Dakota, MN & Eastern R. R. v. R. J. Corman R. R. ( 2013 )

United States Court of Appeals
For the Eighth Circuit
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No. 12-2043
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Jack Lieffort
lllllllllllllllllllll Plaintiff
v.
Dakota, Minnesota & Eastern Railroad Company
lllllllllllllllllllll Defendant
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Dakota, Minnesota & Eastern Railroad Company
lllllllllllllllllllllThird Party Plaintiff - Appellant
v.
R. J. Corman Railroad Construction
lllllllllllllllllllllThird Party Defendant - Appellee
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Appeal from United States District Court
for the Southern District of Iowa - Davenport
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Submitted: November 14, 2012
Filed: January 7, 2013
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Before MURPHY, BENTON, and SHEPHERD, Circuit Judges.
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SHEPHERD, Circuit Judge.
After Jack Lieffort fell and injured his leg and hip while working as the
employee-in-charge of a construction site, he sued his employer, the Dakota,
Minnesota and Eastern Railroad Company (DM&E), under the Federal Employers’
Liability Act (FELA), 45 U.S.C. §§ 51-60. DM&E then brought a third-party
complaint against R.J. Corman Railroad Construction (Corman), contending Corman
was required to indemnify and defend it against Lieffort’s FELA claim pursuant to
a contract between the parties. The district court1 granted summary judgment in favor
of Corman, and we affirm.
I.
DM&E is a railroad company that maintains an interstate railroad system, and
Corman replaces and installs railroad tracks. In 2007, DM&E and Corman entered
into a Contractor Work Agreement (CWA) for the installation of new rail on
DM&E’s property in Iowa. The terms of the CWA included an indemnification
clause, providing:
Contractor [Corman] agrees to defend, save harmless and indemnify the
Railroad [DM&E], its officers, directors, shareholders, agents,
employees, successors and assigns from any loss, cost or damage by
reason of Personal Injury or property damage of whatsoever nature or
1
The Honorable Ross A. Walters, United States Magistrate Judge for the
Southern District of Iowa, to whom the case was referred for final disposition by
consent of the parties pursuant to 28 U.S.C. § 636(c).
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kind arising out of, or as a result of, the negligent performance of the
Work by the Contractors, its employees, agents, or subcontractors.
Additionally, the CWA required Corman to provide liability and automobile
liability insurance with specific policy limits and name DM&E as an additional
insured under the policy. As a result, Corman purchased an insurance policy through
Lexington Insurance that named DM&E as an additional insured. The Lexington
Insurance policy met the financial requirements in the CWA, but Corman kept a
$250,000 self-insured retention, meaning that Lexington had no duty to defend until
Corman first spent $250,000 of its own funds. The Lexington Insurance policy did
not apply to the following:
(1) “Bodily injury” to an “employee” of the insured arising out of
and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured’s
business; or
(2) Any claim or “suit” brought by the spouse, child, parent,
brother or sister of that “employee” as a consequence of
paragraph (1) above.
There was an exception to this general exclusion for damages “[a]ssumed in a
contract or agreement that is an ‘insured contract,’ provided the ‘bodily injury’ or
‘property damage’ occurs subsequent to the execution of the contract or agreement.”
An insured contract was defined as any part of a “contract or agreement pertaining
to your business . . . under which you assume the tort liability of another party to pay
for ‘bodily injury’ or ‘property damage’ to a third person or organization.”
Jack Lieffort was a DM&E employee and the employee-in-charge of the
Corman construction project. In this role, Lieffort primarily monitored train
movement to prevent trains from traveling towards the areas where Corman was
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working to install rail lines. On May 16, 2007, Lieffort began putting out tie fires2
to assist Corman employees. Unprompted, Lieffort grabbed several bottles of water
and poured the water on a tie fire. As Lieffort was walking back to his truck, he
tripped and fell to the ground, injuring his left leg and hip. Lieffort is not sure what
he tripped over or where he landed. During his deposition, Lieffort first maintained
that he tripped over a piece of rail, but later admitted that it was more likely that he
tripped while stepping backwards.
In April 2010, Lieffort sued DM&E and alleged DM&E was negligent in
violation of the FELA. Lieffort’s complaint did not assert any claim against Corman.3
DM&E sought defense and indemnification from Corman and Lexington Insurance,
but both refused to defend the claim. Subsequently, DM&E filed a third-party
complaint against Corman, alleging that Corman was required to indemnify and
defend DM&E under the CWA and seeking a judgment for defense costs and
reimbursement for any damages awarded to Lieffort.
Corman and DM&E moved for summary judgment, but Lieffort settled his
claim against DM&E while the parties’ motions for summary judgment were pending
in the district court. The district court granted summary judgment in favor of
Corman, concluding that (1) DM&E was not entitled to indemnification under the
CWA because it could not establish that Corman was negligent, and (2) Lieffort’s
claims against DM&E fell outside of the Lexington Insurance policy. DM&E now
appeals.
