Opinion
A03-290 CV (JWS), [Re: Motion at Docket 50].
May 5, 2005
ORDER FROM CHAMBERS
I. MOTION PRESENTED
At docket 50, defendants move for summary judgment on their claim that Poong Lim/Pert Joint Venture ("Poong Lim") owes a duty to defend them against a claim asserted by International Steel, and to indemnify them for any liability resulting from that claim. At docket 55, Poong Lim opposes the motion. Oral argument has not been requested and would not assist the court.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c) provides that summary judgment should be granted when there is no genuine dispute about material facts and when the moving party is entitled to judgment as a matter of law. The moving party has the burden to show that material facts are not genuinely disputed. To meet this burden, the moving party must point out the lack of evidence supporting the nonmoving party's claim, but need not produce evidence negating that claim. Once the moving party meets its burden, the nonmoving party must demonstrate that a genuine issue exists by presenting evidence indicating that certain facts are so disputed that a fact-finder must resolve the dispute at trial. The court must not assess the credibility of this evidence, and must draw all justifiable inferences from it in favor of the nonmoving party.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Id. at 325.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).
Id. at 255.
III. BACKGROUND
Dick Pacific/Ghemm Joint Venture ("DPG") is the prime contractor on the Bassett Hospital replacement project at Fort Wainwright, Alaska. DPG contracted with Poong Lim to provide structural steel for the project. It also entered a contract with International Steel to erect the steel supplied by Poong Lim. A dispute arose between DPG and International Steel over performance of their contract.That dispute is now in arbitration. International Steel asserts that DPG has "[failed] to properly administrate the project, intentionally [interfered] with [International Steel's] contractual rights with its employees, causing [International Steel] numerous and costly delays despite repeated requests for direction." International Steel further alleges that its claim:
includes unpaid contract earnings, extra work performed for [DPG], an improper offset charge for DTI washers, certain materials omitted from the steel package, Emergency Custom Repair Work to the steel, direct damages from errors in the steel package, claim preparation, and consequential damages. The Claim results from [DPG's] failure to provide a properly fabricated structural steel package in accordance with accepted industry practices and tolerances . . ., [DPG's] failure to administrate the contract, and [DPG's] failure to place certain concrete, embeds and anchor bolts on schedule, at correct locations elevations to allow erection activities as scheduled. [DPG] procured the structural steel package from an offshore fabricator, Poong Lim Ltd., having no experience in the USA or Alaska, no experience with the Army Corps of Engineers, no hospital experience, and no ASIC specification experience, for the sole purpose of reducing the cost by nearly 30% under any North American pricing. [DPG's] failures have resulted in unanticipated additional costs, damages, extended delays, and unwarranted offsets to [International Steel]. The total monetary impact of this claim is $5,694,051.05.
Doc. 50, ex. 3, International Steel's counterclaim in arbitration, at 2.
Id. at 3.
DPG alleges that Poong Lim is obligated to defend it against International Steel's claim, and to indemnify it for any liability that it may incur as a result of that claim.
To support that allegation, DPG points to its contract with Poong Lim, which provides that:
[Poong Lim] agrees to defend, indemnify and hold harmless [DPG and its] agents and employees, from and against any claim, cost, expense or liability attributable to bodily injury, sickness, disease or death, or damage, loss or destruction of property (including loss of use thereof), caused by, arising out of, resulting from or occurring in connection with the performance of [work by Poong Lim], whether or not caused in part by the active or passive negligence or other fault of a party indemnified hereunder; provided, however, [Poong Lim's] duty hereunder shall not arise if such injury, sickness, disease, death, damage or destruction is caused by the sole negligence of a party indemnified hereunder. If their contract does not expressly require Poong Lim to defend DPG against International Steel's claim and indemnify DPG for liability resulting from that claim, DPG asserts that those duties may be implied from the contract.
Doc. 50, ex. 1, contract between DPG and Poong Lim, at 10.
IV. DISCUSSION
The contract between DPG and Poong Lim provides that it will be interpreted under Alaska law. In Alaska, the goal of contract interpretation is to "determine and enforce the reasonable expectations of the parties." The parties' expectations are determined by "examining the language used in the contract, case law interpreting similar language, and relevant extrinsic evidence, including the subsequent conduct of the parties."Contract interpretation can be a question of law or fact. When the parties' expectations can be determined from the contract's language and case law interpreting similar language, contract interpretation is a question of law to be decided by the court. The court will also interpret the contract if its language can support only one meaning, even when there is conflicting extrinsic evidence of its meaning. However, if there is conflicting extrinsic evidence supporting two meanings, and the contract's language is "reasonably susceptible to both asserted meanings," interpreting the contract is a question of fact for the fact-finder.
Froines v. Valdez Fisheries Dev. Ass'n, Inc., 75 P.3d 83, 89 (Alaska 2003) (citing Alyeska Pipeline Serv. Co. v. O'Kelley, 645 P.2d 767, 771 n. 2 (Alaska 1982) (quoting Hausam v. Wodrich, 574 P.2d 805, 809 (Alaska 1978)).
