find liability.
Here, in contrast, (1) there was credible expert testimony on both
sides, (2) the KAY had been out of Defendants’ control for more
than a month before the fire, and (3) the destruction caused by the
fire made it difficult to discern the cause. In combination, these
facts made it difficult for Plaintiffs to prove their theory of the
accident, even by a preponderance. And, in its capacity as the
finder of fact, the district court concluded that Plaintiffs had
25
In Universe Tankships, Inc., v. Pyrate Tank Cleaners, Inc.,
152 F.Supp 903 (S.D.N.Y. 1957), it was apparent at trial that
defendants had negligently used critically weakened pyrex bowls for
the lamps inside the tank, negligently failed to install non-
sparking metal guards or cages on those bowls, and negligently
permitted its employees to work inside the tank at a time when the
tank had not been tested for its toxic and explosive gas content.
In addition, the court found plaintiffs’ expert witnesses
“impressively reliable and persuasive.” Id. at 907. U.S. v.
Standard Oil Co. of California, 495 F.2d 911 (9th Cir. 1974) is a
similarly distinct situation: the court in that case explained that
circumstantial evidence could suffice to find negligence and
causation in the course of upholding, not overruling, the trial
court’s negligence determination. (“Our review of the record
reveals substantial circumstantial evidence ... which supports the
district court’s finding ....”). Id. at 916.
26
Universe Tankships, 152 F.Supp at 920 (quoting United States
v. Masiello, 235 F.2d 279, 286 (2d. Cir 1956)(Judge Frank,
concurring).
12
failed to carry this burden, labeling their theory as “improbable,”
and “possible, but unlikely.”27
Plaintiffs make two additional arguments about the district
court’s methodology, both revolving around the claim that the court
put them to an improperly high burden of proof. Plaintiffs argue,
for example, that the burden shifted to Defendants to propose an
equally probable cause of the fire after Plaintiffs met their
burden by demonstrating negligence. This argument, of course,
presumes that Plaintiffs actually met their burden in the first
place, and is undermined by the district court’s facially logical
—— and apparently proper —— conclusion that they had not done so.
Similarly, Plaintiffs argue that the district court improperly
“impos[ed] ... a requirement to prove the exact mode and point of
ignition.” The district court did note that it “reject[ed] the
notion that such a [fuel] spray permeated the elbow joint of the
diesel generator exhaust in an amount sufficient to ignite.”28 This
statement, however, is merely part of the district court’s
discussion of the strengths and weaknesses of Plaintiffs’ case.
And, that discussion of the ignition point matters little in the
overall context of this case, as the district court also found that
the other elements of Plaintiffs’ fire theory were improbable and
27
Marquette Transportation Co., Inc., et al., v. Louisiana
Machinery Co., Inc., et al., 2002 WL 1809092 at *14 (Aug. 7, 2002).
28
Id.
13
that there was no contractual breach or maritime negligence by
Defendants in any event.29
In sum, we perceive that the district court did weigh the
conflicting evidence —— all of it credible —— and concluded that
Plaintiffs had not proved their theory of the accident by a
preponderance of the evidence. That there are many fire cases in
which the plaintiff was able to bear his burden with purely
circumstantial evidence does not automatically make the district
court’s approach —— or its conclusion —— erroneous.
C. Indemnification
Quality’s counterclaim, as noted, is based on the repair
agreement’s indemnification clause, which binds the signatories,
Quality and Marquette. That clause provides, in relevant part:
Each party agrees to defend, indemnify and hold harmless
the other party’s Indemnitees free and harmless from and
against any and all suits, claims, or liabilities
(including, without limitation, the cost of defending any
suit and reasonable attorney’s fees) for loss or damage
to property owned, leased or operated by the indemnitor,
regardless of cause, including the negligence or other
legal fault of any of each party’s Indemnitees.30
Quality argues that “property owned, leased or operated” by
Marquette includes the KAY itself. Therefore, according to
29
Id. at *15.
30
Emphasis added. The “other party’s indemnitees,” in the
case of Marquette, are defined in section 8(B) as “Shipyard, its
parent, subsidiary, and affiliated companies, each of their
officers, directors, and employees, the Vessel, its registered
owner, its master and crew, and each of their respective
underwriters.”
14
Quality, because Marquette wrongfully sued for the loss of its
“property,” Marquette should be responsible for the expenses
Quality incurred in defending the claim.
As we have noted, the district court’s decision on this matter
turned on the interplay between the indemnification clause and the
reciprocal insurance obligations required by the repair agreement.
Specifically, Quality was required to purchase:
at its own expense for its own employees, properties and
operations, the following policies of insurance:
(A) By Shipyard -
(1) Worker’s Compensation ... and employer’s
liability insurance and/or appropriate maritime employers
coverage ...;
(2) Comprehensive Public Liability and Ship
Repairers’ Liability Insurance ... including broad form
contractual liability coverage ...;
(3) Automobile liability insurance ...; and
(4) Full form physical damage insurance on all
property (including floating equipment and vessels)
owned, chartered, operated, or otherwise used by the
Shipyard.
