Praetorian Insurance v. Site Inspection, LLC

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 09-2008/2273
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Praetorian Insurance Company f/k/a *
Insurance Corporation of Hanover, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Site Inspection, LLC, *
*
Appellee. *
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Submitted: January 14, 2010
Filed: May 3, 2010
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Before GRUENDER and SHEPHERD, Circuit Judges, and LANGE,1 District Judge.
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SHEPHERD, Circuit Judge.

Praetorian Insurance Company (“Praetorian”) appeals the district court’s2 grant
of summary judgment and award of attorney’s fees in favor of Site Inspection, LLC
(“Site”). We affirm.

1
The Honorable Roberto A. Lange, United States District Judge for the District
of South Dakota, sitting by designation.
2
The Honorable Scott O. Wright, United States District Judge for the Western
District of Missouri.
 I.

Praetorian provides property insurance to hotels nationwide. Jerry Mayo,
Praetorian’s property insurance underwriter, has final underwriting authority for all
of the policies issued under Praetorian’s “American E&S-KIS Hospitality Program”
(the “program”). Under the program, Mayo reviews property applications and issues
“initial binders” upon approval of an application. (Appellant’s Br. 5.) Policies are
then issued by Praetorian, “conditioned on a satisfactory loss control inspection of the
insured property.” (Id.) Klein Insurance Services, Inc. (“Klein”), a producer and
wholesale broker, acts as Praetorian’s agent, and retains inspection companies to
inspect the properties. The inspection companies issue inspection reports, which
include recommendations on how the property could reduce potential risk factors.
Praetorian then sends these recommendations to the property owner and if the
property owner adequately complies with the recommendations, Praetorian issues a
final policy insuring the property.

In 2003, Praetorian issued a conditional policy under the program, covering
Vantage Investments, Inc.’s (“Vantage”) Best Western hotel at 5701 Longview Road
in Kansas City, Missouri. For $245.00, Klein retained Site to inspect the Best
Western property.3 During an initial meeting regarding Site’s inspection of the Best
Western property, Site showed Klein its default inspection report template.4 Located
at the bottom was a disclaimer of liability provision (the “provision”) which Site
included on all 70 inspection reports Site completed for Klein. The provision stated:

3
Site’s inspectors do not physically test equipment. Site’s responsibility is to
locate equipment, assess risk of loss, and make the appropriate suggestions for a
property to reduce risk factors.
4
One of Site’s services allows companies to customize a template for inspection
reports.
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 This report contains information for underwriting analysis only and
should be used for no other purpose. While this report was completed
as accurately as possible, Site Inspection[], LLC does not assume any
legal liability arising from any inaccuracies found to be contained within
this report. Furthermore, the requesting company, their representatives
and reinsures hold Site Inspection[], LLC harmless from any claims or
liabilities arising out of any decisions or actions made based on
information developed in this report.

(Appellant’s Br. 7.) Klein negotiated several revisions to the report template but never
requested removal of the provision. In fact, during the revision process, a Klein
employee wrote “ok” next to the provision.

Site inspected the Best Western and using the final inspection report template
as negotiated, Site issued its report—each page of which contained the provision at
the bottom. The report included several recommendations for reducing risks at the
Best Western. At Klein’s request, Site removed several of the recommendations in
the report. On January 5, 2004, Site submitted a new report containing a total of ten
recommendations for the Best Western and Vantage was provided an opportunity to
comply with the ten recommendations in order to maintain Praetorian’s insurance
coverage. On March 16, 2004, Regional Reporting, Inc. performed a
“recommendation check” and confirmed that Vantage had complied with all of Site’s
recommendations. Pursuant to this finding, Praetorian continued their coverage of
Vantage’s Best Western hotel.5

On August 10, 2004, a fire occurred at the Best Western. Praetorian retained
Poole Consulting Services, Inc. (“Poole”) and paid them approximately $3,784 to
investigate the Best Western’s fire protection systems. Poole assigned the job to Brian

5
On March 20, 2004, three months after Site’s inspection, Campbell Fire
Protection, LLC (“Campbell”) conducted the hotel’s annual fire alarm inspection.
During that inspection, Campbell found that the hotel’s overall fire protection
equipment was operational.
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Olsen, a fire protection specialist. During his investigation, Olsen inspected the
property and reported several inadequacies with the hotel’s fire protection systems.
However, Olsen acknowledged that he had no way of knowing if these inadequacies
existed when Site had performed the inspection prior to the fire.

