NES Rentals Holdings, Incorpor v. Steine Cold Storage, Incorpora ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-1401
NES R ENTALS H OLDINGS, INC., et al.,
Plaintiffs-Appellants,
v.
S TEINE C OLD S TORAGE, INC.,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Indiana, Fort Wayne Division.
No. 10-CV-00406—Roger B. Cosbey, Magistrate Judge.
A RGUED S EPTEMBER 14, 2012—D ECIDED A PRIL 8, 2013
Before P OSNER, R OVNER, and W ILLIAMS, Circuit Judges.
W ILLIAMS, Circuit Judge. Humberto Menendez tragically
died from injuries he suffered while operating a forty-
foot boom lift. His employer, Steine Cold Storage, Inc.,
had rented the lift from NES Rentals. Menendez’s
family filed suit against NES and others, alleging that
their negligence caused the death. NES then sought
indemnification from Steine pursuant to an indemnifica-
tion clause in the rental agreement for the boom lift.
2 No. 12-1401
Indiana courts allow a party to contract to indemnify
for the other party’s own negligence but have said
that doing so is a “harsh burden” that a party would not
lightly accept absent express language in the agree-
ment evidencing such an intention. We agree with
Steine that the indemnification clause in the rental agree-
ment does not expressly state, in clear and unequivocal
terms as Indiana law requires, that Steine agreed to
indemnify NES for NES’s own negligence. We therefore
affirm the district court’s grant of summary judgment
in favor of Steine.
I. BACKGROUND
Steine Cold Storage, Inc. was a subcontractor for
the installation of thermal units at a Wal-Mart store
that was under construction in Gas City, Indiana. Steine
needed a boom lift, so it rented one from NES Rentals,
a company that leases construction equipment. NES
delivered the lift to the Wal-Mart work site on August 23,
2006, where Steine foreman Edward Crager signed a one-
page, two-sided NES “Rental Agreement.”
The Rental Agreement’s signature line is at the bottom
of its front side. Above the signature line, the Agree-
ment states:
Signer acknowledges that he has read and fully
understands this rental agreement including
the terms and conditions on the reverse side.
Signer agrees that Customer is solely responsible
for compliance with Federal and State training
No. 12-1401 3
and licensing requirements, except where Com-
pany provides operator. Signer acknowledges
that he is authorized to Sign this agreement and
bind the customer to the terms and conditions
on the reverse side.
Below the signature line, in all capitals and italics, are
the words: “Please note that there are important terms
on the reverse side of this contract, including an indem-
nification provision.”
On the reverse side, paragraph 19, the final paragraph,
appears in bold, italics, and in text larger than all the
other text on the page. It provides:
19. Indemnity. Customer [Steine] agrees to indem-
nify and hold Company [NES] harmless against
any and all claims, demands, or suits (including
costs of defense, attorney’s fees, expert witness
fees, and all other costs of litigation) for any and all
bodily injury, property damage, or any other
damages or loss, regardless of whether such
injury, damage or loss is caused in whole or in part
by negligence, which arise out of, result from, or
relate to the use, operation, condition or, presence
of the equipment except where such injury, dam-
age or loss is caused solely by the Company [NES].
NES performed a maintenance check of the boom lift
on September 27, 2006. About three weeks later, on No-
vember 20, 2006, Humberto Menendez, a Steine employee,
was operating the boom lift while working and was
fatally injured. Menendez’s family filed a wrongful death
lawsuit against various parties, including NES and Wal-
4 No. 12-1401
Mart, alleging that each of the defendants was negligent
and contributed to Menendez’s death. The family’s com-
plaint did not allege that Steine was negligent and did
not name Steine, Menendez’s employer, as a defendant
(presumably in light of the Indiana Worker’s Compensa-
tion Act, see Ind. Code §§ 22-3-2-2, 22-3-2-6).
After Menendez’s family filed its lawsuit, NES made
a demand upon Steine that it indemnify and hold NES
harmless for any amount for which NES was found to
be liable in the Menendez family lawsuit, as well as the
costs of defense, attorney’s fees, and other litigation
costs incurred by NES in defending against the family’s
lawsuit. Steine refused and as a result, on November 19,
2010, NES filed this lawsuit against Steine. NES main-
tained that under the Rental Agreement, Steine had a
duty to indemnify NES for the negligence claims against
NES asserted by the Menendez family in its lawsuit.
