Honeywell International, Incor v. Lutz Roofing Company, Incorpor ( 2011 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 11a0543n.06
No. 09-1877 FILED
UNITED STATES COURT OF APPEALS Aug 08, 2011
FOR THE SIXTH CIRCUIT
LEONARD GREEN, Clerk
HONEYWELL INTERNATIONAL, )
INCORPORATED, )
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR THE
) EASTERN DISTRICT OF MICHIGAN
LUTZ ROOFING COMPANY, )
INCORPORATED, )
)
Defendant-Appellant. )
)
)
BEFORE: KEITH, CLAY, and COOK, Circuit Judges.
KEITH, Circuit Judge. This is an action for contractual indemnity and breach of contract.
The case arises out of plaintiff-appellee Honeywell International’s suit against defendant-appellant
Lutz Roofing Company for attorney’s fees and other costs Honeywell incurred while defending itself
in a tort claim brought by Geraldo Galvan, one of Lutz’s former employees, and in prosecuting this
action against Lutz. The district court held that Lutz, the subcontractor, breached its obligations to
indemnify and insure Honeywell, the general contractor, under the contract governing Honeywell
and Lutz’s relationship. Lutz appeals, arguing that given the terms of the contract and the scope of
Mr. Galvan’s complaint, it cannot be held liable. It also argues that the district court incorrectly
denied its motion as to Honeywell’s claim for breach of contract with regards to a provision
requiring that Lutz obtain insurance for Honeywell. For the first time, Lutz argues, on appeal, that
the fees Honeywell requests for prosecuting this action are not recoverable under Michigan law. For
the reasons discussed below, we AFFIRM the district court’s rulings and decline to address Lutz’s
new argument regarding attorney’s fees, finding that it was waived.
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
FACTUAL BACKGROUND
Plaintiff-Appellee Honeywell was the general contractor in charge of making improvements
at Algonac High School in Algonac, Michigan. Defendant-Appellant Lutz was the roofing
subcontractor. The parties’ relationship was governed by the Subcontract Agreement (“Agreement”)
that both parties signed.
Under the Agreement’s terms, Lutz agreed to take reasonable precautions to protect the safety
of its employees. In particular, Lutz agreed to implement appropriate safety measures on its work
at the site, including establishing “safety rules, posting applicable warnings and notices, erecting
safety barriers, and establishing proper notice procedures to protect persons and property at the site
and adjacent thereto from injury, loss or damage.” R. 6-2, Subcontract Agreement, § 8.14.3. Lutz
also pledged to comply with all required and recommended governmental safety rules and
regulations. The Agreement also included an indemnity clause requiring Lutz to indemnify
Honeywell in certain situations:
To the fullest extent permitted by law, Subcontractor shall indemnify and hold
harmless Customer, Honeywell and Owner and their agents and employees from
claims, demands, causes of actions and liabilities of every kind and nature, including
reasonable attorney’s fees, incurred in connection with the execution of the
Subcontract Work by the Subcontractor, its subcontractors, agents, or employees to
the extent such claims, demands causes of actions and liabilities result from or arise
from the negligent acts or willful misconduct of the Subcontractor, its subcontractors,
agents or employees. This indemnification shall extend to claims occurring after this
Subcontract is terminated as well as while it is in force. Subcontractor shall not be
obligated to indemnify Customer, Honeywell, or Owner for claims arising from the
negligence or willful misconduct of Customer, Honeywell, or Owner or their agents
of employees or caused by the design and specifications provided by such parties.
The indemnity set forth in this section shall not be limited by insurance requirements
or by any other provision of this Subcontract.
Id. § 10.
The Agreement separately provided that Lutz would “procure and maintain insurance on all
of its operations” including General Liability insurance covering all operations. Id. § 9. Lutz agreed
to name Honeywell as an additional insured under the policy and to provide Honeywell with a
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certificate of insurance verifying such coverage before the project commenced. Lutz obtained
insurance from Lexington Insurance Company. Lutz provided Honeywell a Certificate of Insurance,
supposedly extending liability coverage to Honeywell. The certificate, issued by Lutz and not by
Lexington, stated that
Honeywell . . . [is] an additional insured on the general liability policy . . . with
respect to liability arising out of ongoing and completed operations performed by the
named insured on the above named project. Such insurance afforded to the
additional Insured(s) shall be primary and not excess over . . . any insurance
purchased . . . .
R. 8-10, Certificate of Liability Insurance. However, the insurance Lutz procured from Lexington
explained that “[a]ny coverage provided by this endorsement to an additional insured shall be excess
over any other valid and collectible insurance available to the additional insured . . .” R. 8-16, Letter
from Lexington Insurance Company to Honeywell at 3 (emphasis added).