Based on Olsen’s findings, Praetorian refused Vantage’s claim for the damage
to the Best Western, but eventually paid Vantage $3.25 million pursuant to a
settlement agreement.6 During a deposition in the Vantage litigation, Mayo stated that
he thought Site’s inspection of the Best Western had been satisfactory. Praetorian
then brought this lawsuit against Site, seeking reimbursement for the $3.25 million
paid to Vantage and alleging that it would not have issued the policy to Vantage if Site
had correctly informed Praetorian of the various inadequacies7 in the hotel’s fire
protection systems. Outside of the pleadings, Site demanded indemnification from
Praetorian “for any and all attorney fees and expenses” incurred in its defense or any
potential prosecution of a counterclaim. When Praetorian did not comply with the
indemnification request, Site counterclaimed, alleging common law contractual
indemnity and breach of contract for Praetorian’s breach of the provision in Site’s
inspection report.

6
Notably, Vantage submitted a claim for only $1,092,570.80.
7
Overall, Praetorian alleged a total of 12 inadequacies, all based on the report
by Olsen. These inadequacies included: (1) the lack of a “[c]entral [s]tation fire
alarm;” (2) the absence of a “central station sprinkler system;” (3) the “sprinkler heads
were corroded and inoperable;” (4) a fire pump was “tagged with four failure notices;”
(5) “the key to the fire alarm system was set on reset mode and was not on;” (6) “the
fire alarm system was inoperable;” (7) “the smoke detectors that were hooked up to
the annunciator panel were not hooked into the fire alarm system;” (8) “there was no
smoke detector in the kitchen;” (9) “the fire alarm system’s manual pulls” were
malfunctioning; (10) “the sprinklers in the basement . . . did not function properly;”
(11) “there was no service contract with any monitoring service to monitor the fire
alarm system;” and (12) “the Hotel’s fire protection systems were not in compliance
with NFPA regulations.” (Am. Compl. ¶¶ 11-13.)
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 On July 17, 2008, Site sent Praetorian Requests for Admissions which included
requests for Praetorian to admit that it had never refused to issue a policy, nor
cancelled a policy, due to the fire protection inadequacies Praetorian had alleged in
its complaint. When Praetorian failed to respond, the district court ordered
Praetorian’s response by September 3, 2008. Praetorian responded and objected to
many of the requests, and Site moved to determine the sufficiency of Praetorian’s
responses pursuant to Federal Rule of Civil Procedure 36.8 On December 17, 2008,
the district court found that all of Praetorian’s responses were insufficient and
argumentative, and deemed all requests admitted.9

Site filed a motion for summary judgment on Praetorian’s claims and its own
counterclaims. Praetorian filed a motion for partial summary judgment on its own
claims. In support of its motion, Praetorian submitted an affidavit from Mayo which
reflected that he would have cancelled Vantage’s policy had Site’s report been more
accurate.

The district court (1) granted Site’s motion for summary judgment on
Praetorian’s claims, finding that no genuine issue of material fact existed as to
whether Praetorian would have cancelled Vantage’s policy had Site reported the
inadequacies, (2) denied Praetorian’s cross motion for summary judgment on its own
claims, and (3) granted Site’s motion for summary judgment on its counterclaims.
The court found that “Site’s exculpatory clause and indemnity provision are
enforceable contractual provisions that relieve Site from any liability.” (D. Ct. Or.
24.) Site moved for damages on its counterclaim and the district court awarded Site
$379,520.12 in damages, attorney’s fees, and costs. Praetorian appeals.

8
Under Rule 36, “[t]he requesting party may move to determine the sufficiency
of an answer or objection [to Requests for Admissions]. Unless the court finds an
objection justified, it must order that an answer be served. On finding that an answer
does not comply with this rule, the court may order either that the matter is admitted
or that an amended answer be served.” Fed. R. Civ. Pro. 36(a)(6).
9
Praetorian did not appeal this order.
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 II.

We review the grant of summary judgment de novo. Thomas v. Union Pac.
R.R., 308 F.3d 891, 893 (8th Cir. 2002). “Summary judgment is appropriate if the
evidence, considered in the light most favorable to the nonmoving party, fails to raise
a genuine issue of material fact and the moving party is entitled to judgment as a
matter of law.” Thompson v. United Transp. Union, 588 F.3d 568, 572 (8th Cir.
2009).

A.

Praetorian first alleges that the district court improperly granted Site’s motion
for summary judgment on Praetorian’s claims because a genuine issue of material fact
exists as to whether Praetorian would have cancelled Vantage’s policy had Site’s
report identified the inadequacies in the Best Western’s fire protection system.
However, Praetorian’s Rule 36 admissions included admissions that Praetorian had
never cancelled any of its policies based on any of the alleged inadequacies that
existed in Site’s report. The only substantial evidence that Praetorian introduced to
refute these Rule 36 admissions was the affidavit from Mayo, which directly
contradicts Mayo’s prior testimony that Site’s inspection was “satisfactory.”

