Contracts, Indemnification

Exide Corp v Millwright Riggers, Inc, 727 NE2d 473 (Ind Ct App 2000).

Facts: Construction worker fell through an improperly secured grating on a catwalk and struck the factory floor. He brought action for negligence against the factory operator (Exide). Exide brought a third-party indemnity claim against the contractor that installed catwalk (Millwright). Exide claimed that, pursuant to the indemnity agreement that Millwright had signed, it was contractually obligated to indemnify Exide, pay its attorneys' fees, and provide Exide with insurance. The trial court granted Millwright's motion for summary judgment on the third-party claim, and Exide appealed. In a separate action, an employee of another contractor (Brehob) brought an action against Exide for injuries sustained when he fell into an opening in the top of a vat of molten lead. Exide filed a third-party complaint against Brehob, claiming that, pursuant to an indemnity agreement Brehob had signed, Brehob was contractually obligated to indemnify Exide, pay its attorneys' fees, and provide Exide with insurance. The trial court granted Brehob's motion for summary judgment on the indemnification claim. Exide appealed and the court of appeals consolidated the two cases.

Holding: Affirmed in part and reversed in part. The court of appeals held the following:

 

  1. The grant of summary judgment against Exide on its indemnification claim in the first action did not collaterally estop Exide from raising the same claims in the second action. Because the circuit court's decision in Millwright's case was not final at the time Brehob's case was being litigated, the superior court correctly declined to grant preclusive effect to the circuit court's grant of summary judgment.
  2. The indemnity provisions of the contracts between the contractors and Exide were unenforceable due to their failure to clearly state that the contractors were required to indemnify Exide against its own negligence. Indemnification clauses are strictly construed due to the harshness of obligating one party to pay for the negligence of another party. In order to reflect a knowing and willing acceptance of such a harsh burden, the indemnification clause must expressly state, in clear and unequivocal terms, that the indemnitee agrees to indemnify the indemnitor against the indemnitor's own negligence. The contracts at issue failed to do this.
  3. The unenforceability of the indemnification clauses precluded an award of Exide's attorney fees pursuant to the clauses' attorney fee provisions.
  4. Even though the indemnification agreements were unenforceable, the insurance provisions under which the contractors were required to obtain insurance on Exide's behalf to cover "any liability which may accrue from or during the work performed by [the contractors]" were not. The standard rules of contract interpretation apply to insurance agreements, rather than the strict construction given to self-indemnification clauses. Thus, the insurance clauses were valid.
  5. The contractors' concessions that there was no evidence that they ever secured liability insurance naming Exide as an additional insured precluded summary judgment for the contractors on the claim that they breached their obligations to provide insurance.

EDITOR'S NOTE: Under Illinois law, the Construction Contract Indemnification for Negligence Act (740 ILCS 35/1) would govern. This Act provides in relevant part that covenants to indemnify another person from that person's own negligence, when such covenants are embodied in contracts for the construction, repair, or maintenance of a building or structure, are void as against public policy and wholly unenforceable. Id. Therefore, the indemnity provisions of the contracts between the contractors and Exide would be unenforceable in Illinois. However, provisions in construction contracts requiring an indemnitor to provide liability insurance for an indemnitee, making the indemnitee an insured under the indemnitor's policy, are valid. GTE North, Inc v Henkels & McCoy, Inc, 245 Ill App 3d 322, 612 NE2d 1375, 184 Ill Dec 215 (4th D 1993). Thus, the insurance provisions of the contract under which the contractors were required to obtain insurance on Exide's behalf would be valid in Illinois, and the contractors' failure to procure such insurance would be deemed a breach of contract for which Exide would be entitled to recover.

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