NES’s complaint also asserted that it had been incurring
losses, including attorney’s fees, as a result of Steine’s
failure to indemnify NES. NES and Steine filed cross
motions for summary judgment, although NES’s motion
was for partial summary judgment since the extent of
damages was unknown when the lawsuit was filed. The
magistrate judge, sitting by authority of 28 U.S.C. § 636(c)
and with the consent of both parties, decided the mo-
tions. The judge denied NES’s motion for partial summary
judgment and granted summary judgment in favor of
Steine. NES appeals.
No. 12-1401 5
II. ANALYSIS
We review a district court’s grant of summary judg-
ment de novo. Grinnell Mut. Reinsurance Co. v. Haight,
697 F.3d 582, 585 (7th Cir. 2012). In doing so, we review
the evidence in the record in the light most favorable to
the non-moving party and draw all reasonable infer-
ences in its favor. Nat’l Prod. Workers Union Ins. Trust v.
Cigna Corp., 665 F.3d 897, 901 (7th Cir. 2011). Summary
judgment is proper where “there is no genuine dispute
as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); Xiong
v. Wagner, 700 F.3d 282, 288 (7th Cir. 2012). The parties
agree that Indiana law governs this suit. As a court
sitting in diversity and applying Indiana law, we are
required to make our best prediction of how the
Supreme Court of Indiana would decide the case. BMD
Contractors, Inc. v. Fid. and Deposit Co. of Md., 679 F.3d 643,
648 (7th Cir. 2012). Where as here the state supreme
court has not spoken on a particular issue, then “ ‘decisions
of the state appellate courts control, unless there are
persuasive indications that the state supreme court
would decide the issue differently.’ ” Research Sys. Corp. v.
IPSOS Publicite, 276 F.3d 914, 925 (7th Cir. 2002) (quoting
Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087,
1090 (7th Cir. 1999)).
An indemnity agreement involves “a promise by one
party (the indemnitor) to reimburse another party
(the indemnitee) for the indemnitee’s loss, damage, or
liability.” Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d
751, 756 (Ind. Ct. App. 2002). We have recognized that
6 No. 12-1401
“[a]s a general matter, parties are free under Indiana
law to enter into an indemnification clause and may
obligate one party to insure against and/or to indemnify
certain acts or omissions of the other party.” Gaffney v.
Riverboat Servs. of Ind., Inc., 451 F.3d 424, 469 (7th Cir.
2006); see also, e.g., GKN Co. v. Starnes Trucking, Inc., 798
N.E.2d 548, 552 (Ind. Ct. App. 2003). In particular, when
it comes to negligent conduct, Indiana allows a party to
contract to indemnify another for the other’s own negli-
gence. GKN, 798 N.E.2d at 552. But see, e.g., J.S. Alberici
Const. Co. v. Mid-West Conveyor Co., 750 A.2d 518, 521
(Del. 2000) (under Delaware law, contractual provision
requiring one party to indemnify another for other
party’s own negligence, whether sole or partial, is unen-
forceable).
Indiana courts have construed contracts to indemnify
another for the other’s own negligence strictly, explaining
that “[c]ourts disfavor such indemnification clauses
because to obligate one party for the negligence of
another is a harsh burden which a party would not
lightly accept.” Moore Heating & Plumbing, Inc. v. Huber,
Hunt & Nichols, 583 N.E.2d 142, 145 (Ind. Ct. App. 1991).
Therefore, Indiana appellate courts have ruled that a
party may be obligated by contract to indemnify an-
other for the other’s own negligence only if the party
“knowingly and willingly” agrees to this indemnifica-
tion, and a contract will only be held to provide indem-
nification for the other’s own negligence if “it is so
stated in clear and unequivocal terms.” GKN, 798 N.E.2d
at 552.
No. 12-1401 7
Indiana courts have followed a two-part test to assess
whether a party “knowingly and willingly” accepted the
burden of indemnifying the other for the other party’s
negligence. Id.; see also Exide Corp. v. Millwright Riggers, Inc.,
727 N.E.2d 473, 479-80 (Ind. Ct. App. 2000). First, the
court reviews the indemnification clause to see whether
it states in clear and unequivocal terms that negligence
is an area of application where the indemnitor (here,
Steine) has agreed to indemnify the indemnitee (here,
NES). GKN, 798 N.E.2d at 552. The parties agree
that the first step is satisfied. Paragraph 19 in the
Rental Agreement, the indemnification provision, ex-
pressly mentions “negligence.” It states in particular
that indemnification applies ”. . . for any and all bodily
injury, damage, or any other damages or loss, regardless
of whether such injury, damage or loss is caused in
whole or in part by negligence . . . .”