The repair agreement contains similar insurance requirements for
Marquette, with additional required coverages.
The district court looked to a series of cases in which we
held (or affirmed) that, because of reciprocal insurance
requirements, contractual indemnity provisions did not apply until
the limits of those insurance policies had been reached. In other
words, the insurance policies were the “primary payers” and should
be exhausted before any indemnity obligations attached. In those
cases —— Ogea v. Loffland Brothers Company,31 Tullier v. Halliburton
31
622 F.2d 186 (5th Cir. 1980).
15
Geophysical Services, Inc.,32 and In Re Diamond Services33 —— the
contractual insurance obligations included the express requirement
that each party name the other as an additional insured under the
applicable policies. In Tullier, we noted that this factor had
been “controlling” in Ogea, and deemed it so again in Tullier.34
In Diamond Services, the district court explained that although
there was no additional-insured requirement for the Comprehensive
General Liability policy, which contained the contractual liability
coverage, there was such a requirement for the P&I policy, which
provided primary coverage. The district court in Diamond Services
explained that the “essential fact is that the liability insurance
provided ... under Diamond’s P&I policy is primary and, therefore,
before CMC is required to indemnify Diamond, the limits of the P&I
policy must be exhausted.”35
In the instant case, there are no contractual provisions
requiring “additional insured” coverage or, as in Diamond Services,
32
81 F.3d 552 (5th Cir. 1996).
33
2001 U.S. Dist. LEXIS 6812 (May 16, 2001). As the district
court noted, this case was upheld on appeal in an unpublished
opinion. Therefore, although we discuss the published district
court case, the principles expressed in it were affirmed in our
unpublished opinion.
34
Tullier, 81 F.3d at 554.
35
Diamond Services, 2001 U.S. Dist. LEXIS 6812 at *11. There
was some question whether the P&I policy at issue would be extended
to cover Chet Morrison Contractors, Inc., the adverse party in that
case. The district court, however, declined to reach that issue,
deciding that the fact that the liability insurance provided
through the P&I policy was primary was dispositive.
16
dictating that the contractually-required insurance policies
provide primary coverage. The district court nevertheless looked
past this fact, taking a “broader view” and examining the
underlying reasoning of Ogea and Tullier. As the district court
noted, in both of those cases we explained that it is necessary to
read all contractual provisions “in conjunction with each other in
order to properly interpret the meaning of the contract.”36 This
mandate, combined with the following reasoning from Diamond
Services, led the district court to conclude here that the presence
of “additional insured” coverage is not a critical factor:
There is no reason for an indemnitor to require an
indemnitee to procure insurance if the indemnitor did not
intend to limit its indemnification obligations to the
excess of the required insurance coverage. ... To read
the indemnity and insurance requirements any other way
produces an incoherent result, e.g., why would CMC
require Diamond to obtain certain insurance policies if
CMC is required to indemnify Diamond for any claims
covered under those policies.37
The district court explained that, “[a]fter considering the repair
agreement as a whole,” it came to the same conclusion as did the
Diamond Services court: “There is no logical way to reconcile the
indemnity provisions and the mandatory insurance provisions ...
other than to find that the parties intended that the insurance
36
Tullier, 81 F.3d at 553-54 (quoting Ogea, 622 F.2d at 190).
37
In Re Diamond Services, 2001 U.S. Dist LEXIS 6812 at *10
(citation omitted).
17
coverages be exhausted prior to the indemnity obligation being
triggered.”38
We disagree with the district court’s conclusion that there is
“no logical way” to reconcile the indemnity and insurance
provisions without finding that the parties intended that the
insurance limits be exhausted prior to attachment of the indemnity
obligations. This line of thinking is appropriate in cases like
Ogea, Tullier, and Diamond Services, where the contracts contained
“additional insured” requirements or dictated the primacy of
insurance coverage over indemnification obligations, or both. That
made it illogical to read the underlying contracts as providing for
anything other than an indemnity obligation that does not become
operable until and unless the insurance proceeds are exhausted. In
the absence of similar contractual language, however, this
reasoning is inapposite. In the instant case, the insurance
requirement appears to be designed to provide a solvent, deep
pocket for any indemnity obligations that may eventuate between the
parties and to cover any third-party claims that might arise. It
simply is not true that there is only one way to integrate the
repair agreement’s indemnity and insurance obligations. In this
absence of language supporting the district court’s interpretation
of those provisions, we cannot accept it.
38
Marquette Transportation Co., Inc., et al., v. Louisiana
Machinery Co., Inc., et al., 2002 WL 1809092 at *18 (Aug. 7, 2002).
18
Marquette also makes a number of alternative arguments on the
indemnity clause. Although all these arguments are based, at least
in part, on the assumption that the indemnity clause is ambiguous,
and have therefore been either directly or inferentially addressed
by the district court’s decision on summary judgment,39 we touch on
each briefly.