“[A]s a general rule, admissions made in response to a Rule 36 request for
admissions are binding on that party.” Bender v. Xcel Energy, Inc., 507 F.3d 1161,
1168 (8th Cir. 2007) (“Any matter admitted under this rule is conclusively established
unless the court on motion permits withdrawal or amendment of the admission.”
(citing Fed. R. Civ. P. 36(b))). “Affidavits and depositions entered in opposition to
summary judgment that attempt to establish issues of fact cannot refute default

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admissions.”10 United States v. Kasuboski, 834 F.2d 1345, 1350 (7th Cir. 1987)
(finding that default admissions under Rule 36 can serve as a “factual predicate for
summary judgment”); see also Cornerstone Bible Church v. City of Hastings, 948
F.2d 464, 469-70 (8th Cir. 1991) (“The City’s affidavits are conclusory and
speculative, pointing only to potential secondary effects without the benefit of any
study or factual support.”).

Mayo’s affidavit is self-serving, containing merely his own perspective in
hindsight of the procedures that Praetorian should have implemented, contradicts his
prior testimony, and is not enough to raise a genuine issue of material fact. See Mut.
Marine Office, Inc. v. Atwell, Vogel & Sterling, Inc., 485 F. Supp. 351, 355
(S.D.N.Y. 1980) (finding that a statement from an insurance underwriter that he would
have sought to cancel an insurance policy had the inspection report stated something
different was “speculative opinion” and that summary judgment was still appropriate).
“It would appear that if this [action were] permitted, there [would] never be a grant
of summary judgment. Such an ephemeral question could be raised in almost every
case. That certainly is not the intent of the rule.” Id. (quotation omitted). We
therefore conclude that the district court’s grant of summary judgment to Site on
Praetorian’s claims is proper.

B.

Praetorian next claims that the district court improperly granted Site’s motion
for summary judgment based on the disclaimer of liability provision. Specifically,
Praetorian alleges that the language in the disclaimer of liability provision does not

10
“A matter admitted under this rule is conclusively established unless the court,
on motion, permits the admission to be withdrawn or amended. . . . [T]he court may
permit withdrawal or amendment if it would promote the presentation of the merits
of the action and if the court is not persuaded that it would prejudice the requesting
party in maintaining or defending the action on the merits.” Fed. R. Civ. P. 36(b).
Here, Praetorian did not make any such motion.
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constitute a valid indemnification clause.11 Praetorian first argues that the provision
was not incorporated into the inspection contract with Site.12 In its Rule 36
admissions, Praetorian admitted that the inspection report underwent several revisions,
that Klein made alterations to the report, that the provision remained during every
revision, that Klein wrote “ok” next to the provision, and that the final draft of the
report contained the provision. The issue, therefore, is not whether the provision was
part of the inspection contract, but only whether the provision included a valid
indemnification clause.

“Missouri law controls in this diversity case action. We review the district
court’s interpretation of Missouri law de novo.” Bass v. Gen. Motors Corp., 150 F.3d
842, 846-47 (8th Cir. 1998) (citations omitted). An “indemnity clause,” “[a]lso
termed hold-harmless clause [or] save-harmless clause,” is “[a] contractual provision
in which one party agrees to answer for any specified or unspecified liability or harm
that the other party might incur.” Black’s Law Dictionary 784 (9th ed. 2009). An
indemnity clause must clearly express that one party is releasing the other from his
own negligence and requires precise language. See Util. Serv. & Maint., Inc. v.
Noranda Aluminum, Inc., 163 S.W.3d 910, 913 (Mo. banc 2005) (“[C]ontractual
provisions releasing a party from liability for its own negligent acts must be stated
clearly, unequivocally, and conspicuously.”); see also Nusbaum v. City of Kansas
City, 100 S.W.3d 101, 105 (Mo. banc 2003) (per curium) (“A contract of indemnity
will not be construed so as to indemnify one against loss or damage resulting from his
own negligent acts unless such intention is expressed in clear and unequivocal
terms.”).

11
Praetorian also argues that the district court improperly granted Site’s motion
for summary judgment regarding its exculpatory clause. Because we have affirmed
the district court’s grant of Site’s motion for summary judgment on Praetorian’s
claims against Site, we need not address the exculpatory clause issue.
12
Although the inspection contract was officially negotiated between Klein and
Site, it is undisputed that Klein was acting as Praetorian’s agent when it hired Site.
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 Missouri has recognized an exception to this requirement, distinguishing
“between contracts with consumers and contracts between businesses of equal power
and sophistication.” Util. Serv., 163 S.W.3d at 913. Sophisticated business parties
require less precision in the terms of the indemnity clause, and it is irrelevant whether
the businesses bargained for the provision. See id. at 913-14 (“Courts enforce the
objective terms of contracts between sophisticated businesses, without regard to the
parties’ subjective intent. The character and quality of negotiations do not vary the
terms of a written contract between sophisticated businesses.” (citations omitted)).
As sophisticated business parties, Klein’s indemnification of Site did not require this
precise language, and Site’s provision, stating that “the requesting company, their
representatives and reinsures hold Site Inspection[], LLC harmless from any claims
or liabilities arising out of any decisions or actions made based on information
developed in this report,” (Appellant’s Br. 7), is adequate. See id. at 914 (“There is
nothing ambiguous about a requirement that one party indemnify the other for ‘any
and all claims’ in a commercial contract.”).