On July 14, 2004, Geraldo Galvan, one of Lutz’s employees, was injured when he fell off the
school’s roof. The district court described the fall:
Galvan was on the roof installing a pressure bar and flashing. He was not working
on an exposed edge, but in a location where the roof met a short parapet wall. Galvan
testified that he left the area where [he] had been working and went to get a drink of
water from his lunch box, which was in the middle of the roof. He was walking
toward the next area where he was to work when his boot became stuck in tar that
had not been covered by gravel. This occurred near the edge of the roof, and Galvan
lost his balance and fell to the concrete below. He injured his wrists and had surgery.
Galvan v. Honeywell Int’l, Inc., No. 07-12670, 2009 U.S. Dist. LEXIS 43266, at *3 (E.D. Mich. May
21, 2009) (internal citation omitted).
Galvan received a settlement of a worker’s compensation claim from Lutz’s insurer, and
then, along with his wife, Lourdes Galvan, sued Honeywell. The action was filed in state court and
removed to federal court on the basis of diversity jurisdiction. The Galvans alleged that Honeywell
was negligent in failing to take reasonable safety precautions. They specifically claimed:
There was no gravel on the sticky asphalt on which Plaintiff’s foot became stuck.
There were barriers along the perimeter of the roof initially at the start of the project.
However, there were no flags, warnings, barriers, railings, fall arrest devices or guard
rails after the first two or three days of the project. Honeywell did not inspect or
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require any safety devices and warnings.
R. 8-11, Galvan’s Answer to Honeywell’s Discovery Request at 5.
The Galvans did not file a separate claim against Lutz for these same failures, as the
Workers’ Disability Compensation Act barred them from doing so. However, when deposed, their
experts explained that Lutz had failed to use proper safety measures as it had pledged to do in the
Agreement and that if such measures had been taken, Mr. Galvan would not have been injured. In
response to a question regarding Lutz’s failure to use proper safety measures, Mumtaz Usmen, one
of the Galvans’ experts, explained the preventative role perimeter guarding would have played:
Question: I take it it’s your opinion that if Lutz would be using whatever you defined
as proper safety measures, that this accident could have been avoided entirely?
Answer: Yes. For instance, if they had used perimeter guarding all around, this
accident would not have occurred.
R. 11-2, Dep. of Mumtaz Usmen at 35-36. Similarly, Ronald Tyson, another of the Galvans’
experts, reiterated Lutz’s fault:
Question: Correct. [I]f Lutz had complied with the provisions of [OSHA Regulation]
1926.501 B 10 would Mr. Galvan have been injured?
Answer: More likely than not. Okay, I want to make sure that that answer is clear.
More likely than not he would not have been injured.
R. 11-3, Dep. of Ronald Tyson at 77-78.
John Pyrzewski, an employee of Lutz, testified that Lutz did not use the types of materials
other contractors commonly used to prevent workers from tripping on hidden hazards:
Question: How about safety nets? Have you ever seen them?
Answer: Yeah, I have seen them.
Question: Have you seen them on a Lutz project?
Answer: No, not on a Lutz project.
Question: Do you have an understanding of when safety nets are supposed to be
used?
Answer: Like all the jobs we did so far that we probably never used them.
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[R. 8-4, Dep. of John Pyrzewski at 26-27.]
Honeywell tendered a request for defense and indemnification to Lutz and a request to insure
to Lexington. Both refused Honeywell’s request. Lexington rejected Honeywell’s request on the
grounds that the Agreement did not specifically require the liability coverage to be primary, that
Lexington did not issue the certificate of insurance, and that Honeywell’s claim was within the limits
of Lutz’s self-insured retention. Lutz declined defense and indemnification on the basis that the
indemnity language of the Agreement did not require indemnification under Michigan common law
and statutory law in the light of the scope of the Galvans’ suit.
In response to Lutz’s refusal, Honeywell filed a motion to add Lutz as a third-party defendant
to assert its indemnity claim. The Galvans filed a supplemental response in opposition to
Honeywell’s motion to file a third-party complaint seeking indemnity from Lutz. In their response,
the Galvans stated:
Reference must be made to plaintiff’s complaint to see what Honeywell is being sued
for. Honeywell is being sued for its own negligence. Pursuant to the contract terms,
Lutz shall not be obligated to indemnify Honeywell for claims arising from the
negligence of Honeywell. Plaintiffs are only alleging Honeywell’s negligence, not
Lutz’s.