2
Installing railroad ties commonly causes tie fires because of the extreme heat
required to bend the metal rails before they are laid.
3
During his deposition, when Lieffort was asked if Corman had done anything
wrong, he replied: “Didn’t have enough fire fighting equipment there for one thing.”
After he was asked if Corman did anything else, Lieffort said that excess material
could have been stored or piled where employees were not working.
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II.
On appeal, DM&E argues (1) that the indemnity provision contained in the
CWA extends to Lieffort’s FELA claim and (2) that, alternatively, Lieffort’s claim
is covered by the Lexington Insurance policy. We review de novo a district court’s
grant of summary judgment. Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990
(8th Cir. 2005). Reviewing “the record in the light most favorable to the nonmoving
party,” id., we will affirm the grant of summary judgment “if the movant shows that
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).
A.
First, DM&E contends that indemnity provisions in railroad contracts
implicitly include FELA negligence claims, in addition to ordinary negligence.4
Under the FELA, railroad employees have a federal cause of action for injuries
“resulting in whole or in part from the negligence” of the railroad. 45 U.S.C. § 51.
In crafting this remedy, “Congress removed various common-law obstacles to an
employee’s recovery, and courts have liberally construed FELA to further Congress’s
remedial goal.” Cowden v. BNSF Ry. Co., 690 F.3d 884, 889-90 (8th Cir. 2012)
(internal citation, alteration marks, and quotation marks omitted). According to
DM&E, even if Corman was not negligent under common-law negligence principles,
it is liable under the broader liability imposed by the FELA.
4
Corman contends that DM&E did not raise the issue that FELA claims are
implied in railroad contracts in the district court. However, DM&E argued in its brief
supporting its motion for summary judgment that a FELA claim is a form of
negligence and, therefore, is covered under the terms of the indemnity provision of
the CWA, and the district court addressed this issue.
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DM&E primarily relies on this Court’s holding “that an industry’s obligation
to indemnify a railroad under an industrial track agreement is a contractual duty and
not a duty arising under the common law of tort.” Burlington N., Inc. v. Hughes
Bros., Inc., 671 F.2d 279, 284 (8th Cir. 1982); see also Burlington N., Inc. v. Bellaire
Corp., 921 F.2d 760, 763 (8th Cir. 1990) (same). The indemnification clause in
Hughes Brothers stated that the railroad company would be indemnified for “loss,
damage, or injury from any act or omission of” Hughes Brothers, whose plant was
served by Burlington Northern’s railroad. 671 F.2d at 283. The court found that
“[t]he obvious purpose of the agreement is to provide for indemnification of the
railroad when the industry’s act or omission violates the railroad’s nondelegable duty
to furnish a safe place for its employees to work.” Id. at 284. The court reasoned that
the contract was made in contemplation of FELA liability, and thus the phrase “act
or omission” in the disputed indemnification clause “include[d] any act or omission
which constitutes a violation of the railroad’s duty to provide a safe work place and
thus subjects it to liability under the act.” Id.
The Eleventh Circuit has distinguished Hughes Brothers, concluding that the
agreement in Hughes Brothers included FELA claims because the indemnification
clause extended to “liab[ility] for any actions or omissions . . . .” See S. Ry. Co. v.
Ga. Kraft Co., 823 F.2d 478, 481 n.4 (11th Cir. 1987). In contrast, the court in
Georgia Kraft held that the agreement, which extended to “‘any and all damage
resulting from negligence of’ Georgia Kraft,” id. at 479, contemplated common-law
negligence because “the indemnity agreement clearly says ‘negligence’ of Georgia
Kraft,” id. at 482. Therefore, “no language indicat[ed] any ground for liability other
than common-law negligence.” Id.
We conclude the same is true in this case: nothing in the CWA agreement
indicates that it extends to claims which are unrelated to Corman’s common-law
negligence. The indemnity clause in the CWA does not mention the FELA. It states
that it covers all claims “arising out of, or as a result of, the negligent performance”
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of Corman. Therefore, it is more similar to the provision in Georgia Kraft than the
broader provisions contained in Bellaire and Hughes Brothers. In those cases, the
indemnity agreements covered damages resulting from “any act or omission.”
Hughes Bros., 671 F.2d at 283; Bellaire, 921 F.2d at 762. Here, similar to the
indemnity provision in Georgia Kraft, the indemnity clause is explicitly tied to
Corman’s negligence; thus, without proof of any negligence by Corman, Lieffort’s
damages are not covered by the indemnity clause in the CWA. DM&E asserts that
the “of whatsoever nature or kind” language in the indemnity clause is broad enough
include FELA liability. “Of whatsoever nature or kind,” however, refers to the injury
suffered, not the act committed. The language discussing the act is “negligent
performance,” and because there is no proof of negligence, the indemnification clause
is not triggered.
