MacGlashing v. Dunlop Equipment Co.

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

Nos. 95-2051
95-2207

CHARLES MACGLASHING AND SHARLENE MACGLASHING,

Plaintiffs, Appellees,

v.

DUNLOP EQUIPMENT COMPANY, INC.,

Defendant, Appellee.

RESTORATION PRESERVATION MASONRY, INC.,

Third-Party Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Reginald C. Lindsay, U.S. District Judge]

Before

Cyr, Circuit Judge,

Coffin and Bownes, Senior Circuit Judges.

Robert P. Powers, with whom Michael R. Byrne, Andre A. Sansoucy,

and Melick & Porter were on brief for Restoration Preservation

Masonry, Inc., appellant.
Thomas G. Hoffman, with whom Thomas M. Greene, Paul D. Hoffman,

Greene & Hoffman, P.C. were on brief for Charles MacGlashing and

Sharlene MacGlashing, plaintiffs, appellees and Dunlop Equipment
Company, Inc., defendant, appellee.

July 25, 1996

BOWNES, Senior Circuit Judge. This appeal concerns
BOWNES, Senior Circuit Judge.

the interpretation and enforceability of an indemnification

clause in a lease between third-party defendant-appellant

Restoration Preservation Masonry, Inc. ("RPM") and defendant-

appellee Dunlop Equipment Company, Inc. ("Dunlop").

Plaintiff-appellee Charles MacGlashing was injured when an

elevated work platform leased by Dunlop to RPM collapsed

while he and another employee of RPM were using it in their

masonry work. MacGlashing and his wife, residents of New

Hampshire, brought a diversity action in tort against Dunlop,

a Massachusetts corporation, in the district court of

Massachusetts. Dunlop sued RPM, invoking the lease

indemnification clause. Prior to trial the MacGlashings,

with court approval, entered into a settlement agreement with

Dunlop. The issue on appeal is whether the MacGlashings,

standing in the shoes of Dunlop, can collect the amount of

the settlement from RPM under the indemnification clause of

the lease between RPM and Dunlop. This issue was decided in

favor of the MacGlashings and Dunlop by summary judgment.

There is no question that Massachusetts law applies.

RPM maintains that it has no obligation under the

lease agreement to indemnify Dunlop for damages flowing from

Charles MacGlashing's accident because Dunlop materially

breached the agreement. It also challenges the scope of the

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indemnification clause. Discerning no error in the district

court's summary judgment analysis, we affirm.

I.
I.

BACKGROUND
BACKGROUND

Viewed in the light most favorable to RPM, the

nonmoving party, the facts are as follows. RPM, a

Massachusetts-based corporation, employed Charles MacGlashing

as a brick mason until September 2, 1993, when he was

involved in a work-related accident at The Longwood Towers

located in Brookline, Massachusetts. In 1993, the Longwood

Corporation ("Longwood"), owner of The Longwood Towers

complex, commissioned RPM to conduct phase II of a renovation

project at Longwood Towers. Like phase I, which had been

completed a year earlier by NER, Inc. ("NER"), phase II

involved removal and replacement of brick and stone at the

top of three eight-story buildings located in the complex.

RPM was formed by former employees of NER. Several of them,

including RPM's president Paul Haven, had worked on phase I.

During both phase I and II, mobile, elevated work platforms

fitted with eight-foot outrigger devices, which extended off

the main platform to expand its width, were utilized for

stone and brick removal and to make certain setback portions

of the buildings accessible. The outriggers were

modifications to the original platform design.

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On September 2, 1993, MacGlashing and a co-worker,

James Proctor, were removing a piece of stone from the

parapets of Building B when the work platform they were using

collapsed. Both men fell eight stories to the ground.