R. 6-5, Galvans’ Supplemental Resp. to Honeywell’s Motion for Leave to Amend the Pleadings and
Add Parties. However, at the hearing on the motion before Magistrate Judge R. Steven Whalen, the
Galvans explained that their opposition was based primarily on the delay it would cause and the
resulting prejudice to their case. The Galvans conceded that Honeywell could later add Lutz as a
“Non-Party at Fault.”
Judge Whalen denied the motion on the grounds that the language in the Agreement provided
that Lutz would be liable only “to the extent such claims . . . arise from the negligent acts of Lutz,”
and because under Michigan law Honeywell could only be held liable for acts for which it was
responsible, the court need not have allowed Honeywell to seek indemnity from Lutz. The court
explained further:
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
The complaint itself alleges only that it was Honeywell’s negligence that was the
proximate cause of the injuries. To the extent that the jury were to find Honeywell
partially responsible or totally responsible to whatever extent it would find
Honeywell responsible, under the contract Lutz would have no – neither Lutz nor
Lexington would have any duty to indemnify. So in that regard it would be futile to
add them.
R. 8-16, Tr. of the Mar. 18, 2008 Hr’g Regarding Def’s Mot. for Leave to Amend the Pleadings to
Add Third Parties at 12. Finally, the court noted the potential delay that may be caused by the
addition.
After Judge Whalen denied Honeywell’s motion to add Lutz as a third-party defendant,
Honeywell filed a motion to name Lutz as a “Non-Party at Fault” in the underlying action, which
Judge Whalen granted. Under Michigan law, if Honeywell was found liable, the court could hold
a hearing and then assess to Lutz any costs attributable to Lutz’s percentage of fault.
As for the Galvans’ suit against Honeywell, the district court granted Honeywell’s motion
for summary judgment. Galvan, 2009 U.S. Dist. LEXIS 43266, at *12. The court explained that,
under Michigan law, the sole tort theory under which a worker can recover against a general
contractor is the common work doctrine. Id. at *4-5. To proceed successfully under the doctrine,
a plaintiff must show, among other things, that the risk the employer created affected an area used
by a significant number of workers. Id. at *5-6. As the Galvans could not show that a sufficient
number of workers had been working on the roof on the day of Mr. Galvan’s injury, they could not
proceed under the theory. Id. at *8-10. Alternatively, the Galvans claimed that they were third-party
beneficiaries of the contract between the Algonac School System and Honeywell governing the
construction project and, thus, they should be able to recover on account of Honeywell’s alleged
contractual breach. Id. at *10-11. As an alleged third-party beneficiary, the Galvans claimed that
they were entitled to recovery on account of Honeywell’s failure to find and correct any safety
defects in the workspace, as the contract required. Id. at *11. The district court, however, did not
reach the issue of Honeywell’s fault, but rather found that the Galvans were not third-party
beneficiaries of the contract. Id. at *12.
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
While the underlying case was pending, Honeywell filed an action for contractual indemnity
against Lutz. The complaint alleged four counts. Count One, seeking a declaratory judgment, asked
that the court declare that Lutz had a duty to defend and indemnify Honeywell. Count Two, seeking
indemnification and defense, alleged that Lutz had breached its contractual duty to defend and
indemnify Honeywell in the underlying action. Count Three alleged that Lutz breached the insurance
provision of the Agreement when Lexington, Lutz’s insurer, declined to insure Honeywell. Finally,
Count Four alleged that Lutz, by failing to indemnify Honeywell as it requested, breached the
certificate of insurance Lutz provided Honeywell.
Lutz filed a motion for judgment on the pleadings, arguing primarily that because Honeywell
could only have been held liable, under Michigan law, for the fault that was its own, Lutz need not
indemnify Honeywell for any damages or costs it incurred. For the same reasons, Lutz argued that
it had not breached its obligation to insure. Honeywell filed a cross-motion for summary judgment
as to all claims.
The motions were heard on January 13, 2009 by district judge Marianne Battani. Judge
Battani denied Lutz’s motion for judgment on the pleadings and granted Honeywell’s motion for
summary judgment as to all claims. Honeywell Int’l, Inc. v. Lutz Roofing Co., No. 08-13311, 2009
U.S. Dist. LEXIS 47922, at *5-14 (E.D. Mich. June 8, 2009). The district court subsequently denied
Lutz’s motion for reconsideration. Honeywell Int’l, Inc. v. Lutz Roofing Co., No. 08-13311, 2009
U.S. Dist. LEXIS 106425, at *9 (E.D. Mich. Nov. 16, 2009). Lutz timely appealed.