Second, the court determines to whom the indemnifica-
tion clause applies; “in clear and unequivocal terms, the
clause must state that it applies to indemnification of
the indemnitee by the indemnitor for the indemnitee’s
own negligence.” Id. We first note that the parties
agree that Steine has no obligation to indemnify NES if
the sole cause of the injury or damages is NES, as the
indemnification clause specifically excludes that from
coverage. See Par. 19 of Rental Agreement (”. . . except
where such injury, damage or loss is caused solely by
[NES]”); Raytheon Eng’rs & Constructors, Inc. v. Sargent
Elec. Co., 932 N.E.2d 691, 698 (Ind. Ct. App. 2010).
The question at hand is whether, if NES is assessed
some portion of fault in the Menendez family suit and
8 No. 12-1401
others are also assessed some portion of fault, the indem-
nity clause in the Rental Agreement means that Steine
must indemnify NES for NES’s own negligence. In light
of the “harsh burden” imposed by obligating a party
for another’s negligence, the indemnification for NES’s
own negligence must be “explicit,” not “implicit,” for
Steine to have knowingly and willingly accepted the
burden. See Moore Heating, 583 N.E.2d at 146. The
Indiana appellate court explained in Moore Heating:
For example, if a clause simply states that a sub-
contractor shall indemnify a general contractor
for any negligence which arises from the job, it
is sufficient to show that the clause applies to
negligence but is insufficient to inform the sub-
contractor that it must indemnify the general
contractor for acts of the general contractor’s
own negligence. The claim of negligence which
arises from the job could have been caused by
the negligence of the general contractor, the sub-
contractor, third persons, or a combination of
them. This is the very reason the indemnity for
the indemnitee’s own negligence must be specifi-
cally, not generally, prescribed . . . . Therefore,
in order to reflect a knowing and willing accep-
tance of such a harsh burden, the indemnification
clause must expressly state, in clear and unequivo-
cal terms, that the indemnitee agrees to indemnify
the indemnitor against the indemnitor’s own
negligence.
Id. at 145-46.
No. 12-1401 9
Here, the indemnification clause provides that Steine
will indemnify NES for any injury, “regardless of whether
such injury . . . is caused in whole or in part by negli-
gence. . . .” Under the explanation in Moore Heating that
we just quoted, that statement is sufficient to make
clear to Steine that the indemnification clause applies to
negligence, but it is not sufficient to inform Steine “in
clear and unequivocal terms” that Steine must indemnify
NES for acts of NES’s own negligence. See id.; see also,
e.g., Vernon Fire and Cas. Ins. Co. v. Graham, 336 N.E.2d
829, 831 (Ind. Ct. App. 1975) (finding clause insufficient
to obligate indemnification for indemnitee’s own negli-
gence where clause stated: “The Lessee agrees to be
responsible for any damage to the property . . . which
may result from any use of the demised premises, or
any act done thereon by Lessee . . . and will also save
the Lessor harmless from any liability to any other
person, for damage to person or property resulting
from any such causes.”).
The language we quoted from Moore Heating reflects
the court’s rationale but not the exact language of the
provision at issue there, and NES maintains that the
provision at issue in Moore Heating demonstrates why it
should prevail. We disagree. The indemnity provision
in Moore Heating, which the court found obligated
Moore to indemnify for Huber’s own negligence, states
in relevant part:
[Moore] agrees to indemnify [Huber] against
and hold [Huber] harmless from any and all lia-
bility. . . from any claim or cause of action of any
10 No. 12-1401
nature arising while on or near the Job Site . . . and
whether or not it is alleged that [Huber] in any
way contributed to the alleged wrongdoing or is
liable due to a nondelegable duty. It is the intent
of the parties that [Moore] shall indemnify
[Huber] under [this clause] to the fullest extent
permitted by law, however, [Moore] may not
be obligated to indemnify [Huber] for the sole
negligence or willfull misconduct where such
indemnification is contrary to law, but otherwise
it is the intent of the parties that [Moore] shall
indemnify [Huber] to the fullest extent permitted
by law for such liability.
Id. at 144.
The Moore Heating provision contains a significant
clause that NES’s Rental Agreement did not: “whether or
not it is alleged that [Huber] in any way contributed
to the alleged wrongdoing or is liable due to a
nondelegable duty.” That provision contains explicit
language making clear the obligation to indemnify for
Huber’s own conduct. See Moore Heating, 583 N.E.2d at
147. And it makes all the difference. No comparable
provision exists here.
Similarly, the clause in GKN Co. v. Starnes Trucking,
Inc., 798 N.E.2d 548, 554 (Ind. Ct. App. 2003), contains
clear and unequivocal language making clear the obliga-
tion to indemnify for the indemnitee’s negligence.