Proctor died from the injuries he sustained. MacGlashing,

who was thirty-nine at the time, survived, but suffered

injuries that hospitalized him for six months and left him

partially paralyzed and in constant pain. These injuries

included, inter alia, broken bones, internal and neurological

damage, a ruptured aorta and bladder, a perforated colon,

lung damage, and lacerations. MacGlashing incurred more than

$800,000.00 in medical fees and expenses as a result of the

accident. His future medical costs and net economic loss

have been projected between $600,000.00 to $1.1 million and

$1.1 million to $1.3 million, respectively. At trial, the

parties agreed that the platform involved in the accident

collapsed because it could not bear the weight placed on it,

but disagreed about whether the platform had been defectively

designed, used negligently, or negligently modified by

Dunlop. Dunlop, whose business consists of supplying work

platforms for sale or lease, provided the platforms employed

in both phase I and II of the Longwood Towers renovation

project. It executed a July 7, 1993, lease agreement to

provide four platforms with RPM's president, Paul Haven, who

had left NER to form RPM.

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The lease agreement executed between RPM and Dunlop

was a standard form contract and contained the following

indemnification clause:

12. THE LESSEE HEREBY ABSOLVES THE
LESSOR OF ANY RESPONSIBILITY OR
OBLIGATION IN THE EVENT OF ACCIDENT,
REGARDLESS OF CAUSES OR CONSEQUENCES, AND
THAT ANY COSTS, CLAIMS, COURT OR
ATTORNEY'S FEES, OR LIABILITY RESULTING
FROM THE USE OF DESCRIBED EQUIPMENT WILL
BE INDEMNIFIED BY THE LESSEE REGARDLESS
AGAINST WHOM THE CLAIMANT OR CLAIMANTS
INSTITUTE ACTION.

II.
II.

PROCEEDINGS BELOW
PROCEEDINGS BELOW

The MacGlashings brought a federal diversity

jurisdiction suit, see 28 U.S.C. 1332(a), against Dunlop,

seeking recovery on theories of negligence, product

liability, and breach of warranty. They charged Dunlop with

negligence in the design and modification of the work

platforms leased to RPM, negligence in failing to inspect the

platforms and repair defects and damage, and negligence in

failing to warn and instruct RPM employees in the use of the

platform. They also asserted that Dunlop breached the

implied warranty that the work platforms were merchantable

and fit for their intended use. The MacGlashings later

amended their complaint to assert claims against Longwood

under Mass. Gen. L. ch. 143, 51. These claims are not

relevant to this appeal.

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Dunlop filed a third-party complaint against RPM,

seeking indemnification pursuant to their lease agreement.

RPM denied any indemnification responsibility and

counterclaimed, alleging that Dunlop materially breached the

lease agreement by providing defective and unreasonably

dangerous equipment.

Each of the parties filed summary judgment motions

before the magistrate judge. Dunlop and the MacGlashings

moved for summary judgment on Dunlop's third-party complaint.

They maintained that, under the indemnification clause

contained in the lease agreement, RPM was obligated to

indemnify Dunlop for any liability resulting from the use of

the leased equipment and that Dunlop did not materially

breach its obligations under that agreement. RPM contested

this joint motion and filed its own motion for summary

judgment on Dunlop's third-party claims. In both instances,

it contested the enforceability of the lease agreement

executed with Dunlop, claiming that Dunlop materially

breached the implied warranties of merchantability and

fitness for a particular purpose contained in the agreement

by failing to test the load-bearing capacity of the work

platforms and outriggers prior to delivery of them to the

project site.

The case was assigned to a magistrate judge. In

her report and recommendations, she first addressed RPM's

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summary judgment motion. The magistrate judge denied RPM's

claim that the lease agreement it executed with Dunlop

included an implied warranty of fitness for a particular

purpose, under Mass. Gen. L. ch. 106, 2-315, but agreed

that it contained an implied warranty of merchantability,

under Mass. Gen. L. ch. 106, 2-314. The magistrate judge

recommended that RPM's motion for summary judgment be denied

because she found that genuine issues of material fact

existed as to whether Dunlop breached its implied warranties.

Turning to the joint motions for summary judgment

filed by Dunlop and the MacGlashings, the magistrate judge

concluded that the record, viewed in RPM's favor, precluded a

dismissal with prejudice, of RPM's counterclaim for breach.

