Opinion
24A-CT-455
12-13-2024
Indianapolis Construction Services, Inc., Appellant-Defendant v. P&J Portables, LLC, Appellee-Defendant and Cliff Norwood, Appellee-Plaintiff
ATTORNEYS FOR APPELLANT Crystal G. Rowe Jacob W. Zigenfus Kightlinger & Gray, LLP New Albany, Indiana ATTORNEY FOR APPELLEE P&J PORTABLES, LLC Katie M. Charleston Katie Charleston Law, P.C. Carmel, Indiana ATTORNEY FOR APPELLEE CLIFF NORWOOD Steven W. Etzler Etzler Lawhead Legal Group Crown Point, Indiana
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the Boone Circuit Court The Honorable Lori N. Schein, Judge Trial Court Cause No. 06C01-2003-CT-407
ATTORNEYS FOR APPELLANT
Crystal G. Rowe Jacob W. Zigenfus Kightlinger & Gray, LLP New Albany, Indiana
ATTORNEY FOR APPELLEE P&J PORTABLES, LLC
Katie M. Charleston Katie Charleston Law, P.C. Carmel, Indiana
ATTORNEY FOR APPELLEE CLIFF NORWOOD
Steven W. Etzler Etzler Lawhead Legal Group Crown Point, Indiana
MEMORANDUM DECISION
FOLEY, JUDGE
[¶1] Indianapolis Construction Services, Inc. ("ICS") appeals the trial court's order granting P&J Portables, LLC's ("P&J") motion for declaratory judgment and determining that, pursuant to an indemnification clause in its Equipment Rental Agreement ("the Agreement") with P&J, ICS was obligated to indemnify P&J for losses that allegedly stemmed from P&J's own negligence. We reverse and remand for further proceedings.
Oral argument was heard on this case on October 29, 2024, in the Indiana Court of Appeals courtroom in Indianapolis, Indiana. We thank counsel for their preparation and argument, and we commend them on their written and oral advocacy.
[¶2] ICS was contracted to renovate a Pilot gas station in Lebanon, Indiana ("the Gas Station"). On October 1, 2018, ICS and P&J entered into the Agreement, under which P&J leased a portable restroom trailer to ICS for public use at the Gas Station during renovations. The Agreement contained an indemnification clause in Paragraph 25 ("the Indemnity Clause"), stating:
25. [ICS] will indemnify and hold harmless [P&J] against any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including attorney's fees and costs, arising out of or related to [ICS's] use of the Equipment.
Appellant's App. Vol. 2 p. 117. The Agreement also contained an insurance provision ("the Insurance Provision") in Paragraphs 20-24, requiring ICS to maintain comprehensive general liability ("CGL") insurance against claims for bodily injury arising out of the use of the equipment. The Insurance Provision stated:
20. [ICS] will, during the whole of the Term and for as long as [ICS] has possession of the Equipment, take out, maintain and pay for [CGL] insurance against claims for bodily injury, including death, and property damage or loss arising out of the use of the Equipment. The insurance policy will have limits of at least $250,000.00.
21. The insurance will be in the joint name of [P&J] and [ICS] so that both [P&J] and [ICS] will be protected from liability and will provide primary and non-contributing coverage for [P&J]. The insurance policy will have a provision that it will not be modified or cancelled unless the insurer provides [P&J] with thirty (30) days written notice stating when such modification or cancellation will be effective.
22. Upon written demand by [P&J], [ICS] will provide [P&J] with an original policy or certificate evidencing such insurance.
23. [ICS] appoints [P&J] as [ICS's] attorney-in-fact ("Attorney") with the power to maintain the above insurance and to secure payments arising out of any insurance policy required by this Agreement. The Attorney has the power to do all acts that are necessary or desirable to secure such payments.
24. If [ICS] fails to maintain and pay for such insurance, [P&J] may, but is not obligated to, obtain such insurance, but if [P&J] does obtain such insurance, [ICS] will pay to [P&J] the cost of such insurance upon notification from [P&J] of the amount.Id. at 116-17.