The clause there stated:
[Starnes] shall indemnify and hold harmless
[GKN] . . . from and against all claims . . . arising
No. 12-1401 11
out of or resulting from the performance of the
work, provided that such claim . . . is caused in
whole or in part by any negligent act or omission
of [Starnes] . . . regardless of whether it is caused in
part by a party indemnified hereunder.
Id. at 550 (emphasis added). The GKN court ruled that
the last part of the clause (“regardless of whether it is
caused in part by a party indemnified hereunder”) “clearly
and unequivocally operated to alert Starnes to the
burden it undertook.” Id. at 553-55. There, again, a
clause explicitly made clear that indemnification
applied even if the damages were caused in part by the
indemnified party.
That direct reference to conduct by the indemnitee
present in Moore Heating (“whether or not it is alleged
that [Huber] in any way contributed to the alleged wrong-
doing or is liable due to a nondelegable duty”) and
GKN (“regardless of whether it is caused in part by a
party indemnified hereunder”) is missing in the NES
Rental Agreement. Instead, the language is largely
general: “any and all claims”; “for any and all bodily
injury, property damage, or any other damages or loss”;
“regardless of whether such injury, damage or loss is
caused in whole or in part by negligence”. The provision
states that it covers “negligence” in a general sense, but
it does not contain language making it explicit that
it covers NES’s own negligence.
The only reference to NES in the indemnification pro-
vision comes in its final words: “except where such in-
jury, damage or loss is caused solely by the Company
12 No. 12-1401
[NES].” NES argues that this phrase is an explicit
statement set within a broad indemnity clause requiring
Steine to indemnify NES “for any and all claims” arising
out of the use of the equipment, and that this “except”
clause is explicit in establishing that Steine must
indemnify NES whenever the triggering event involved
concurrent or contributing acts of others. Cf. Moore
Heating, 583 N.E.2d at 146 (stating words of a contract
are not alone and that entire contract must be read to-
gether). The problem with this argument, however, is
that the “except” clause does not make the obligation
to indemnify for NES’s own negligence explicit. Any
obligation based on the “except” clause is only, at best,
an implicit one. NES’s argument is essentially that there
is an implication from the provision’s coverage of “any
and all claims . . . caused in whole or in part by negli-
gence” “except” those caused by NES’s sole negligence
that the provision covers NES’s own negligence in in-
stances when it was not the sole cause. Whatever
appeal that argument may have, it is not enough
under Indiana law, as the obligation to indemnify for
the other party’s own negligence must be “explicit.”
See Moore Heating, 583 N.E.2d at 146.
NES maintains, however, that case law demonstrates
that the “except” clause is enough. It emphasizes in its
brief a 1966 Indiana appellate court decision, New York
Central Railroad Co. v. Northern Indiana Public Service
Company, 221 N.E.2d 442 (Ind. Ct. App. 1966). The clause
there stated:
Sixth. Second Party (NIPSCO) shall and will at all
times hereafter indemnify and save harmless
No. 12-1401 13
First Party (NYC) from and against any and all
detriment, damages, losses, claims, demands, suits,
costs, or expenses which First Party (NYC)
may suffer, sustain, or be subject to, directly or
indirectly, caused either wholly or in part by
reason of the location, construction, maintenance,
use or presence of said Work as permitted by
this license or resulting from the removal thereof,
except such as may be caused by the sole negli-
gence of First Party (NYC), its agents or employees.
Id. at 444.
In that case, the trial court found that the operator of the
crane involved in the fatal accident was NYC’s agent. Id.
at 445. It also found that the death was caused by the
sole negligence of NYC, acting through its agents and
employees. Id. The question on appeal was whether the
trial court erred in finding that the crane operator was
NYC’s servant, id. at 446, and the appellate court spent
the bulk of its opinion addressing that question.
The final argument the appellate court addressed
was NYC’s argument that NIPSCO failed to maintain
power lines at a sufficient height, and that this failure
contributed to the accident. Id. at 451. The court rejected
this argument and ruled that the evidence in the record
demonstrated that the accident was caused by the
sole negligence of NYC, its agents, or employees. Id. So
the exception in the indemnity clause applied (“except
such as may be caused by the sole negligence of First
Party (NYC), its agents or employees”), and NIPSCO
had no obligation to indemnify NYC. Id. As a result,
14 No. 12-1401
New York Central Railroad did not address the question
here. Whether the indemnification clause required in-
demnification for NYC’s own negligence in instances
when it was not the sole cause was simply not at issue.