She recommended, however, that Dunlop and the MacGlashings'

joint motion for summary judgment on Dunlop's third-party

complaint be allowed. The magistrate judge found that,

barring a determination that Dunlop materially breached the

lease agreement, RPM was "obligated to indemnify Dunlop for

any liability resulting from Charles MacGlashing's use of the

leased equipment." She concluded that "whether Dunlop's

conduct amounted to a material or serious breach of the

contract" was an issue of fact for the jury. Each of the

parties filed timely objections to the magistrate judge's

report.

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The district court issued an order accepting, in

part, and modifying, in part, the Report and Recommendation

of the magistrate judge. The district court agreed with the

magistrate judge's determination that RPM's motion for

summary judgment should be denied. While it also agreed that

summary judgment in favor of Dunlop and the MacGlashings was

appropriate on Dunlop's third-party complaint, the court

rejected the magistrate judge's conclusion that RPM's

obligation to indemnify Dunlop for damages arising from

Charles MacGlashing's injuries could be relieved by a

material breach by Dunlop. The court held that, under

Massachusetts law, a party's breach of an implied warranty

was insufficient to invalidate a broadly worded

indemnification clause.

The district court scheduled a jury trial on the

various claims asserted by the parties. Before the trial

date arrived, however, the MacGlashing's entered into a

settlement agreement with Dunlop, subject to court approval.

The settlement contemplated satisfying the MacGlashings' suit

for damages against Dunlop with a $750,000.00 cash payment --

approximately 75 percent of the insurance coverage available

to Dunlop through its insurer -- and the assignment of

Dunlop's claims against RPM and Longwood to the MacGlashings.

Under the agreement, judgment was to enter in favor of

Charles MacGlashing in the amount of $4,560,000.00 and in

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favor of Sharlene MacGlashing for $300,000.00. The

MacGlashings agreed to seek no further recovery from Dunlop

in the event they could not recover from RPM or Longwood.

The district court held a hearing and reviewed

evidence before approving the settlement. At the hearing

RPM's counsel stated, inter alia:

I don't believe that RPM has any
objection to the structure of the
settlement under the current
circumstances . . . I believe that the
settlement is fair and equitable under
these circumstances.

The district court approved the settlement. The

claims against Longwood were tried to a jury which returned a

verdict in favor of Longwood. The district court issued a

final judgment dismissing the action of the MacGlashings

against Longwood, entering judgment against Dunlop, and

ordering that Charles MacGlashing recover $4,651,739.23 and

his wife, $306,032.52 -- the amount of the settlement plus

post-judgment interest at the rate of 5.86% -- from RPM.

This appeal followed.

III.
III.

STANDARD OF REVIEW
STANDARD OF REVIEW

We review the district court's grant of summary

judgment de novo and review the record in the light most

favorable to the nonmoving party, drawing all inferences in

that party's favor. Den Norske Bank AS v. First Nat'l Bank

of Boston, 75 F.3d 49, 53 (1st Cir. 1996); EEOC v. Green, 76

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F.3d 19, 23 (1st Cir. 1996). "Our review is limited to the

record as it stood before the district court at the time of

its ruling." J. Geils Band Employment Benefit Plan v. Smith

Barney Shearson, Inc., 76 F.3d 1245, 1250 (1st Cir. 1996).

Summary judgment is proper "if the pleadings, depositions,

answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is

entitled to judgment as a matter of law." Fed. R. Civ. P.

56(c).

Allegations of a factual dispute "will not defeat

an otherwise properly supported motion for summary judgment;

the requirement is that there be no genuine issue of material

fact." Morrissey v. Boston Five Cents Sav. Bank, 54 F.3d 27,

30 (1st Cir. 1995)(quoting Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 247-48 (1986)). Material facts are those that

have the potential to affect the outcome of a suit. J. Geils

Band, 76 F.3d at 1250-51. Disputes as to the existence of

material facts are genuine if "'the evidence is such that a

reasonable jury could return a verdict for the nonmoving

party.'" Morrissey, 54 F.3d at 30 (quoting Anderson, 477

U.S. at 247-48). We must affirm the district court's grant

of summary judgment "[i]f the evidence [presented by RPM] is

merely colorable, or is not significantly probative." Id.