Id. (quoting W. Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657 n. 4 (Alaska 1991)).
Id.
In this case, interpreting DPG and Poong Lim's contract is a question of law for the court to decide because the parties have submitted no extrinsic evidence of its meaning.
A. Express and Implied Duties to Indemnify
The court can "only decide as a matter of law that there is a duty to indemnify if the indemnitee is liable for damages." This principle is true for both express and implied indemnity claims. DPG has not yet been held liable to International Steel for any damages. Consequently, the court cannot rule on DPG's claim that Poong Lim owes it express and implied duties to indemnify.
Hoffman Constr. Co. of Alaska v. U.S. Fabrication Erection, Inc., 32 P.3d 346, 352 (Alaska 2001).
See Hoffman Constr., 32 P.3d at 350 n. 1 (express indemnity); Fairbanks N. Star Borough v. Kandik Constr., Inc. Assocs., 823 P.2d 632, 635 (Alaska 1991) (citations omitted) (implied indemnity).
For its part, DPG invites the court to "hold as a matter of law that Poong Lim is obligated to indemnify DPG for any payments to International Steel arising out of or relating to its supply of structural steel. . . ." This holding would not be appropriate because Poong Lim's obligation to indemnify DPG would be limited to damages within the scope of the indemnity clause or, for implied indemnity, foreseeable damages.
Doc. 50 at 6 (emphasis added).
AVCP Reg'l Hous. Auth. v. R.A. Vranckaert Co., Inc., 47 P.3d 650, 657 (Alaska 2002) (quoting Kandik Constr., 823 P.2d at 636).
B. Duty to Defend
1. Express
When an indemnity clause requires an indemnitor to defend an indemnitee against certain claims, the indemnitor's duty to defend arises when claims falling within the indemnity clause's scope are asserted against the indemnitee. The indemnity clause in DPG and Poong Lim's contract requires Poong Lim to defend DPG against claims for damages arising from injuries to persons or physical property, but not for economic damages. International Steel's claim is for economic damages. Thus, it does not trigger Poong Lim's duty to defend DPG.
Hoffman Constr. Co., 32 P.3d at 352.
DPG argues that the indemnity clause obligates Poong Lim to defend DPG against claims for economic damages because it contains the word "damage." But, the word "damage" does not stand alone. Instead, it modifies the word "property."
See Doc. 50, ex. 1, contract between DPG and Poong Lim, at 10.
2. Implied
If their contract does not expressly obligate Poong Lim to defend DPG against International Steel's economic damages claim, DPG makes a two-part argument that the contract impliedly requires that defense. First, DPG argues that, in addition to Poong Lim's express obligation to indemnify DPG for damages resulting from injuries to persons or physical property, Poong Lim is impliedly obligated to indemnify DPG for economic damages. Second, DPG asserts that Poong Lim's implied obligation to indemnify DPG for economic damages includes a duty to defend DPG against claims for economic damages.
When an indemnity clause requires an indemnitor to defend and indemnify an indemnitee, the duty to defend is treated as "separate and distinct" from the duty to indemnify. The duty to defend is triggered when claims within the scope of the indemnity clause are asserted, regardless of whether the claims ultimately are successful. In contrast, the duty to indemnify is owed only if the claims are successful and liability is established. If the indemnitor breaches its duty to defend the indemnitee, the damages available to the indemnitee are the reasonable costs and attorneys' fees it incurs in defending itself.
Afcan v. Mutual Fire, Marine Inland Ins. Co., 595 P.2d 638, 645 (Alaska 1979) (citations omitted).
Stephan Sons, Inc. v. Municipality of Anchorage, 629 P.2d 71, 75-76 (Alaska 1981).
Id.
Afcan, 595 P.2d at 646 (citing Marwell Constr., Inc. v. Underwriters at Lloyd's London, 465 P.2d 298, 307 (Alaska 1970)).
When a duty to indemnify is implied from a contract, a separate duty to defend is not also implied, but the damages that are available for breach of an express duty to defend are also available for breach of the implied duty to indemnify. If an indemnitee is held liable on a claim against which it is entitled to indemnity, and its fault did not contribute to the injury from which the claim arose, it may recover the reasonable attorneys' fees it incurred in its defense against the claim from the indemnitor.
Fairbanks N. Star Borough v. Roen Design Assocs., Inc., 727 P.2d 758, 761 (Alaska 1986) (quoting Heritage v. Pioneer Brokerage Sales, Inc., 604 P.2d 1059, 1067 (Alaska 1979)).
Consequently, although Poong Lim is not under an implied duty to defend DPG against International Steel's economic damages claim, DPG may be able to recover the costs it incurs in defending against that claim from Poong Lim. To recover its defense costs, DPG must be held liable for International Steel's economic damages, establish that Poong Lim owes it an implied duty to indemnify it for those damages, and show that its actions did not cause those damages.
V. CONCLUSION
For the reasons set out above, the motion at docket 50 is DENIED.