NES’s reliance on Penn Central Co. v. Youngstown Sheet &
Tube Co., 253 N.E.2d 704 (Ind. Ct. App. 1969) similarly
does not help it. As NES acknowledges, the indemnitor
there made no effort to argue that the indemnity clause
did not obligate it to indemnify the plaintiff in in-
stances where the plaintiff’s negligence was not the
sole cause of an accident. The only question was whether
the indemnification clause violated public policy, and
the issue of indemnification for the indemnitee’s own
negligence was not litigated. Id. at 220-23.
NES also points to Center Township of Porter County v.
City of Valparaiso, 420 N.E.2d 1272 (Ind. Ct. App. 1981).
The clause there stated:
That the City of Valparaiso, Indiana, its agents,
departments, officials, and governing boards
shall be held harmless from any and all
negligence, misconduct, malfeasance or misfea-
sance resulting under its performance of this
contract, whether or not caused by or resulting
from the activity of the Fire Department or any
other participating agency or department or
official of the City of Valparaiso, Indiana. The
City is not a guarantor nor an insurer of the lives
and property of the said Center Township and is
responsible and bound only to the good faith
performance of the terms and obligations of this
contract.
No. 12-1401 15
Id. at 1274. The court held that the provision “put the
parties on notice that the indemnitor (Center Township)
is liable for loss arising from the negligence of the
indemnitee (City).” Id. at 1275. This result makes sense,
as the clause explicitly stated it applied for all negligence
whether or not caused by any City agency or official.
The NES Rental Agreement lacks a comparable clause.
We noted many years ago that it is not unconscionable
or illicit to contract for protection against one’s own
negligence, whether through insurance or indemnity.
Indem. Ins. Co. of N. Am. v. Koontz-Wagner Elec. Co., 233
F.3d 380, 383 (7th Cir. 1956) (applying Indiana law).
Indeed, the Indiana courts do “not invalidate such
clauses simply because they might provide broad pro-
tection for the indemnitee.” Ft. Wayne Cablevision v. Ind.
& Mich. Elec. Co., 443 N.E.2d 863 (Ind. Ct. App. 1983).
Rather, “[t]he policy of disfavor is directed at indemnifica-
tion duties which the indemnitor did not knowingly
assume.” Id. The Indiana appellate court has explained:
Our “judicial policy of disfavor” toward such
clauses is grounded in the recognition that the
obligation to insure another party against the
costs of the other’s own negligence is “so extra-
ordinary and harsh . . .” with the “potential lia-
bilities assumed . . . awesome” that a promisor
would not lightly accept such a burden knowingly
and willingly. . . .
Ind. State Highway Comm’n v. Thomas, 346 N.E.2d 252, 263
(Ind. Ct. App. 1976) (internal citations and quotations
omitted). And unlike in many insurance settings, where
16 No. 12-1401
one has an incentive to act carefully at the risk of in-
creased premiums, the indemnitee who will be indemni-
fied for prospective acts of negligence generally lacks
the same incentive.
In light of the way the Indiana appellate court deci-
sions have construed indemnification provisions, our
best prediction is that the Supreme Court of Indiana
would conclude that the indemnification provision in
the NES Rental Agreement does not evidence that
Steine knowingly and willingly accepted the burden of
indemnifying NES for NES’s own negligence. See Treat
v. Tom Kelley Buick Pontiac GMC, Inc., 646 F.3d 487, 492
(7th Cir. 2011) (looking especially to more recent Indi-
ana Court of Appeals decisions in deciding diversity
case). That is, we think the Supreme Court of Indi-
ana would agree with the district court that the Rental
Agreement does not explicitly provide, “in clear and
unequivocal terms,” that Steine must indemnify NES
for NES’s own negligence, and so Steine has no obliga-
tion to do so.
Finally, NES contends on appeal that even if the
district court viewed the language of the indemnity
clause as insufficient to indemnify NES for its own negli-
gence, the district court should have entered partial
summary judgment in favor of NES on the basis that
NES had alleged it incurred costs in its defense of the
Menendez lawsuit. It maintains that Steine should in-
demnify it for any defense costs associated with
defending itself, other than for its own negligence, in
the Menendez lawsuit. The principal problem with this
No. 12-1401 17
contention is that NES never made this argument to
the district court. “It is a well-established rule that argu-
ments not raised to the district court are waived on ap-
peal.” Puffer v. Allstate Ins. Co., 675 F.3d 709, 718
(7th Cir. 2012). NES filed memoranda both in support
of its motion for partial summary judgment and in opposi-
tion to Steine’s motion for summary judgment
before the district court, but it never made the “costs
of defense” argument it makes now. We do not consider
it here.
III. CONCLUSION
The judgment of the district court is A FFIRMED.
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