We apply Massachusetts law.

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IV.
IV.

DISCUSSION
DISCUSSION

The issue is whether the indemnification clause

contained in the lease agreement RPM executed with Dunlop is

enforceable and, if so, whether its scope includes liability

for damages stemming from the injuries MacGlashing sustained

as a result of the accident. RPM avers that it is not

obligated, under Massachusetts law, to pay the judgment

awarded the MacGlashings because Dunlop materially breached

the lease agreement, relieving RPM of the promise to

indemnify Dunlop contained in the agreement. In the

alternative, RPM argues that even if the indemnification

clause is valid, it should not be deemed responsible for the

particular claims advanced by the MacGlashings because they

fall outside the contemplated scope of the agreement.

Appellees contest both of these arguments. We

begin by addressing the enforceability of the lease agreement

and then turn to a discussion of its scope.

Enforceability of the Lease Agreement's
Enforceability of the Lease Agreement's

Indemnification Clause
Indemnification Clause

RPM challenges the enforceability of the

indemnification clause by attacking the validity of the lease

agreement it executed with Dunlop. See Kelly v. Dimeo, Inc.,

31 Mass. App. Ct. 626, 628 (1991)("Under Massachusetts law, a

contract-based right to indemnification exists only if there

is a binding contract between indemnitor and indemnitee in

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which such right is expressed or from which it can be fairly

implied."), review denied, 412 Mass. 1102 (1992). RPM, using

the Uniform Commercial Code as its launching pad, argues that

the indemnification clause is unenforceable because Dunlop

materially breached implied warranties of merchantability,

see Mass. Gen. L. ch. 106, 2-314 (1990), and fitness for a

particular purpose, see Mass. Gen. L. ch. 106, 2-315

(1990), by providing RPM with work platforms that were

defective and unreasonably dangerous. RPM asserts that

because, under Massachusetts law, the MacGlashings would not

have been entitled to any recovery in the absence of a

finding that the work platform Dunlop provided was defective

or unreasonably dangerous, Dunlop, ipso facto, breached the

implied warranties of merchantability and fitness for a

particular purpose.

RPM, in effect, attempts to use the tort claim of

the MacGlashings against Dunlop as a basis for its argument

that Dunlop breached its implied warranty of merchantability.

But the contract between RPM and Dunlop was for the lease of

property. RPM cannot use the indemnity clause to turn an

economic contract into one based on tort concepts.

Massachusetts law plainly forecloses RPM's

argument. It adopts the majority view which draws a clear

distinction between tort recovery for physical injury and

contract recovery for economic loss. See Jacobs v. Yamaha

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Motor Corp., 420 Mass. 323, 329 n.5 (1995); Bay State-Spray &

Provincetown S.S., Inc. v. Caterpillar Tractor Co., 404 Mass.

103, 107 (1989); Colter v. Barber-Greene Co., 403 Mass. 50

(1988); Correia v. Firestone Tire & Rubber Co., 388 Mass.

342, 356 (1983); Marcil v. John Deere Indus. Equip. Co., 9

Mass. App. Ct. 625, 630 (1980); see also Canal Elec. Co. v.

Westinghouse Elec. Co., 973 F.2d 988, 996 (1st Cir. 1992);

Reibold v. Simon Aerials, 859 F. Supp. 193, 198 (E.D. Va.

1994). The rule that the absence of a showing of personal

injury, or of physical damage to property belonging to the

contracting party forecloses recovery for economic losses

stemming from tort-based strict liability or negligence is

well established in Massachusetts. Garweth Corp. v. Boston

Edison Co., 415 Mass. 303, 305 (1993). Attempts to

circumvent this rule by "[c]ouching the allegations in terms

of breach of contract" have been rejected routinely. See,

e.g., FMR Corp. v. Boston Edison Co., 415 Mass. 393, 394

(1993). We cannot, as RPM urges, regard the difference

between tort and contract-based claims as "irrelevant" in

this case. RPM's attempt to shift the obligation to

compensate the MacGlashings back to Dunlop fails because RPM

alleges no direct damage or injury to itself. The argument

that RPM is entitled to relief from the contract it

negotiated with Dunlop hinges entirely on the physical injury

its employee, Charles MacGlashing, sustained. Compare

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Garweth, 415 Mass. at 307. RPM has not made the showing of

injury or damage to itself as Massachusetts law requires.