STANDARD OF REVIEW
This court reviews de novo a trial court’s ruling on a motion for judgment on the pleadings.
Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 592 (6th Cir. 2009). We also review de novo
the district court’s decision on a motion for summary judgment. UAW v. Dana Corp., 278 F.3d 548,
554 (6th Cir. 2002). To avoid usurping the role of the fact-finder, a court deciding a summary
judgment issue must accept as true the non-moving party’s evidence and accept all justifiable
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inferences that can be drawn therefrom. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986).
Though the parties agree that de novo review is appropriate, they raise varying arguments as
to the appropriate level of deference due state court decisions in a diversity case such as this. Lutz
argues that, in a diversity case where the state supreme court has not issued a ruling on the matter,
we are bound by the decisions of an intermediate state court. Lutz relies primarily on the Sixth
Circuit’s decision in Birgel v. Board of Commissioners, 125 F.3d 948 (6th Cir. 1997). The court’s
ruling in Birgel was premised on the fact that the federal case involved exactly the same parties and
issues as a case previously ruled upon by an intermediate state court. Id. at 951-52. In fact, the
Birgel court specifically stated that its decision was based on the concept of issue preclusion. Id. at
952. Instead, we agree with Honeywell that the appropriate level of deference due intermediate state
court decisions was set out by the Supreme Court in Commissioner v. Estate of Bosch, 387 U.S. 456(1967). As the Court explained:
This Court has . . . held that while the decrees of lower state courts should be
attributed some weight . . . the decision is not controlling . . . where the highest court
of the State has not spoken on the point. . . . [T]his Court [has] further held that an
intermediate appellate state court . . . is a datum for ascertaining state law which is
not to be disregarded by a federal court unless it is convinced by other persuasive
data that the highest court of the state would decide otherwise. Thus, under some
conditions, federal authority may not be bound even by an intermediate state
appellate court ruling.
Id. at 464-65 (internal citations and quotation marks omitted); see also Pack v. Damon Corp., 434
F.3d 810, 818 (6th Cir. 2010).
DISCUSSION
The parties agree that resolution of the main issues in this case turns on the interpretation of
the Subcontractor Agreement.
Subcontractor agreements are construed in accordance with the general rules for construction
of contracts. Triple E Produce Corp. v. Mastronardi Produce, Ltd., 530 N.W.2d 772, 776 (Mich.
Ct. App. 1995). Consequently, the contract should be construed to effectuate the intentions of the
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parties. Id. Courts determine the intent from the language of the provision itself, the parties’
situation, and the circumstances surrounding the making of the contract. Id.; Sherman v. DeMaria
Bldg. Co., 513 N.W.2d 187, 190 (Mich. Ct. App. 1994).
As noted, the district court found that Lutz breached both its duty to indemnify and its duty
to insure Honeywell. Lutz appeals both rulings. Additionally, Lutz, for the first time, challenges
Honeywell’s right to recover its attorney’s fees for prosecuting this action. We discuss each issue
in turn below.
I. The Indemnity Clause Obligated Lutz to Indemnify Honeywell.
As the district court found, the indemnity provision is unambiguous. The provision requires
Lutz to indemnify Honeywell for any claim that arises from the execution of the subcontract work
to the extent that the claim arises or results from a “negligent act” of Lutz or its employees. In
essence, the Agreement requires fault on Lutz’s part or Mr. Galvan’s, and the phrase “to the extent”
limits Lutz’s indemnity in proportion to their fault. Further, Lutz is not obligated to indemnify
Honeywell for claims arising solely from Honeywell’s own negligence. See MSI Constr. Managers
Inc. v. Corvo Iron Workers Inc., 527 N.W.2d 79, 81 (Mich. Ct. App. 1995) (interpreting a similar
provision – one that required the subcontractor to indemnify the contractor “to the extent caused in
whole or in part by any negligent act or omission of the [s]ubcontractor,” – and finding that the
language limited the extent of the subcontractor’s liability to its own negligence).
Despite the provision’s apparent clarity, the parties interpret the agreement in varying
manners such that neither believe they should be liable for the attorney’s fees Honeywell incurred
in defending against the Galvans’ suit.
Lutz argues that because the Agreement on its face states that Lutz can only be liable to
Honeywell for its negligence and the Galvans’ complaint did not allege that Lutz was negligent, Lutz
cannot be responsible for Honeywell’s costs in defending itself from the Galvans’ suit. Lutz further
argues that this conclusion is reinforced by Michigan’s abolition of joint liability, after which a party
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
may only be held liable for costs in proportion to its percentage of fault. Accordingly, Lutz argues
that under no circumstances can it be responsible for the costs Honeywell incurred in defending itself
in a suit by Lutz’s employee where the employee did not allege that Lutz was at fault.
