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Eastern Airlines Inc. v. Insurance Co.

March 29, 1985

EASTERN AIRLINES, INC.
v.
INSURANCE COMPANY OF NORTH AMERICA, APPELLANT



On Appeal from the District Court of the Virgin Islands Division of St. Thomas and St. John, D.C. Civil No. 1982-96.

Seitz, Gibbons, and Sloviter, Circuit Judges.

Author: Sloviter

Opinion OF THE COURT

SLOVITER, Circuit Judge

Eastern Airlines, Inc. and ABC Services, Inc. entered into a contract whereby ABC agreed to provide janitorial services for Eastern at its terminal and cargo facilities at the Harry S. Truman Airport in St. Thomas, U.S. Virgin Islands. The agreement required that ABC indemnify Eastern and procure insurance for certain risks. It provided, in pertinent part:

3. Contractor [ABC] agrees to assume full responsibility for any and all liability to its employees on account of injury, disability and death resulting from, or sustained by said employees in the performance of the services contemplated herein. Contractor agrees to carry Workmen's Compensation and employer's liability insurance. . . . 4. Contractor agrees and hereby undertakes to indemnify, defend and save harmless Eastern, its officers, employees, servants, representatives, and agents from and against any and all liability, damages, claims, suits or actions of every name and description (including any and all costs and expenses related thereto) brought against Eastern . . . on account of any injuries to or death of any persons . . . directly or indirectly arising out of or resulting from any acts, or omissions or operations on the Part of Contractor, its agents, servants or employees, except however, injuries, deaths, damages, or losses arising solely from the negligent act of Eastern, its agents or employees. . . . 5. The Contractor agrees to provide, maintain and keep in effect at all times during the existence of this Agreement . . . . (3) appropriate Comprehensive Public/Automobile Disability Insurance including Contractual Liability and Products/Completed Liability Insurance with a minimum combined single limit of $1,000,000.00 covering injury or death of any person and damage or destruction of the property of any person, corporation, company, partnership, et al.

(emphasis added). Pursuant to this agreement, ABC entered into an insurance contract with Insurance Company of North America (INA) which included a "hold harmless clause" in favor of Eastern.*fn1

While these contracts were in effect, Brenda Bedford, an employee of ABC working at the Truman Airport, injured her back while acting within the scope of her employment. Bedford sued Eastern, which tendered the defense of the action to ABC and its insurer, INA. INA repeatedly denied any obligation to defend the suit. The Bedford trial ended in a deadlocked jury. The case was retried. This time INA agreed to provide a defense, but reserved the right to challenge its obligation to pay any judgment awarded or costs of defending the suits. At the second trial the jury found Eastern was 80% negligent and Bedford 20% negligent, and it awarded Bedford $62,240.00 in compensatory damages.

INA continued to deny any obligation to pay Eastern under the indemnity agreement, leading Eastern to file this action for declaratory judgment against INA to determine the rights and obligations of the parties. Eastern sought reimbursement for the judgment it paid to Bedford as well as for all attorney's fees and costs it incurred in the course of the litigation. Both parties filed motions for summary judgment. The district court entered summary judgment for Eastern, granting all the relief it sought.

On appeal, INA argues first, that the indemnity provision does not require ABC to indemnify Eastern for Eastern's own negligence, and second, that even if such an obligation does exist, no indemnification is owed in the present case because of the "sole negligence" exception in the contract.

In support of its first contention, INA argues that because the agreement does not state that ABC's duty of indemnification includes protection against Eastern's own negligence, it should not be so construed. We have held, however, that an indemnity provision need not specifically refer to the indemnitee's negligence if the language is sufficiently broad and unambiguous. Beloit Power Systems, Inc. v. Hess Oil Virgin Islands Corp., 757 F.2d 1427, (3d Cir. 1985) (hereafter Beloit I). See also First Jersey National Bank v. Dome Petroleum Ltd., 723 F.2d 335, 339-40 (3d Cir. 1983) (New Jersey law); Draper v. Airco, Inc., 580 F.2d 91, 101 (3d Cir. 1978) (Pennsylvania law).

ABC undertook to indemnify and defend Eastern "from and against any and all liability, damages, claims, suits or actions . . . brought against Eastern . . . on account of any injuries to . . . any persons . . . arising out of or resulting from any acts, or omissions or operations on the Part of Contractor, its agents, servants or employees," an undertaking that patently covers a claim such as Bedford's. This supplemented ABC's undertaking to assume full responsibility for any and all liability to its employees for injuries sustained by them in performing the services contemplated by the contract. Moreover, the provisions requiring ABC to secure insurance "manifest an intent to shift the risk." Beloit Power Systems, Inc. v. Hess Oil Virgin Islands Corp., 757 F.2d 1431 (3d Cir. 1985) (hereafter Beloit II). See also Willey v. Minnesota Mining & Manufacturing Co., 755 F.2d 315 (3d Cir. 1985). Thus, we agree with the district court that there is nothing ambiguous about the contractual language.

We turn then to INA's second argument, which goes to the meaning of the "sole negligence" exception. INA argues that since Bedford's recovery was reduced by twenty percent, the amount the jury found she contributed to her own injuries, the damages that Eastern had to pay were attributable solely to Eastern's negligence, which had been assessed at eighty percent. INA's argument might be more persuasive if the language of the indemnity provision were limited to "damages paid". It is not. ABC agreed not only to indemnify Eastern for all "liability" and "damages", but also to hold Eastern harmless from all "claims, suits or actions" brought against Eastern "on account of any injuries . . . except . . . injuries . . . arising solely from the negligence of Eastern." Bedford's "claim" or "suit" was on account of injuries she suffered that did not "aris[e] solely from the negligent act of Eastern", since they arose partially from her own negligent act. Thus, INA's argument is contrary to the clear contractual language.

The widespread use of "sole negligence" provisions may be explained in part by the reluctance of many courts to enforce an all-inclusive indemnity provision. Instead, they read such language as if there were an additional provision whereby injuries caused by the sole negligence of the indemnitee were excepted from the scope of the indemnity provision. See Annot., 175 A.L.R. 8, 32 (1948). Even now, in some jurisdictions, "[a] provision which guarantees indemnification for the sole negligence of the indemnitee is void as against public policy." Harbenski v. Upper Peninsula Power Co., 118 Mich. App. 440, 325 N.W.2d 785, 791 (Mich. App. 1982) (citations omitted). See also Chicago & North Western Transportation Co. v. V & R Sawmill, Inc., 501 F. Supp. 278 (D.S.D. 1980) (applying South Dakota statute rendering agreement to indemnify for the sole negligence of indemnitee void and unenforceable). Thus, sole negligence provisions may have evolved because of a belief that they were judicially required or would preserve an otherwise invalid broad indemnity provision. Moreover, by imposing on the indemnitee the obligation to bear ...


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