Additionally, the fact that Site was paid only $245.00 for the inspection is
consistent with the Praetorian’s agreement to indemnify Site. See id. at 914 (“[T]he
economic reality is that the price of the work may well include the cost of insurance
for [one party] to indemnify [the other party] for ‘any and all claims.’ A contract
between sophisticated businesses that does not include indemnification would
presumably carry a different price than a contract that does include such a
provision.”). Therefore, we find that Site’s provision contained an enforceable
indemnification clause.

Praetorian next argues that this particular indemnification clause is
unenforceable because this case does not involve a third-party claim. Although
indemnification suits generally arise in the context of third-party claims, Missouri
law13 does not require it. Cf. Safeway Stores, Inc. v. City of Raytown, 633 S.W.2d

13
“If the Missouri Supreme Court has not yet addressed a particular issue, we
may consider relevant state precedent, analogous decisions, considered dicta, . . . and
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727, 729-32 (Mo. banc 1982) (holding that Missouri law does not require claims for
indemnification and contribution be brought initially as third-party claims in the
context of joint tortfeasors); Lee v. Investors Title Co., 241 S.W.3d 366, 367-68 (Mo.
Ct. App. 2007) (upholding an indemnity clause that granted attorneys fees in a direct
suit between a builder and a title company).

Here, the “plain language of the provision” clearly states that, “the requesting
company,” Praetorian through Klein, is responsible for indemnification of Site for
“any claims or liabilities arising out of” Site’s report. See Litton Microwave Cooking
Prods. v. Leviton Mfg. Co., 15 F.3d 790, 796 (8th Cir. 1994) (applying Minnesota law
and finding that “[o]nly a strained reading could produce the third-party suit
requirement that Leviton would have us impose on the indemnity clause. Such a
construction would produce the odd result of paying Litton’s attorney’s fees [under
the indemnification clause] if, but only if, Litton waited to be sued by consumers for
the damage resulting from the breach of warranty. The plain language of the
provision does not appear to demand such a circumstance.”). This unusual situation
is similar to that in Litton in that, under any other interpretation of the provision, Site
could never be indemnified unless another party sued Site for the inspection it
performed for Praetorian. Therefore, we find that the indemnification clause was
enforceable in this case, despite the absence of a third-party action.

Finally, Praetorian claims that the absence of the words “attorney’s fees” from
the provision inhibits their recovery by Site. Although Missouri courts generally
“construe ambiguities in contracts against those who draft them,” Transit Cas. Co. in
Receivership v. Certain Underwriters at Lloyd’s of London, 963 S.W.2d 392, 398
(Mo. Ct. App. 1998), Missouri law authorizes the award of attorney’s fees when not
specified in certain unique situations. See City of Grandview, Mo. v. Hudson, 377

any other reliable data. Decisions from Missouri’s intermediate appellate court (the
Missouri Court of Appeals) are particularly relevant, and must be followed when they
are the best evidence of Missouri law.” Bockelman v. MCI Worldcom, Inc., 403 F.3d
528, 531 (8th Cir. 2005) (quotations omitted).
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F.2d 694, 697-98 (8th Cir. 1967) (applying Missouri law and stating, “there is sound
authority that the indemnitee . . . is entitled to recover from the indemnitors, as a part
of its damages, reasonable attorney fees which [the indemnitees] incurred in defending
a suit brought against it in reference to the matters against which it was indemnified.
This is so even though the indemnity agreement does not specifically include or
mention ‘attorney fees.’”); see also Sears, Roebuck & Co. v. Peerless Prods., Inc., 539
S.W.2d 768, 770 (Mo. Ct. App. 1976) (allowing reimbursement of litigation expenses
when the indemnity clause stated, “By the acceptance of this order you agree to
protect and indemnify said customer and Sears, Roebuck and Company from all
claims or demands on account of injury to persons or property occurring during or as
a result of said installation.”). Site’s situation was clearly one of these unique
circumstances where attorney’s fees are not specified in the contract, but where Site
was “defending a suit brought against it in reference to the matters against which it
was indemnified.” City of Grandview, 377 F.2d at 697. Therefore, we find that the
attorney’s fees were properly awarded to Site.

III.

For the foregoing reasons, we affirm.
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