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Beloit Power Systems Inc. v. Hess Oil Virgin Islands Corp.

March 29, 1985


On Appeal from the District Court of the Virgin Islands (St. Croix) (D.C. Civil No. 80-94).

Seitz, Gibbons and Sloviter, Circuit Judges.

Author: Sloviter


SLOVITER, Circuit Judge.

At issue in this appeal is the interpretation of an indemnification clause under which Beloit Power Systems, Inc. (Beloit) seeks to impose on Hess Oil Virgin Islands Corp. (Hess) the obligation to pay damages for which it was held liable in an earlier lawsuit. These damages arose when an instrument fitter, Norwilton Murray, fell and suffered severe spinal injury while installing an electrical control panel built by Beloit at the Hess oil refinery in St. Croix, Virgin Islands. Murray was employed by Litwin Corporation, the installer of the equipment. He fell when the iron bar on which he leaned during the installation gave way because it was inadequately welded to the equipment.

Murray sued Beloit alleging both negligence and strict products liability. The jury found Beloit liable under both theories and attributed five percent of the fault to Murray. After the appropriate reductions, Murray was awarded $1,747,855.60. This court affirmed the judgment. See Murray v. Beloit Power Systems, Inc., 450 F. Supp. 1145 (D.V.I. 1978), aff'd sub nom. Murray v. Fairbanks Morse, 610 F.2d 149 (3d Cir. 1979).

Beloit then brought this action against Hess seeking indemnity based on the contract of sale between Beloit and Hess or, in the alternative, for contribution based on its allegation that Murray's accident was caused in whole or in part by Hess' negligence. Hess impleaded Litwin for indemnity based on the contract between them. The Hess/Litwin controversy is the subject of a separate appeal, also decided today.

The indemnity provision that forms the basis of Beloit's indemnity claim against Hess was negotiated by the parties after Beloit's predecessor, Colt Industries (hereafter jointly referred to as Beloit), had made it clear that the warranty and indemnity provisions on Hess' printed purchase order form were unacceptable. Beloit requested the language which was typed and inserted by Hess. The portion of the language at issue is as follows:

N. Warranty

(emphasis added).

Beloit, relying on the underlined language, contends that Hess (the "Buyer") undertook to indemnify it for all claims, including those filed by third parties for personal injuries, beyond the amount of liability Beloit (the "Seller") agreed to shoulder, which was $397,481 ("the contract price" modified by subsequent change orders). Hess moved for summary judgment, relying on the contract language to defeat Beloit's indemnity claim and on collateral estoppel and other legal principles to defeat the contribution claim. Beloit filed a cross-motion for summary judgment on the indemnity claim, supported by the affidavit of John Ivey, its negotiator with Hess on the contract. Ivey stated that Beloit advised Hess' representative that Beloit "would not agree to the warranty and indemnity provisions" contained on the reverse of Hess' standard purchase order, that Beloit "specifically intended to limit the liability of [Beloit] in any case whatsoever to have [Hess] indemnify us [Beloit] for any amount we were to pay above [the] contract price." Ivey stated that Hess agreed to these new provisions, included them in its purchase order, and subsequently included them again with a change order. Ivey further averred that "the typed provisions . . . were specifically designed to supersede the printed 'Terms and Conditions' as to warranty and indemnity, [and] were drafted by [Hess] . . . at the request of [Beloit] . . . with the specific intent to limit the liability of Beloit under all circumstances to the total of the contract price" (emphasis added). Hess filed no counter affidavit. Nor does it contend that the contents of the Ivey affidavit would not be admissible in evidence.

The district court granted Hess' motion for summary judgment on the issue of indemnity. Beloit Power Systems, Inc. v. Hess Oil Virgin Islands Corp., 561 F. Supp. 279, 287-88 (D.V.I. 1983). The district court's decision was based in large part on "the premise that in order for a party to be contractually indemnified for its own negligence, such an intention must be clearly and unambiguously expressed in the contract." Id. at 282.

The court held that the provision was not sufficiently clear to support Beloit's claim for indemnification. Id. at 285. The bases for this conclusion were as follows. First, the court noted that the burden of proof falls on the party seeking indemnification, particularly where, as here, that party drafted the agreement. Id. at 282. Second, the court found that the crucial sentence referred generally to indemnification for "all claims" and did not explicitly mention indemnification for "negligence" or even for "personal injury." In reaching this conclusion, the court discounted the reference to "negligent manufacture" as referring, in context, to contract damages. Id. at 282-83. Finally, the court noted the absence of a provision requiring Hess to insure the liability allegedly shifted to it by the clause in question. This, the court found, supported its conclusion that the parties did not intend that this risk be shifted. Id. at 285. With regard to the contribution claim, the court held that since Hess' negligence as a joint tortfeasor was not litigated in the prior action. Beloit's claim for contribution from Hess could not be determined on a motion for summary judgment. Id. at 286.

Because the contribution claim remained for litigation, the order granting summary judgment would not have been appealable. The court certified its order for interlocutory appeal pursuant to 28 ...

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