DM&E argues that the settlement agreement proved Corman’s negligence,
citing Missouri Pacific Railroad Co. v. International Paper Co., 618 F.2d 492 (8th Cir.
1980). There, the court held that “the settlement of the FELA claim conclusively
resolved the issue of liability, absent fraud or collusion.” Id. at 495. The court’s
holding, however, was based on the terms of an indemnity agreement which tied the
obligation to indemnify the railroad to the railroad’s FELA liability. See id. at 496
(“In other words, IPC is liable to the Railroad under the indemnity agreement if IPC’s
conduct made the Railroad liable to Roach under FELA.”). Further, the indemnity
agreement in International Paper contained the same broad language as the contracts
in Bellaire and Hughes Brothers, agreeing to indemnify against loss or injury from
“any act or omission” of the indemnitor or its employees. Id. (internal emphasis
omitted). Even if the settlement between Lieffort and DM&E established DM&E’s
FELA liability, DM&E has presented no evidence that Corman acted negligently, and
the indemnification agreement between DM&E and Corman only extends to damages
caused by the negligent conduct of Corman. Therefore, the settlement between
Lieffort and DM&E did not conclusively establish Corman’s obligation to defend and
indemnify DM&E under the CWA’s indemnification clause.
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Further, in the district court, DM&E agreed that Corman was not negligent.
In DM&E’s brief in support of its motion for summary judgment, it stated, “Corman’s
refusal of DM&E’s tender of defense in this case is based on the argument that there
was no negligence (DM&E agrees with this), and therefore there is no duty under the
indemnification clause on the part of Corman.” (emphasis added). Aside from the
settlement, the only evidence offered to establish Corman’s negligence is Lieffort’s
statement during his deposition that Corman should have had more fire-fighting
equipment on site. Lieffort’s deposition does not establish that Corman was
negligent, or that the workplace was unsafe. In his deposition, Lieffort acknowledges
that he does not know what he tripped on and admits that he was backing up when he
tripped. Further, Lieffort had no duty to assist in putting out the tie fires, nor was he
asked to aid in that effort. DM&E has not shown any issues of material fact exist,
and, therefore, we conclude as a matter of law that no negligence can be attributed to
Corman.
B.
Second, DM&E argues that even if Lieffort’s claim is not covered under the
indemnity provision in the CWA, it is still covered under the Lexington Insurance
policy.5 The policy states it does not cover “bodily injury to an employee of the
insured arising out of the course of . . . employment by the insured.” DM&E
concedes this general exclusion provision in the policy applies, but contends that the
5
DM&E also argues that if Lieffort’s claim is not covered, then it is a breach
of the terms of the CWA agreement, which required Corman to procure insurance,
because Corman self-insured a portion of the Lexington Insurance policy. DM&E did
not directly raise this argument in its briefing before the district court or raise a cause
of action for breach of contract in its third-party complaint. Indeed, the district court
noted that the argument that self-insurance may constitute a breach of the CWA was
not made; therefore, because DM&E never raised this argument, we do not address
it. See Aaron v. Target Corp., 357 F.3d 768, 779 (8th Cir. 2004) (“Arguments and
issues raised for the first time on appeal are generally not considered . . . .”).
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policy still extends to Lieffort’s claim under a separate exception to the general
exclusion. The exception DM&E relies upon relates to an “insured contract,” which
covers “the tort liability of another party.” According to DM&E, the indemnification
agreement in the CWA is an insured contract, within the meaning of the Lexington
Insurance policy, because Corman agrees to indemnify DM&E for DM&E’s own
FELA negligence.
Under South Dakota law,6 to relieve a party of its own negligence, “the
language of the agreement must be clear and unequivocal.” Bell v. E. River Elec.
Power Coop. Inc., 535 N.W.2d 750, 753 (S.D. 1995) (internal quotation marks
omitted). To establish the existence of an insured contract under the terms of the
Lexington Insurance policy, there must be an obligation to indemnify a party against
its own negligence. The indemnification provision which DM&E contends is the
basis for the insured contract does not indicate that Corman is liable for DM&E’s
negligence, or the negligence of DM&E’s employees. Rather, the indemnification
provision only extends to claims based upon Corman’s negligent conduct. Therefore,
the indemnification provision in the CWA does not trigger the insured contract
exception to the general exclusion provision contained in the Lexington Insurance
policy, and, as a result, no obligation exists based on the terms of the policy.7
6
The parties agree that South Dakota law applies to this case based on the
choice-of-law clause in the CWA.
7
DM&E argues that Corman’s self-insured retention agreement with Lexington
makes Corman an insurer for DM&E. For DM&E to prevail on this argument, we
must find that Lieffort’s claim is covered under the Lexington Insurance policy.
Thus, this argument similarly fails because we conclude Lieffort’s claim is not
covered under the policy.
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III.
We affirm the ruling of the district court granting summary judgment in favor
of Corman.
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