Moreover, appellant has not convinced us that the

alleged breach of the lease agreement rendered the

indemnification clause invalid, as if it had never been

executed. The one-page contract executed between RPM and

Dunlop contains standard-form language and clauses which

suggest that the indemnity provision is separate from the

underlying lease. The face of the agreement sets out, inter

alia, the type and cost of the equipment to be leased, as

well as guidelines for its installation and transportation

around the site, and expressly incorporates a July 21, 1993,

handwritten note regarding delivery, assembly, and pickup of

the work platforms by Paul Haven, RPM's president.

The reverse side of the agreement contains

seventeen numbered paragraphs that outline lease conditions

and are clearly separated by spacing. Two of these reverse-

side clauses concern responsibility for damages flowing from

the use of equipment referred to in the lease agreement. The

first clause provides that RPM assumes full responsibility

under the agreement for damages, injuries, and accidents

caused by the use of Dunlop equipment and reads:

3. Lessee assumes the full
responsibility for damages, injuries and
accidents resulting to any property or
persons, caused by the use of said
equipment while in the possession of the
lessee, from the time of arrival at the

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above named location, during the term of
lease, and until equipment is returned to
lessor.

The second clause deals with indemnification and is one of

six written in boldfaced type. It provides that RPM absolves

Dunlop of any responsibility or obligation in the event of

accidents resulting from the use of the leased equipment,

regardless of cause or consequence and reads:

12. THE LESSEE HEREBY ABSOLVES THE
LESSOR OF ANY RESPONSIBILITY OR
OBLIGATION IN THE EVENT OF ACCIDENT,
REGARDLESS OF CAUSES OR CONSEQUENCES, AND
THAT ANY COSTS, CLAIMS, COURT OR
ATTORNEY'S FEES, OR LIABILITY RESULTING
FROM THE USE OF DESCRIBED EQUIPMENT WILL
BE INDEMNIFIED BY THE LESSEE REGARDLESS
AGAINST WHOM THE CLAIMANT OR CLAIMANTS
INSTITUTE ACTION.

The standard form equipment sign-off sheets Paul Haven signed

on the 20th, 22nd, 23rd, and 27th of July 1993, when Dunlop

delivered the work platforms to the work site, contain

similar language. They provide that RPM agrees that:

"Dunlop, Inc. is not responsible for any damages to the

building, or any injuries or accidents resulting to people or

property caused from the use or misuse of this equipment."

Based on our reading of the lease and the sign-off

sheets, we do not think RPM and Dunlop intended the covenants

contained in the lease agreement and the indemnification

clause to be dependent. See Connolly v. Haines-CE Brook,

Inc., 277 Mass. 423, 427 (1931)("[W]hether covenants are

conditional is determined . . . by the true intention of the

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parties as expressed by the language of the contract."); see

also 41 Am. Jur. 2d 17, at 358 (1995) ("Where the language

of the indemnity contract is neither technical nor ambiguous,

the words are given their legal, natural, and ordinary

meaning."). Because the right of action on the leased

platforms accrues as soon as there is a breach of its terms,

-- i.e., failure to deliver the equipment in a timely fashion

-- the right of action under the indemnity agreement does not

accrue until Dunlop makes payment to a third party or suffers

the loss addressed by the agreement. See 41 Am. Jur. 2d 4,

at 349 (1995); 42 C.J.S. 2, at 72-73 (1991); see also

Restatement (Second) of Contracts 379, comment a. We agree

with the district court that the better and more logical

approach is to treat the indemnification clause as an

independent provision of the lease. See Chatlos Sys., Inc.

v. Nat'l Cash Register Corp., 635 F.2d 1081, 1085 (3d Cir.

1980).

There is solid precedent for our decision to treat

the indemnification clause as a separate agreement unaffected

by any breach of the lease contract. See, e.g., Hill Constr.

