Missouri Federal Contract Cases 2012 (Part 01): Indemnification for One’s Own Negligence

by Brian Rogers on February 26, 2012

in Missouri Contract Cases

XTRA Lease LLC v. Pacer International, Inc.

Pacer Transport, an affiliate of Pacer International, Inc., the defendant in this case, leased a flatbed semi-trailer from XTRA Lease LLC. The trailer was involved in a serious accident when a wheel came off the trailer and struck a car, killing the driver of the car and seriously injuring the passenger. XTRA was sued for the personal injuries and death resulting from the accident. XTRA looked to Pacer for indemnification under its lease agreement with Pacer, and brought suit when Pacer refused.

Is Pacer required to indemnify XTRA for its own negligence?

The issue before the court on the plaintiff’s and defendant’s motions for summary judgment was whether the lease’s indemnification provision required Pacer to indemnify XTRA for its own negligence. The indemnification provision in the lease reads,

LESSEE HEREBY AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS XTRA LEASE . . . FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS AND EXPENSES . . . FOR PERSONAL INJURY (INCLUDING DEATH) OR DAMAGES TO ANY PERSON OR PROPERTY, WHEREVER OCCURRING, ARISING OUT OF OR INCIDENT TO LESSEE’S PERFORMANCE OR FAILURE TO PERFORM UNDER THE LEASE OR LESSEE’S USE, POSSESSION, MAINTENANCE OR CONTROL OF THE: (I) EQUIPMENT . . . .

Missouri law allows a sophisticated party to agree to indemnify the counter-party to a contract against the indemnified party’s own negligence. However, that intention must be unequivocal, and “where any doubt exists regarding the parties’ intentions, Missouri courts will not construe an indemnity contract to indemnify against one’s own negligence.” Nusbaum v. City of Kansas City, 100 S.W.3d 101, 105 (Mo. 2003).

Is the case similar to Noranda?

In Utility Service & Maintenance v. Noranda Aluminum, 163 S.W.3d 910 (Mo. 2005), the Missouri Supreme Court held that an indemnification clause provided for indemnification for a party’s own negligence. The indemnification provision at issue read,

Seller [Utility] shall indemnify and save Purchaser [Noranda] free and harmless from and against any and all claims, damages, liabilities or obligations of whatsoever kind, including, but not limited to, damage or destruction of property and injury or death of persons resulting from or connected with Seller’s performance hereunder or any default by Seller or breach of its obligations hereunder.

The Noranda court found that despite the requirement that liability limitations for one’s own negligence be clear and unambiguous, sophisticated parties may limit liability without precisely mentioning terms such as “negligence” or “fault.” The court reasoned that the indemnification clause at issue “specifically states that it includes, but is not limited to, Utility’s performance under the contract.” The language “any and all claims” thus provided that the indemnification obligation related to more than just Utility’s performance, which included Noranda’s negligence.

Is the case similar to Nusbaum?

In Nusbaum v. City of Kansas City, 100 S.W.3d 101 (Mo. 2003), the Missouri Supreme Court held that the indemnification clause at issue did not require indemnification for a party’s own negligence. That clause stated,

[T]he Subcontractor shall indemnify and hold harmless the Owner, . . . 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 Subcontracto’’s Work under this Subcontract, but only to the extent caused in whole or in part by negligent acts or omissions of the Subcontractor . . . , regardless of whether or not such claim, damage, loss, or expense is caused in part by a party indemnified hereunder.

The Nusbaum court held that the phrase “to the extent” contained in the indemnification clause expressed “the intent to limit the indemnitor’s liability to the portion of fault attributed to the indemnitor.”

Conclusion

The district court concluded that the indemnification provision in XTRA’s lease agreement was closer to the Nusbaum clause than the Noranda clause. The court stated,

While the provision contains the language “any and all losses,” those losses are limited only to those arising out of Pacer’s use, possession, maintenance, or control of the equipment. Nothing in the provision explicitly or unequivocally states that Pacer is required to indemnify XTRA for its own negligence. This language differs substantially from the contract in Noranda, which stated that the plain language of the contract related to more than just Utility’s performance.

The court found that the indemnification provision required Pacer to indemnify XTRA for the combined negligence of Pacer and XTRA, but not for XTRA’s own negligence and entered summary judgment in Pacer’s favor.

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