Honeywell, in contrast, argues that our review cannot be constrained by the Galvans’
complaint, but must be guided by the operative set of facts out of which the Galvans’ claims arose.
Applying this approach, Honeywell attests that the Galvans’ claims were the product of Lutz’s
negligence. In support, Honeywell relies on the deposition testimony of the Galvans’ experts and
employee who testified that the accident would not have occurred had Lutz taken proper safety
measures. It further argues, in support, that given the district court’s ruling that it was not negligent,
either Lutz or Galvan must have been negligent. Together, Honeywell argues, these facts and
holdings support the conclusion that Lutz is responsible for any and all costs Honeywell incurred in
defending itself from the Galvans’ suit.
The district court largely accepted Honeywell’s argument. In making its ruling, the court
began by examining Sixth Circuit jurisprudence interpreting Michigan law governing contracts with
language similar to the one in this case. The court emphasized that under the terms of the
indemnification agreement, “there is no dispute that the contract between Honeywell and Lutz placed
the responsibility for safety measures relative to roofing on Lutz.” Honeywell Int’l, 2009 U.S. Dist.
LEXIS 47922, at *12. The court then noted that Michigan courts have found that similarly worded
agreements carry with them a duty that the subcontractor defend the contractor even if it has no duty
to indemnify because a jury could conclude that the subcontractor or the plaintiff was comparatively
negligent. Id. (citing Turner Constr. Co. v. Robert Carter Corp., No. 97-1394, 1998 U.S. App.
LEXIS 20544, at *6 (6th Cir. Aug. 17, 1998)). Accordingly, “even if the Court had found Honeywell
solely negligent on the facts, and therefore contractually barred from indemnification, Lutz would
owe Honeywell a duty to defend under the circumstances presented.” Id.10
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The district court further noted the Michigan Court of Appeals’ decision in Walbridge Co.
v. Walcon Corp., 525 N.W.2d 489, 492 (Mich. Ct. App. 1995), in which a general contractor was
sued under similar circumstances. Accepting the reasoning of this case, the district court held that
the contractual provision barring indemnification by the subcontractor “did not apply absent the
actual establishment of a breach of duty by the general contractor.” Id. at *13. Accordingly, as
Honeywell had not been found to have breached any duty, Lutz retained a responsibility to defend
Honeywell. Id.
We agree with the district court’s conclusion.
In Turner Construction, we considered the claim of a general contractor who sought to
compel indemnification from a subcontractor for the costs associated with defending a claim of
injury caused by one of the subcontractor’s employees. 1998 U.S. App. LEXIS 20544, at *6. Like
this case, Turner Construction involved the application of Michigan contract law. Id. at *8. Though
the court eventually rejected the general contractor’s request for indemnification, it provided useful
guidance as to when a duty to indemnify should apply in the context of attorney’s fees, and on what
basis the court should make the determination that such a duty exists:
Thus, even though [the general contractor] was the only defendant named by [the
injured party] in his action, that fact standing alone, would not relieve [the
subcontractor] of its contractual duty to defend [the general contractor]. [The
subcontractor] had no obligation to defend [the general contractor] because based
upon the facts alleged in the underlying complaint, [the subcontractor] could not have
owed [the general contractor] indemnification.
Id. at *14.
Accordingly, the court explicitly rejected the argument advanced by Lutz that the injured
party’s decision to name or not name the subcontractor in its action is determinative as to whether
a duty to indemnify exists. Rather, the focus should be on the general source of the injury described
in the complaint. Though Turner Construction involved a clause that imposed liability on the
subcontractor for all injuries “arising out of or occurring in connection with the execution of the
[subcontractor’s] Work,” id. at *2, we see nothing in the Turner court’s reasoning or Lutz’s briefs
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that would limit the rule from Turner to cases involving identical indemnity clauses. Nor can we
see any reason why Turner should be limited as such. While contracts that require indemnification
where the injury “arises out of” the subcontractor’s work do not require that the subcontractor have
been negligent, they nonetheless require that the subcontractor have caused the injury. Empire Fire
& Marine Ins. Co. v. Minuteman Int’l, Inc., No. 274660, 2008 Mich. App. LEXIS 101, at *2 (Mich.