[¶3] Pursuant to the Agreement, P&J provided a portable restroom trailer and access ramp that was placed outside the Gas Station. Cliff Norwood ("Norwood") visited the Gas Station on October 10, 2018. According to Norwood, he was an invitee at the Gas Station when he slipped and fell on a ramp used to enter and exit the portable restroom trailer that ICS had leased from P&J. Norwood claimed that only one half of the ramp was covered in a "grip tape" or "nonslick tape." Tr. Vol. 2 p. 6. The ramp did not have any tape on it when P&J provided the ramp to ICS, and Norwood alleged that ICS modified the ramp by adding tape to one-half of the ramp. Norwood claimed that he slipped and fell when he walked on the side that was devoid of the tape.
[¶4] On March 24, 2020, Norwood filed his initial complaint alleging that Pilot Travel Centers, LLC, as the sole defendant, was negligent and through such negligence, he was injured. After two subsequent amendments, Norwood named both ICS and P&J as defendants. On September 1, 2021, P&J filed a cross-claim against ICS, alleging that ICS was liable to indemnify P&J under the Agreement. On January 6, 2023, a stipulation for dismissal with prejudice was filed, removing Pilot Travel Centers as a defendant.
[¶5] On November 17, 2023, P&J filed a motion for declaratory judgment, attaching the Agreement as an exhibit and seeking a declaration that the Indemnity Clause is "valid and that neither ICS nor [Norwood] may litigate against P&J," which was "to be indemnified by ICS." Appellant's App. Vol. 2 p. 134. In response, ICS filed its objection, arguing that P&J's motion was procedurally incorrect and, further, that the Indemnity Clause "evidences no such agreement between the parties to shift the burden of P&J's negligence to ICS." Id. at 138. The trial court conducted a hearing on December 20, 2023, regarding the respective motions.
[¶6] The trial court ultimately granted P&J's motion for declaratory judgment on January 19, 2024. The trial court found that the Indemnity Clause in the Agreement was valid and required ICS to indemnify P&J for its own negligence, and it ordered ICS to indemnify P&J pursuant to the Agreement. ICS filed a motion to correct error, which the trial court denied. On February 19, 2024, ICS asked the trial court to direct the entry of a final judgment under Trial Rule 54(B) with respect to the declaratory judgment, and the court did so on February 22, 2024. ICS now appeals.
Discussion and Decision
[¶7] ICS appeals the trial court's order granting P&J's motion for declaratory judgment. The use of a declaratory judgment is discretionary with the trial court, and therefore, a trial court's decision regarding a declaratory judgment is generally reviewed for an abuse of discretion. Mid-Century Ins. Co. v. Estate of Morris ex rel. Morris, 966 N.E.2d 681, 687 (Ind.Ct.App. 2012), trans. denied. An abuse of discretion occurs when the decision is clearly against the logic and effect of the facts and circumstances before the court or the court misinterprets the law. Smith v. Franklin Twp. Cmty. Sch. Corp., 151 N.E.3d 271, 273 (Ind. 2020). To the extent the declaratory judgment turns on a question of law, we review pure questions of law de novo. Salmon v. Tafelski, 235 N.E.3d 867, 871 (Ind.Ct.App. 2024).
[¶8] Interpretation of a written contract, including an indemnity provision, is a question of law. Mead Johnson & Co., Inc. v. Kenco Grp., Inc., 899 N.E.2d 1, 2 (Ind.Ct.App. 2009). Thus, we review de novo the trial court's conclusion that, under the Agreement, ICS was required to indemnify P&J for losses stemming from its own negligence. The goal of contract interpretation is to ascertain and give effect to the parties' intent. Id. at 3. In most cases, the intent of the parties to a contract is to be determined from the "four corners" of the contract. Id. We look at the contract as a whole. Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 252 (Ind. 2005). If a contract's provisions are clear and unambiguous, courts must give the provisions their plain and ordinary meaning. Id. at 251.
[¶9] Here, we are tasked with interpreting an indemnity clause. In general, this type of clause involves a promise by one party (the indemnitor) to reimburse another party (the indemnitee) for the indemnitee's loss, damage, or liability. N. Am. Roofing Servs., Inc. v. Menard, Inc., 997 N.E.2d 1087, 1091 (Ind.Ct.App. 2013), trans. denied. The basic purpose of an indemnity clause is to shift the financial responsibility to pay damages from the indemnitee to the indemnitor. Id. We construe an indemnity clause to cover all losses and damages to which it reasonably appears the parties intended it to apply. Id.