First, Marquette argues that an ambiguity exists in the “other
parties’ indemnitees” language of the indemnity clause.
Specifically, Marquette notes that “the vessel ... its registered
owner, and each of their respective underwriters” are included in
the definitions of both “owner indemnitees” and “shipyard
indemnitees.” Marquette asserts that this makes the provision
“confusing and contradictory as to who is indemnifying whom.”
Although, certainly, an indemnity claim by the vessel’s owners
against themselves would be contradictory and confusing, we find no
ambiguity in the contract’s requirement that Marquette indemnify
Quality. “Shipyard, its parent, subsidiary, and affiliated
companies” are the first of the listed “Shipyard indemnitees.”
That fact, in combination with the phrase “[e]ach party agrees to
defend, indemnify, and hold harmless the other party’s
indemnitees,” makes clear that Marquette agreed to indemnify
Quality and hold it harmless.
39
Discussing Marquette’s contention that the indemnity
clause’s discussion of “property” did not include the vessel
itself, or was at least ambiguous, the district court asserted:
“[T]he terms of the Agreement are not ambiguous ....”
19
Marquette also argues that the indemnity clause amounts to an
unenforceable exculpatory clause. Again, we disagree. First, the
clause clearly indicates that the indemnification obligation will
attach regardless of the negligence of any of the indemnitees:
“Each party agrees to defend, indemnify and hold harmless the other
party’s indemnitees ... regardless of cause, including the
negligence or other legal fault of each party’s indemnitees.”
Second, this particular indemnity clause does not absolve Quality
of its warranty duties under the contract as Marquette alleges.40
If Quality had been found to be in breach of those warranties,
perhaps our application of the indemnity clause would be different.
As Quality apparently met its duties under the contract, however,
it is entitled to indemnification from Marquette for the costs and
expenses caused by the latter’s suit.
Marquette contends in addition that the phrase “property
owned, leased, or operated” does not encompass the vessel itself.
In an effort to support this proposition, Marquette notes that the
term “vessel” is used 19 times in the repair agreement, but the
term “property” is used only six times, and argues this is an
indicator that different meanings are ascribed to the two terms.
Although the limited use of the term “property” may suggest a
limited meaning, the plain fact is that, as between the terms
40
Marquette claims the clause “serves to absolve the shipyard
of all obligations,” and that the contract does not “contain any
other clause or language disclaiming express or implied
warranties.”
20
“property” and “vessel,” the former is the broader of the two.
“Vessel” is a lesser included type of “property,” but it is
property nonetheless. If Marquette had wanted to exclude the
vessel from the ambit of “property,” it could have insisted on
language such as “property other than the vessel” or even “other
property” in the indemnity clause.41 No such language is present,
however, and we will not infer limiting language absent any
indication of party intent.
Finally, Marquette asserts that the indemnity clause should be
construed against its drafter —— Quality —— again, because of the
clause’s alleged ambiguity. Beyond our conclusion, shared by the
district court, that the language is not ambiguous (certainly not
in the context of the instant case), we note further that changes
—— initialed by both parties —— were made to the indemnification
provisions found in paragraph 8 of the repair agreement.42 This
shows that Marquette read and considered the language of the
indemnification clause —— again, language that we do not find
ambiguous. Under these facts, we decline to impose a strained
41
In its order on the cross-motions for summary judgment, the
district court came to the same conclusion on this point: “If
Marquette intended for the loss of the vessel to be exempt from
this broad clause, it could have included such an exclusion.”
42
Although the parties changed only subparagraph 8(B), and the
precise indemnification language at issue in the instant case comes
from 8(C), this is nevertheless an important indicator of Quality’s
knowledge of the contents of paragraph eight.
21
construction of the language on Quality for having drafted the
initial version of the agreement.
III. Conclusion
The district court did not require Plaintiffs to meet an
incorrectly difficult burden of proof on the issues of negligence
and causation; rather, Plaintiffs simply failed to carry the proper
burden. On the issue of indemnification, however, the district
court’s expansive application of the Ogea/Tullier reasoning to the
instant situation is unwarranted. The repair agreement in this
case —— unlike those in Ogea and Tullier —— did not require that
any party opposite be named as an additional insured; neither did
it dictate that the required insurance would provide primary
coverage before indemnification. Absent explicit language
entitling Marquette to benefit from the proceeds of those insurance
policies, we see no justification for reading such provisions into
the agreement. We therefore affirm that portion of the district
court’s August 6, 2002 Order finding that Plaintiffs had not
carried their burden of proof with regard to negligence and
causation, but reverse that portion of the Order finding Quality’s
counterclaim without merit by virtue of the interplay between the
repair agreement’s indemnification clause and insurance
obligations. The decision of the district court is therefore
AFFIRMED in part, REVERSED in part, and REMANDED with instructions.
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