Ct. App. Jan. 15, 2008) (collecting cases). Accordingly, Lutz’s argument as to the determinative
nature of the injured party’s complaint would be applicable where the clause merely required that
the injury have arisen from the subcontractor’s work; a subcontractor could argue that because it was
not named in the injured party’s suit against the general contractor it could not have caused the injury
and thus could not be responsible for the general contractor’s costs in defending itself. Nonetheless,
in Turner, we refused to be limited by the precise wording of the injured party’s complaint. If a
contract requires negligence on the part of the subcontractor, as the contract does here, this imposes
an additional requirement that the district court determine whether, based on the facts before it, the
subcontractor not only caused the harm, but was also at fault. However, it has no effect on the scope
of facts the court may examine in determining whether such fault exists.
We are further persuaded by the fact that our analysis is consistent with the general
jurisprudential approach of Michigan court decisions issued after our decision in Turner
Construction. See generally Empire Fire & Marine Ins., 2008 Mich. App. LEXIS 101, at *5 (“We
agree with Minuteman that the trial court erred to the extent it found the allegations in Empire’s
complaint were dispositive of Minuteman’s third-party complaint for indemnification of its litigation
expenses, including attorney fees and defense costs.”); Westfield Ins. v. Mitchell, No. 209558, 2000
Mich. App. LEXIS 2231, *2 (Mich. Ct. App. May 30, 2000) (“[T]he duty to defend and indemnify
is not determined solely by the terminology used in the pleadings. Rather, it is necessary to focus
on the basis for the injury and not the nomenclature of the underlying claim in order to determine
whether coverage exists.” (internal quotation marks and citations omitted)).
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Finally, we note that adherence to Turner Construction respects the practical realities of tort
litigation. In a case such as this, where the injured party is barred by the Workers’ Disability
Compensation Act from pursuing claims against his employer, the subcontractor, a rule based solely
on whether the complaint named the subcontractor would needlessly elevate form over substance.1
Here, the Galvans alleged in their complaint that the injury occurred when Honeywell failed
to take reasonable safety precautions on the roof on which Mr. Galvan was working. Under the
terms of the indemnity agreement, Lutz specifically agreed to implement appropriate safety measures
on the roof, namely the placement of safety belts and warning signs. Accordingly, the Galvans’ suit
specifically implicated Lutz’s negligence regardless of whether Lutz was named as a party in their
complaint.
Lutz, in response, relies almost exclusively on the Michigan Court of Appeals’ decision in
Ormsby v. Capital Welding, Inc., 660 N.W.2d 730 (Mich. Ct. App. 2003), rev’d on other grounds,
684 N.W.2d 320 (Mich. 2004). In Ormsby, the court dismissed the general contractor’s third-party
complaint seeking indemnity from the subcontractor for any damages assessed to it in a suit against
it by an injured worker. Id. at 745-46. The court reasoned that because Michigan had abolished joint
and several liability, in favor of comparative negligence, the general contractor could only be held
liable for the portion of his costs associated with his negligence. Id. at 745. Accordingly, as the
general contractor would not have to pay for any portion of the damages for which the subcontractor
was responsible, the general contractor could not seek indemnity from the subcontractor. Id. at 745-
46. Ormsby is clearly distinguishable in that the general contractor did not seek, and the court did
not address, any costs or fees the general contractor might incur in defending the suit.
1
Furthermore, the record undercuts Lutz’s argument as to why the Galvans opposed adding Lutz to
the case. The transcript from the hearing regarding Honeywell’s motion to add Lutz as a third-party
defendant reveals that the Galvans opposed adding Lutz to the case not because they believed Lutz
to be free of fault, as Lutz speculates, but rather because they believed the addition would further
delay the case and thereby prejudice them.
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Having established that Lutz may be liable for the costs Honeywell incurred despite not
having been named as a defendant by the Galvans, the only remaining question is whether Lutz was
in fact negligent. The district court concluded that Lutz was negligent, relying in large part on the
fact that Honeywell was not found liable. Accordingly, it reasoned that either Lutz or Galvan must
have been negligent. While we have questions as to whether the dismissal of the Galvans’ case
against Honeywell necessitates that Lutz or Galvan must be found negligent,2 an independent review
of the evidence before the court supports a finding of negligence on Lutz’s part.
As noted above, testimony from the Galvans’ experts and one of Lutz’s employees
demonstrates that Lutz failed to follow applicable safety protocols and this failure caused Mr.