[¶10] Absent prohibitive legislation, no public policy prevents parties from contracting as they desire, including an obligation to indemnify the negligent acts or omissions of another party. GKN Co. v. Starnes Trucking, Inc., 798 N.E.2d 548, 552 (Ind.Ct.App. 2003). Nevertheless, we generally disfavor that type of indemnification clause because we are mindful that to obligate one party for the negligence of another is a harsh burden that a party would not lightly accept. In re Ind. State Fair Litigation, 49 N.E.3d 545, 549 (Ind. 2016). Therefore, we strictly construe this type of indemnity clause and require that it be entered into knowingly and willingly. GKN Co., 798 N.E.2d at 552. To ensure that the indemnitor knowingly and willingly agreed to indemnify the other party's negligence, the provisions providing for the indemnity must be clear and unequivocal. Id.
[¶11] Indiana courts have followed a two-step analysis to determine whether a party has knowingly and willingly accepted the obligation of indemnifying another party for that party's own negligence. GKN, 798 N.E.2d at 552; see also Exide Corp. v. Millwright Riggers, Inc., 727 N.E.2d 473, 480 (Ind.Ct.App. 2000), trans. denied; Moore Heating &Plumbing, Inc. v. Huber, Hunt &Nichols, 583 N.E.2d 142, 146 (Ind.Ct.App. 1991). First, the indemnification clause must expressly state in clear and unequivocal terms that negligence is an area of application where the indemnitor (in this case, ICS) has agreed to indemnify the indemnitee (in this case, P&J). See Hagerman Constr. Co. v. Long Elec. Co., 741 N.E.2d 390, 392 (Ind.Ct.App. 2000), trans. denied. The second step determines to whom the indemnification clause applies. Id. Again, in clear and unequivocal terms, the clause must state that it applies to indemnification of the indemnitee by the indemnitor for the indemnitee's own negligence. Id.
[¶12] ICS argues that the trial court erred when it determined that the Indemnity Clause required the indemnitor, ICS, to indemnify the indemnitee, P&J, for P&J's own negligence. According to ICS, the Agreement does not provide in clear and unequivocal terms that ICS was agreeing to indemnify P&J for P&J's own negligence, thus, ICS did not knowingly and willingly accept responsibility for P&J's negligence.
[¶13] First, we must first determine if the Indemnity Clause expressly states in clear and unequivocal terms that it applies to negligence. Other Indiana cases have held that indemnity language meets this burden where the language references such things as liability, damages, actions, omissions, claims, duties, and causations, which are the "language of negligence." See Moore, 583 N.E.2d at 146 (holding that an indemnification clause clearly and unequivocally applied to negligence because it used the "language of negligence," invoking terms of art specific to negligence claims); Exide, 727 N.E.2d at 480 (similar); Hagerman, 741 N.E.2d at 393 (similar).
[¶14] In the present case, the Indemnity Clause includes the language: "all claims, actions, suits, proceedings, costs, expenses, damages and liabilities, including attorney's fees and costs, arising out of or related to [ICS's] use of the Equipment." Appellant's App. Vol. 2 p. 117. Similar to Moore, Exide, and Hagerman, this is the language of negligence and is sufficient to establish application of the Indemnity Clause to negligence. Therefore, the Indemnity Clause expressly states in clear and unequivocal terms that negligence is an area of application where ICS has agreed to indemnify P&J. This satisfies the first step of the analysis.