Corp. v. American Airlines, Inc., 996 F.2d 1315 (1st Cir.

1993)(carrier cargo liability limitations survive breach of

the agreement to carry cargo); County of Middlesex v. Gewvyn

Constr. Corp., 450 F.2d 53 (1st Cir. 1971), cert. denied, 405

U.S. 955 (1972) (arbitration agreement valid despite

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construction contract breach). The Supreme Judicial Court of

Massachusetts addressed the question of whether breach of a

contract undermines a consensual allocation of risk in Canal

Elec. Co. v. Westinghouse Elec. Corp., 406 Mass. 369 (1990).

That case involved electric utility companies which sought

remedies for breach, under the UCC, for losses they allegedly

incurred as the result of the failure of electric generator

components supplied by Westinghouse Electric Corporation.

They sought to be relieved of the limits on indirect,

special, incidental, and consequential damages imposed by the

selling policies to which they agreed. Id. at 371. The

Supreme Judicial Court held that the liability limitations

were enforceable even though Westinghouse's efforts to cure

the problems created by its generator components were

unsuccessful. Id. at 374-75.

This holding persuades us that the course we adopt

in this case would be followed by the Massachusetts courts.

Under Massachusetts law, the allocation of risk through

contractual agreements neither conflicts with public policy,

Canal Elec., 406 Mass. at 372; Minassian v. Ogden Suffolk

Downs, Inc., 400 Mass. 490, 493 (1987), nor the Massachusetts

workers' compensation statute prohibition against an employee

receiving direct compensation for work-related injuries from

its employer. See Decker v. Black and Decker Mfg. Co., 389

Mass. 35, 38 (1983); Whittle v. Pagani Bros. Constr. Co., 383

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Mass. 796, 800 (1981); see also Mass. Gen. L. ch. 152, 23

(1988); Clarke v. Kentucky Fried Chicken of California, Inc.,

57 F.3d 21, 24 (1st Cir. 1995)(describing provisions of

workers' compensation statute). This is especially true

where, as in this case, the parties to the agreement

allocating risk are "sophisticated business entities." Canal

Elec., 406 Mass. at 374; Deerskin Trading Post, Inc. v.

Spencer Press, Inc., 398 Mass. 118, 123 (1986).

Risk allocation agreements are common in the

construction industry and are widely-regarded as a

"reasonable accommodation" between parties to a commercial

agreement. See Canal Elec., 406 Mass. at 374; Jones v. Vappi

Co., 28 Mass. App. Ct. 77 (1989); see also Debra A. Perelman,

Risk Allocation Through Indemnity Obligations In Constr.

Contracts, 40 S.C. Law. Rev. 989, 989-90 (1989). They have

the advantage of allowing owners, contractors, and

subcontractors to shift the significant and, oftentimes,

unforeseeable risks inherent in construction work. Cf. Hill

Constr., 996 F.2d at 1317; Perelman, Risk Allocation, 40 S.C.

Law. Rev. at 989-90. They also permit the equipment needed

to complete construction jobs to be obtained at lower rates

because the lessors of such equipment can exclude the cost of

insuring against accident-related damages from the equipment

price. Cf. Hill Constr., 966 F.2d at 1317. In Shea v. Bay

State Gas Co., 383 Mass. 218, 224 (1981), the Supreme

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Judicial Court candidly recognized that "realistically

viewed, the shift of liability is a shift in the burden of

providing adequate insurance coverage."

Nothing in the record suggests that Dunlop acted in

bad faith, see Mass. Gen. L. ch. 106 1-203 (1990), Hill

Constr., 996 F.2d at 1317, or unfairly seeks to bind RPM to

an indemnity clause which was hidden or buried deep in the

contract. Compare Mobil Chemical Co. v. Blount Bros. Corp.,

809 F.2d 1175, 1182 (5th Cir. 1987). Paragraph 12 shifts

liability to RPM in clear and unmistakable language.

Additionally, the record makes it clear that RPM's president,

Paul Haven, a man with more than twenty years of experience

in the construction industry, knew or should have known about

the risk allocation provisions contained in the agreement.