Galvan’s injury. Mumtaz Usmen, one of the Galvans’ experts, testified that Lutz failed to use proper
safety measures, namely perimeter guarding, on the roof. Had Lutz used such guarding, Usmen
stated, the accident would not have occurred. Likewise, Ronald Tyson, another of the Galvans’
experts, testified that Lutz failed to comply with an applicable federal safety regulation. Had Lutz
followed this requirement, Tyson explained, more likely than not, Mr. Galvan would not have been
injured. Similarly, John Pyrzewski, an employee of Lutz, testified that, despite the fact that other
employers commonly used safety nets to protect workers from the type of hidden hazard that caused
Mr. Galvan’s injury, Lutz never used such nets.
2
The district court, in making its negligence determination, relied primarily on the Michigan Court
of Appeals’ decision in Walbridge, 525 N.W.2d at 492, which is inapplicable to the facts of this case.
As Lutz correctly points out, the indemnity provision at issue in Walbridge was broader than the one
in this case in that it provided that the general contractor would be indemnified as long as the claims
arose out of the work of the subcontractor and the general contractor was not solely negligent. Id.
at 492 n.1. Said differently, the sole bar to the general contractor’s indemnification for harm
resulting from the subcontractor’s work was if the general contractor was itself negligent in its
performance. Accordingly, where the general contractor was found not negligent, it was reasonable
to assess costs on the subcontractor on this basis alone. Here, as Lutz correctly notes, it is not as
clear that the general contractor has the right to indemnification simply because it was not negligent.
Under the present Agreement’s indemnification clause, for Honeywell to be due indemnification,
we must find that the claim was the product of Lutz or Mr. Galvan’s negligence, i.e., that they
breached an applicable duty under the circumstances.
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
Lutz, in response, presents no evidence that it complied with these requirements, that it used
such safety materials, or that its failure to do such did not cause Mr. Galvan’s injuries. Nor do we
see any evidence in the record suggesting otherwise. Lutz, as mentioned, relies wholly upon the
scope of the Galvans’ suit from its perspective. However, as discussed above, we reject the limited
view that Lutz advocates. Examining the operative set of facts outlined in the complaint, there is
no question that Lutz’s conduct was the source of Mr. Galvan’s injuries. Accordingly, having before
us convincing evidence of Lutz’s negligence, we affirm the district court’s grant of Honeywell’s
motion for summary judgment.
II. Lutz Breached its Contractual Duty to Insure.
Lutz also argues that the district court erred in denying its motion for judgment on the
pleadings and granting Honeywell’s cross-motion for summary judgment as to whether Lutz
breached its duty to insure Honeywell. The Agreement provided that Lutz was required to procure
insurance for the site, name Honeywell as an “additional insured,” and provide a certificate
evidencing such. Lutz delivered a certificate of insurance extending liability coverage to Honeywell
and stating that the coverage would be primary. Nevertheless, Lexington, Lutz’s insurer, denied
Honeywell coverage, because the policy Lutz purchased only provided excess coverage for
Honeywell. Furthermore, Lexington did not issue the certificate Lutz provided Honeywell.
Therefore, the district court denied Lutz’s motion.
Lutz raises three arguments on appeal. First, Lutz argues that it met its obligation in naming
Honeywell as an additional insured. It argues that its mere provision of a certificate, which Lutz
produced, on which it added Honeywell’s name was sufficient to meet this obligation.
The term “additional insured” is not defined in the Agreement. Nor does the Agreement
delineate the scope of coverage to be provided to an “additional insured.” Michigan courts have held
that if a term is ambiguous, the fact-finder may look to relevant extrinsic evidence, such as “the
parties’ conduct, the statements of its representatives, and past practice to aid in interpretation.”
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
Klapp v. United Ins. Grp. Agency, Inc., 663 N.W.2d 447, 454 (Mich. 2003) (quoting Penzien v.
Dielectric Prods. Eng’g Co., Inc., 132 N.W.2d 130, 132 (1965)). In this case, available extrinsic
evidence suggests that Lutz, rather than satisfying its obligation, failed to meet it. The certificate
Lutz provided Honeywell specifically stated that the coverage it had procured for Honeywell was
primary. Accordingly, we can conclude that the parties intended that Honeywell, as an additional
insured, be provided with primary coverage, as opposed to the excess coverage Lutz actually
procured.
Furthermore, we are cautioned against adopting the interpretation Lutz advocates by its
practical implications. Were we to accept Lutz’s argument that merely providing Honeywell a
certificate was all that the Agreement required, the provision requiring Lutz to name Honeywell as
an additional insured would be superfluous. The same amount of coverage would exist regardless
of whether Lutz provided Honeywell a certificate with or without it named as an additional insured.