[¶15] As for the second step, we must determine whether the Indemnity Clause clearly and unequivocally includes indemnification of P&J by ICS for P&J's own negligence. In Moore, this court held that an indemnification clause clearly and unequivocally included the indemnitee's own negligence. Moore, 583 N.E.2d at 144. There, a general contractor and a subcontractor entered into a written contract that contained an indemnification clause, which stated in pertinent part:
[Moore] agrees to indemnify [Huber] against and hold [Huber] harmless from any and all liability . . . from any claim or cause of action of any nature arising while on or near the Job Site . . . including claims relating to its . . . employees, or by reason of any claim or dispute of any person or entity for damages from any cause directly or indirectly relating to any action or failure to act by [Moore], its representatives, employees, subcontractors or suppliers, and whether or not it is alleged that [Huber] in any way contributed to the alleged wrongdoing or is liable due to a nondelegable duty. It is the intent of the parties that [Moore] shall indemnify [Huber] under [this indemnification clause and the insurance clause] to the fullest extent permitted by law, however, [Moore] may not be obligated to indemnify [Huber] for the sole negligence or willful misconduct where such indemnification is contrary to law, but otherwise it is the intent of
the parties that [Moore] shall indemnify [Huber] to the fullest extent permitted by law for such liability....583 N.E.2d at 144. On appeal, this court concluded that the language in the indemnification clause clearly and unequivocally established that it was the intent of the parties that Moore indemnify Huber for losses stemming from Huber's own negligence, so long as that type of indemnity was permitted by law, and therefore, the indemnification clause was enforceable. Id. at 147.
[¶16] ICS argues that, unlike the provision in Moore, the Indemnity Clause here contains no such express language indicating that ICS agreed to indemnify P&J for P&J's own negligence. ICS contends that the Indemnity Clause is more similar to the provisions found to be invalid in both Exide and Hagerman, which did not explicitly state that the indemnitor must indemnify the indemnitee for the indemnitee's own negligence.
[¶17] In Exide, a construction worker brought an action against the operator of the factory where he worked, and the operator brought a third-party indemnification claim against the contractors that employed the worker. 727 N.E.2d at 476-77. There, the indemnification provision in the contract between Exide and the contractor provided:
Without limiting the foregoing, Contractor, for itself, its successors and assigns releases Exide and agrees to indemnify, defend with counsel satisfactory to Exide and hold harmless Exide and its officers and employees from any against any and all liability, claims, actions, suits, losses, costs and expenses (including without limitation attorneys' fees), fines or penalties
which may arise in any way, directly or indirectly, from Contractor, its employees, subcontractors and their employees, third persons or the government, and from entry onto the Site or any other Exide property or from use, the possession, handling, storage, transportation, and treatment or disposal, of any materials or exposure thereto or contact therewith. This indemnity shall survive the termination or expiration of any contract between the contractor and Exide or receipt and removal of the materials. If any portion of this indemnity shall in the future be deemed or held to be invalid or unenforceable, the indemnity shall apply and be enforceable to the maximum extent allowed by law.727 N.E.2d at 479. On appeal, this court held that, while the indemnification clause at issue discussed liability, claims, and suits and explicitly indemnified Exide for the acts of the contractors and their employees, subcontractors, and the government, it did not explicitly state that the contractors were required to indemnify the indemnitee (Exide) for its own negligent acts. Id. at 480. Because the indemnification clause did not contain a clear and unequivocal statement that would have given the contractors notice of the harsh burden of complete indemnification, the indemnity provision was found to be unenforceable. Id.
[¶18] In Hagerman, a contractor and a subcontractor entered into a written agreement with a boilerplate indemnification clause taken from a form agreement drafted by the American Institute of Architects, which provided:
To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, Contractor, Architect, Architect's consultants, and agents and employees of any of them
from and against claims, damages, losses and expenses, including but not limited to attorney's fees, arising out of or resulting from performance of the Subcontractor's Work under this Subcontract, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Subcontractor, the Subcontractor's Sub-subcontractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or otherwise reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 4.6.741 N.E.2d at 392-93. On appeal, this court found that the indemnification clause did not clearly and unequivocally provide that the indemnitor was to indemnify the indemnitee for the indemnitee's own negligent acts because it included a "but only to the extent" provision that clearly limited the indemnitor's (Long's) obligation to indemnify the indemnitee (Hagerman) only to the extent that the indemnitor (Long), its sub-subcontractors, employees, and anyone for whom it may be liable, are negligent. Id. at 393-94. The clause contained no clear statement that would give the general contractor notice of the harsh burden that complete indemnification would impose. Id. at 394.
