American International v. Kindercare

FILED
NOT FOR PUBLICATION FEB 08 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
AMERICAN INTERNATIONAL No. 09-35015
SPECIALTY LINES INSURANCE
COMPANY, an Alaska corporation, D.C. Nos. 3:07-cv-00642-KI
3:07-cv-00978-KI
Plaintiff - Appellant,
and MEMORANDUM *
EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin corporation,
Plaintiff,
v.
KINDERCARE LEARNING CENTERS,
INC., a Delaware corporation,
Defendant - Appellee.
AMERICAN INTERNATIONAL No. 09-35060
SPECIALTY LINES INSURANCE
COMPANY, an Alaska corporation, D.C. Nos. 3:07-cv-00642-KI
3:07-cv-00978-KI
Plaintiff,
and
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin corporation,
Plaintiff - Appellant,
v.
KINDERCARE LEARNING CENTERS,
INC., a Delaware corporation,
Defendant - Appellee.
Appeal from the United States District Court
for the District of Oregon
Garr M. King, District Judge, Presiding
Argued and Submitted December 9, 2009
Portland, Oregon
Before: FARRIS, D.W. NELSON and BERZON, Circuit Judges.
American International Specialty Lines Insurance Company and Employers
Insurance Company of Wausau (American International) appeal the district court’s
entry of summary judgment indemnifying Kindercare Learning Centers, Inc.
(Kindercare) for its own negligence in connection with injuries sustained by
Nicholas Dawson. The district court ruled that an indemnity provision contained
in a separate writing was incorporated by reference into a contract between
Kindercare and the insured, School Specialty, that it was unambiguous, and that it
was conspicuous.
2
Under Oregon law, “[w]hen a written contract refers in specific terms to
another writing, the other writing is part of the contract.” Garrett v. State Farm
Mut. Ins. Co., 829 P.2d 713, 716 (Or. Ct. App. 1992). The contract executed by
Kindercare and School Specialty states, “This Agreement shall provide pricing and
discount terms to supplement the vendor information packet executed by School
Specialty on January 25, 2002.” Even though School Specialty’s vendor
information packet itself was rejected by Kindercare and so did not result in the
formation of a contract at that time, its terms are clearly and specifically
incorporated into the subsequent agreement.
Although a reference to another document for a specific purpose makes the
document a part of the contract for the purpose specified only, Wallace v. Oregon
Engineering & Construction Co., 174 P. 156, 157 (Or. 1918), there is no limitation
on the purposes for which the vendor information packet is incorporated into the
contract here. The contract includes, therefore, all terms contained in the vendor
information packet.
American International argues that the indemnity provision is ambiguous in
light of a second indemnity provision in the contract that does not cover negligent
acts. Because of this ambiguity, American International maintains, canons of
construction that counsel against extending indemnity to cover negligence dictate
3
that the more generous indemnity provision not be enforced. See Cook v. Southern
Pacific Transportation Company, 623 P.2d 1125, 1128 (Or. Ct. App. 1981). The
two provisions, however, do not conflict. There is nothing in the second indemnity
provision that excludes indemnity for negligent acts; rather, the second provision is
simply silent on the question of negligence. Accordingly, the contract is not
ambiguous with respect to whether indemnity extends to negligent acts, and the
cited canons of construction do not apply. See Yogman v. Parrott, 937 P.2d 1019,
1022 (Or. 1997).
American International next argues that the indemnity provision is
unenforceable because it is not conspicuous. Kindercare does not contend that the
indemnity provision at issue was specifically bargained for or that it was brought to
School Specialty’s attention at the time of contracting, so it must be conspicuous to
be enforceable. See Young v. Continental Crane & Rigging Co., 53 P.3d 465,
467–68 (Or. Ct. App. 2002). Oregon statute provides:
A term or clause is conspicuous when it is so written that a reasonable
person against whom it is to operate ought to have noticed it. A printed
heading in capitals . . . is conspicuous. Language in the body of a form is
“conspicuous” if it is in larger or other contrasting type or color.
Or. Rev. Stat. § 71.2010(10).
4
We conclude that the indemnity provision covering negligence is not
conspicuous. It is printed in 8-point, black type on page six of an eleven page
agreement. The type is identical to the rest of the print on the page. See Seibel v.
Layne & Bowler, Inc., 641 P.2d 668, 670 (Or. Ct. App. 1982) (“[A] provision is
not conspicuous when there is only a slight contrast with the balance of the
instrument.”); Anderson v. Ashland Rental, Inc., 858 P.2d 470, 471 (Or. Ct. App.
1993) (finding a disclaimer not conspicuous because it was one of eight sections on
the back of a form, all printed in the same faint type, with identical headings).
Although the paragraph begins with the heading “INDEMNITY
AGREEMENT,” that heading provides no indication that the paragraph includes
indemnification for negligence. Contrary to Kindercare’s submission, there is no
Oregon case holding that a capitalized topical heading is sufficient to make the
ensuing text of the warranty disclaimer or indemnity provision conspicuous if it
otherwise is not. Cf. Atlas Mutual Insurance Co. v. Moore Dry Kiln Co., 589 P.2d
1134, 1135–36 (Or. Ct. App. 1979) (holding that a warranty disclaimer was
conspicuous in part because the words “There are no warranties, express or
implied, including the warranty of merchantability, except as specifically set forth
herein” were themselves capitalized); Duyck v. Northwest Chemical Corp., 764
P.2d 943, 945 (Or. Ct. App. 1988) (holding that a warranty disclaimer was
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conspicuous in part because the words “Seller makes no warranty whatsoever,
express or implied, of merchantability or fitness for a particular purpose” were
themselves capitalized). Particularly in light of the separate, conspicuous, and
much more readable indemnity provision that does not cover negligence, the vague
heading does not render the indemnity for negligence conspicuous.
Moreover, it is relevant to the conspicuousness determination that these
provisions were not part of the contract document at all but of a separate document,
rejected by Kindercare at the time it was submitted, dating from a year and a half
earlier, and incorporated by reference but not attached to the actual contract. As
such, it was certainly not conspicuous in the actual contract document signed by
the parties.
For these reasons, we have little difficulty concluding that the indemnity
provision that covers negligence is not conspicuous and is therefore
unenforceable.1
REVERSED and REMANDED.
1
As the indemnity provision is not conspicuous and so not enforceable, we
do not reach American International’s argument that the indemnity obligation is
capped at $1 million by a provision in the vendor information packet specifying
“Insurance Requirements.”
6