He negotiated the lease agreement and represented, in signing

it on RPM's behalf, that he had "read and agree[d] to all

terms stated on both sides of th[e] form." By Haven's own

acknowledgement indemnity clauses of the sort contained in

the Dunlop lease agreement are standard in the construction

industry. Cf. Perelman, Risk Allocation, 40 S.C. Law. Rev.

at 989-90 (Indemnity provisions in construction contracts

should be interpreted by "recognizing the intent of the

parties entering into the agreement."). We, therefore,

conclude that the indemnity clause contained in the lease

agreement RPM executed with Dunlop is enforceable.

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Scope of the Indemnification Clause
Scope of the Indemnification Clause

Under Massachusetts Law
Under Massachusetts Law

In addition to attacking the enforceability of the

indemnity clause, RPM attacks its scope. It argues that,

under Massachusetts law, the term "use" contained in

paragraph 12 of the agreement cannot be read to include

liability for claims brought on a theory of strict liability

instead of negligence. See Hayes v. Douglas Dynamics, Inc.,

8 F.3d 88, 88 n.1 (1st Cir. 1993) ("Under Massachusetts law,

the theory of breach of an implied warranty of

merchantability is basically the same as strict liability

theory in tort."), cert. denied, 114 S. Ct. 2133 (1994).

The rule that indemnity contracts are to be

strictly construed against the indemnitee no longer obtains

in Massachusetts. See Whittle, 383 Mass. at 797. The modern

rule is that "'[c]ontracts of indemnity are to be fairly and

reasonably construed in order to ascertain the intention of

the parties and to effectuate the purpose sought to be

accomplished.'" Shea, 383 Mass. at 222 (quoting New York,

N.H. & H.R. Co. v. Walworth Co., 340 Mass. 1, 3 (1959).

Courts are expected to give effect to the parties' intentions

at the time of the agreement and to give them reasonable

meaning. Id.; see also Cohen v. Steve's Franchise Co., Inc.,

927 F.2d 26, 28 (1st Cir. 1991); Polaroid, 416 Mass. at 694;

Speers v. H.P. Hood, Inc., 22 Mass. App. Ct. 598 (1986),

review denied, 398 Mass. 1105 (1986).

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We are not impressed by RPM's argument that the

indemnity clause's failure to specifically refer to strict

liability claims omits such claims from its scope. That the

clause also fails to mention claims brought on a theory of

negligence undermines the force of RPM's argument

significantly because there is little support for the

contention that the omission of a specific reference to

negligence invalidates an indemnity clause. Massachusetts

cases such as Shea, 383 Mass. 219-20, "teac[h] that . . . an

indemnity provision may be read to cover situations of [an]

indemnitee's negligence although there is no explicit

statement to that effect." Speers, 22 Mass. App. Ct. 598,

601. Where the language is broad and the parties' intent

relatively clear, responsibility for a risk not expressly

mentioned in the indemnity clause may be properly placed with

the indemnitor. Cf. Shea, 383 Mass. at 224-25.

We have little doubt that the language contained in

the indemnity clause is broad enough to encompass claims

brought on a theory of either negligence or strict liability.

First, we do not agree with RPM that private agreements

allocating the risk of strict liability for tort damages in

the circumstances presented here thwart public policy. Such

agreements are reasonable accommodations in the construction

industry context. Second, the language contained in

paragraph 12 of the lease agreement is broad and expansive.

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It absolves Dunlop for "any responsibility or obligation" in

the event of an accident, "regardless of cause or

consequences," stemming from the use of its equipment.

Similar language has been found sufficient to

encompass indemnification obligations on claims brought on a

theory of strict liability. See Beloit Power Sys., Inc. v.

Hess Oil Virgin Islands Corp., 757 F.2d 1427, 1428 (3d Cir.

1985) ("agrees to indemnify and hold harmless seller from all

claims by third parties which extend beyond the foregoing

limitations on seller's liability"); Midland Ins. Co. v.

Delta Lines, Inc., 530 F. Supp. 190 (1982)("all loss lessor .