[¶19] We agree with ICS that the Indemnity Clause is more similar to the indemnifications clauses in Exide and Hagerman, which were found to be unenforceable. Here, the Indemnity Clause does not contain any explicit language indicating that ICS agreed to indemnify P&J for P&J's own negligence as was present in Moore. Instead, the language merely sets out that ICS agreed to indemnify P&J for claims arising out of or related to ICS's use of the equipment rented from P&J with no clear and unequivocal mention of indemnification of P&J for P&J's own negligence. Such language is insufficient to give ICS notice of the harsh burden of complete indemnification.
[¶20] P&J argues that the Agreement when read as a whole, including the Indemnity Clause and the Insurance Provision, clearly and unequivocally informed ICS of the requirement to indemnify P&J for its own negligence. P&J highlights that the Insurance Provision requires ICS to "take out, maintain[,] and pay for [CGL] insurance against claims for bodily injury . . . arising out of the use of the Equipment" and that the insurance will be "in the joint name of [P&J] and [ICS] that both [P&J] and [ICS] will be protected from liability." Appellant's App. Vol. 2 p. 116. P&J contends that the Agreement as a whole demonstrates that ICS was aware of and accepted the financial risk of claims arising from the use of the equipment, including for P&J's potential negligence. We disagree.
[¶21] An agreement to insure differs from an agreement to indemnify in that, with an agreement to insure, the risk of loss is not intended to be shifted to one of the parties, but is instead intended to be shifted to an insurance company. West Bend Mut. Ins. Co. v. MacDougall Pierce Constr., Inc., 11 N.E.3d 531, 544 (Ind.Ct.App. 2014), trans denied. In an insurance provision, neither party intends to assume a potential liability because both are demonstrating appropriate business foresight in avoiding liability by allocating it to an insurer. Id. Although the Insurance Provision requires ICS to agree to take out a joint CGL policy, there is no clear and unequivocal language demonstrating that, in agreeing to take out said policy, ICS was undertaking the harsh burden of indemnifying P&J for P&J's own negligence. Nowhere in the Insurance Provision does it explicitly refer to the Indemnity Clause or to any assumption of risk on the part of ICS based upon P&J's negligence. Further, the Insurance Provision is not dependent upon the Indemnity Clause to function; the Insurance Provision functions on its own and is independent of the Indemnity Clause. The language of the Insurance Provision simply requires ICS to obtain a CGL policy to shift the risk of loss to the insurance company. As Indiana courts have said, in an insurance provision, neither party intends to assume a potential liability, and instead, they are avoiding liability by allocating it to an insurer. See id. Thus, when we look to the language contained within the Insurance Provision and read the Agreement as a whole, we do not find that in clear and unequivocal terms, the language states that it applies to indemnification of the indemnitee by the indemnitor for the indemnitee's own negligence.
[¶22] Indiana law makes clear that we will not infer a party's agreement to such an onerous liability of complete indemnification unless that intent is expressed unmistakably. In re Indiana State Fair Litigation, 49 N.E.3d at 550. Our Supreme Court has deduced the following principle from Indiana contract law: "Indemnification for another party's negligence . . . is an extraordinary obligation that is generally not favored." Id. at 553 (internal quotations omitted). Accordingly, as a matter of law, we will not find such an onerous obligation when, as here, the parties' contract does not expressly call for it in "clear and unequivocal terms." Id. at 550 (citing GKN Co., 798 N.E.2d at 552). If the parties had intended the indemnity obligation to extend to indemnification for P&J's own negligence, they could easily have drafted the language to say exactly that. Here, nowhere in the language of the Agreement-in the Insurance Provision or the Indemnity Clause-does it clearly and unequivocally state that the indemnity obligation applies to indemnification of P&J by ICS for P&J's own negligence.
[¶23] When we strictly construe the language in the Agreement, as we must, we conclude that the trial court erred when it found that the Indemnity Clause required ICS to indemnify P&J for P&J's own negligence. We, therefore, reverse the trial court's grant of declaratory judgment and remand for further proceedings.
[¶24] Reversed and remanded.
Vaidik, J. and Weissmann, J., concur.