Michigan courts have rejected interpretations which render contractual provisions meaningless. See
Port Huron Educ. Ass’n MEA/NEA v. Port Huron Area Sch. Dist., 550 N.W.2d 228, 237 (Mich.
1996) (rejecting plaintiff’s interpretation where its effect would have made the provision
superfluous).
Second, Lutz argues that the insurance Honeywell requested would have violated public
policy, in light of the Michigan Court of Appeals’ decision in Peeples v. City of Detroit, 297 N.W.2d
839 (Mich. Ct. App. 1980). In Peeples, the court held that it would violate Michigan law for a
subcontractor to indemnify a general contractor where the general contractor’s sole negligence was
the cause of the damage or injury. Id. at 843. The Michigan Court of Appeals subsequently
provided further interpretation of the rule it set out in Peeples, explaining that a clause which does
not explicitly address the general contractor’s sole negligence will not be void unless the general
contractor is seeking redress for a matter in which it was solely negligent. Fischbach-Natkin Co. v.
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
Power Process Piping, Inc., 403 N.W.2d 569, 573 (Mich Ct. App. 1987). As noted above,
Honeywell was not found negligent.3 Accordingly, Peeples does not apply.
Finally, we reject Lutz’s third argument, that because Lutz met its obligation under the
contract, Honeywell’s dispute is with Lexington. It is merely derivative of and dependent on Lutz’s
first argument. Thus, this argument is also meritless.
III. Lutz Waived its Argument Regarding the Amount of Attorney’s Fees it Owes.
Finally, the parties dispute whether Honeywell is entitled to recovery of attorney’s fees
incurred while prosecuting this action. Lutz argues that Michigan courts follow the “American rule”
pursuant to which a prevailing party may not recover attorney’s fees from a losing party. Honeywell,
while admitting that Michigan courts have generally adhered to this rule, argues that this case is
distinguishable from those that have come before as it involves a breach of contract claim to enforce
an indemnity provision. The provision of fees, Honeywell argues, would merely return Honeywell
to the position it would have been if Lutz had met its obligation to Honeywell under the Agreement.
Ultimately, we need not decide the issue as Lutz failed to raise this argument before the
district court in either its motion for judgment on the pleadings or its response to Honeywell’s cross-
motion for summary judgment. This Court has held that:
[We] will not review issues raised for the first time on appeal. Our function is to
review the case presented to the district court, rather than a better case fashioned after
a district court’s unfavorable order. The court will consider an issue not raised below
only when the proper resolution is beyond doubt or a plain miscarriage of justice
might otherwise result.
DaimlerChrysler Corp. Healthcare Benefits Plan v. Durden, 448 F.3d 918, 922 (6th Cir. 2006)
3
In Lutz’s discussion of whether it must indemnify Honeywell for the costs Honeywell incurred
while defending itself from the Galvans’ suit, Lutz argues that Honeywell was never found not to
be negligent, but rather was merely found to have not owed a duty to Mr. Galvan. This argument
is internally inconsistent. For a person or entity to have acted negligently under Michigan law, it
must have breached a duty it owed. See Lorencz v. Ford Motor Co., 483 N.W.2d 844, 846 (Mich.
1992) (stating that in order to establish a negligence claim, a plaintiff must prove: (1) duty, (2)
breach of duty, (3) causation, and (4) damages). Accordingly, by definition, a person cannot have
acted negligently where he owed no duty. The district court correctly found that “Honeywell was
not negligent.” Honeywell Int’l, 2009 U.S. Dist. LEXIS 106425, at *8.
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No. 09-1877, Honeywell, Inc. v. Lutz Roofing Co., Inc.
(internal citations omitted); see also Enertech Elec., Inc. v. Mahoning Cnty. Comm’rs, 85 F.3d 257,
261 (6th Cir. 1996) (“When a party fails to present an argument to the district court, we have
discretion to resolve the issue only where the proper resolution is beyond any doubt, or where
injustice might otherwise result.” (citation omitted)). Given the lack of a decision directly on point
or the presentation of any reason to believe a miscarriage of justice would result, we choose the
better course of declining to review this issue. Barber v. Louisville & Jefferson Cnty. Metro. Sewer
Dist., 295 F. App’x 786, 791 (6th Cir. 2008) (refusing to consider claim raised for the first time on
appeal because, even though the issue was “a pure question of law, the existence of such a claim
[was] not ‘clear and beyond doubt’”).
CONCLUSION
For the foregoing reasons, the district court’s denial of Lutz’s motion for judgment on the
pleadings and grant of Honeywell’s cross-motion for summary judgment are, hereby, AFFIRMED.
18