. . may sustain or suffer because of . . . the use of the

equipment."); Mid-America Sprayers, Inc. v. U.S. Fire Ins.

Co., 8 Kan. App. 2d 451, 454 (1983)("any responsibility or

obligation . . . resulting from the use of described

equipment"); see also Berry v. V. Ponte & Sons, 166 N.J.

Super. 513, 517, cert. denied, 81 N.J. 271 (1979). In Cohen

v. Steve's Franchise Co., Inc., 927 F.2d 26, 29 (1st Cir.

1991), we interpreted a franchise agreement executed under

Massachusetts law and held that the language contained in an

indemnity clause was broad enough to cover both negligent and

nonnegligent business decisions. The clause required the

franchisor to indemnify Steve's Ice Cream, Inc. "for any

liability arising 'by reason of an act or omission with

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respect to the business or operation of the STEVE'S ICE CREAM

STORE . . . .'" Id. at 29.

In Polaroid Corp. v. Rollins Envtl. Serv. (NJ),

Inc., 416 Mass. 684 (1993), the Supreme Judicial Court held

that an indemnity clause encompassed claims for strict

liability, even though it did not explicitly provide for it.

Polaroid involved an indemnity clause for liability and loss

"for release or a substantial threat of release of hazardous

substances." Id. at 686. The plaintiffs in the case sought

a determination that the hazardous waste transporter with

whom they executed the contracts containing the

indemnification clauses, Rollins Environmental Services (NJ),

Inc., was obligated to indemnify them against claims arising

from a spill at a hazardous waste storage facility. The

language contained in the indemnity clause read in relevant

part: "You hereby agree to indemnify and save Polaroid

harmless from all liability and loss arising from services

performed by you or your employees hereunder . . . ." After

concluding that the private indemnity agreements were not

prohibited by CERCLA, 42 U.S.C. 9607(e)(1), the court held

that the clause was broad enough to cover strict liability

for hazardous waste damage imposed under CERCLA. In reaching

this conclusion, the court found that strict liability in

tort for ultrahazardous activities existed in Massachusetts

at the time the parties entered into their agreements and

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that there was no outward manifestation on the part of the

indemnitor to limit its obligations under the agreement to

negligence.

Moreover, paragraph 14 of the lease convinces us

that the parties intended the indemnity agreement to cover

all liability whether grounded in negligence or strict

liability. Paragraph 14 provides, in relevant part, "Our

insurance [Dunlop's] does not cover the equipment while in

your possession [RPM's]." It can be reasonably inferred from

this that the parties intended RPM to procure insurance to

cover the burden it assumed under the indemnity clause. Cf.

Speers, 22 Mass. App. Ct. at 601; see also Cohen, 927 F.2d at

29. That RPM carried $5 million in liability insurance,

whereas Dunlop carried only $1 million supports this

contention. See Midland Insurance, 530 F. Supp. at 194

(broad language of agreement and existence of increased

insurance is evidence of obligation to indemnify). RPM gave

no indication that it intended to indemnify for negligence

liability only. See Polaroid, 416 Mass. at 694 ("[A]

contracting party's objective intention dictates and a party

is bound by its outward manifestations to the other party.").

RPM cannot escape its obligations under the indemnity clause.

RPM's contention that the indemnity clause is not

conspicuous and cannot shift liability for defective

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equipment does not deserve extended comment. The clause is

printed in capital letters. Its language is neither

ambiguous nor confusing. The president of RPM testified that

he read it and understood it. At oral argument counsel for

RPM agreed that the lease was not a contract of adhesion.

We end our analysis by noting that at the hearing

on the proposed settlement between the MacGlashings and

Dunlop, counsel for RPM expressly approved the structure of

the settlement and stated that it was fair and equitable.

V.
V.

The judgments of the district court are affirmed.
The judgments of the district court are affirmed.

There will be added to the judgment amounts of $4,651,739.23
There will be added to the judgment amounts of $4,651,739.23

and $306,032.52 such additional post-judgment interest as is
and $306,032.52 such additional post-judgment interest as is

due.
due.

Costs on appeal awarded to appellees.
Costs on appeal awarded to appellees.

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