American International Specialty Lines Insurance v. Kindercare Learning Centers, Inc.

FILED
NOT FOR PUBLICATION FEB 08 2010

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS

FOR THE NINTH CIRCUIT

AMERICAN INTERNATIONAL No. 09-35015
SPECIALTY LINES INSURANCE
COMPANY, an Alaska corporation, D.C. Nos. 3:07-cv-00642-KI
3:07-cv-00978-KI
Plaintiff - Appellant,

and MEMORANDUM *

EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin corporation,

Plaintiff,

v.

KINDERCARE LEARNING CENTERS,
INC., a Delaware corporation,

Defendant - Appellee.

AMERICAN INTERNATIONAL No. 09-35060
SPECIALTY LINES INSURANCE
COMPANY, an Alaska corporation, D.C. Nos. 3:07-cv-00642-KI
3:07-cv-00978-KI
Plaintiff,

and

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin corporation,

Plaintiff - Appellant,

v.

KINDERCARE LEARNING CENTERS,
INC., a Delaware corporation,

Defendant - Appellee.

Appeal from the United States District Court
for the District of Oregon
Garr M. King, District Judge, Presiding

Argued and Submitted December 9, 2009
Portland, Oregon

Before: FARRIS, D.W. NELSON and BERZON, Circuit Judges.

American International Specialty Lines Insurance Company and Employers

Insurance Company of Wausau (American International) appeal the district court’s

entry of summary judgment indemnifying Kindercare Learning Centers, Inc.

(Kindercare) for its own negligence in connection with injuries sustained by

Nicholas Dawson. The district court ruled that an indemnity provision contained

in a separate writing was incorporated by reference into a contract between

Kindercare and the insured, School Specialty, that it was unambiguous, and that it

was conspicuous.

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 Under Oregon law, “[w]hen a written contract refers in specific terms to

another writing, the other writing is part of the contract.” Garrett v. State Farm

Mut. Ins. Co., 829 P.2d 713, 716 (Or. Ct. App. 1992). The contract executed by

Kindercare and School Specialty states, “This Agreement shall provide pricing and

discount terms to supplement the vendor information packet executed by School

Specialty on January 25, 2002.” Even though School Specialty’s vendor

information packet itself was rejected by Kindercare and so did not result in the

formation of a contract at that time, its terms are clearly and specifically

incorporated into the subsequent agreement.

Although a reference to another document for a specific purpose makes the

document a part of the contract for the purpose specified only, Wallace v. Oregon

Engineering & Construction Co., 174 P. 156, 157 (Or. 1918), there is no limitation

on the purposes for which the vendor information packet is incorporated into the

contract here. The contract includes, therefore, all terms contained in the vendor

information packet.

American International argues that the indemnity provision is ambiguous in

light of a second indemnity provision in the contract that does not cover negligent

acts. Because of this ambiguity, American International maintains, canons of

construction that counsel against extending indemnity to cover negligence dictate

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that the more generous indemnity provision not be enforced. See Cook v. Southern

Pacific Transportation Company, 623 P.2d 1125, 1128 (Or. Ct. App. 1981). The

two provisions, however, do not conflict. There is nothing in the second indemnity

provision that excludes indemnity for negligent acts; rather, the second provision is

simply silent on the question of negligence. Accordingly, the contract is not

ambiguous with respect to whether indemnity extends to negligent acts, and the

cited canons of construction do not apply. See Yogman v. Parrott, 937 P.2d 1019,

1022 (Or. 1997).

American International next argues that the indemnity provision is

unenforceable because it is not conspicuous. Kindercare does not contend that the

indemnity provision at issue was specifically bargained for or that it was brought to

School Specialty’s attention at the time of contracting, so it must be conspicuous to

be enforceable. See Young v. Continental Crane & Rigging Co., 53 P.3d 465,

467–68 (Or. Ct. App. 2002). Oregon statute provides:

A term or clause is conspicuous when it is so written that a reasonable
person against whom it is to operate ought to have noticed it. A printed
heading in capitals . . . is conspicuous. Language in the body of a form is
“conspicuous” if it is in larger or other contrasting type or color.

Or. Rev. Stat. § 71.2010(10).

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 We conclude that the indemnity provision covering negligence is not

conspicuous. It is printed in 8-point, black type on page six of an eleven page

agreement. The type is identical to the rest of the print on the page. See Seibel v.

Layne & Bowler, Inc., 641 P.2d 668, 670 (Or. Ct. App. 1982) (“[A] provision is

not conspicuous when there is only a slight contrast with the balance of the

instrument.”); Anderson v. Ashland Rental, Inc., 858 P.2d 470, 471 (Or. Ct. App.

1993) (finding a disclaimer not conspicuous because it was one of eight sections on

the back of a form, all printed in the same faint type, with identical headings).

Although the paragraph begins with the heading “INDEMNITY

AGREEMENT,” that heading provides no indication that the paragraph includes

indemnification for negligence. Contrary to Kindercare’s submission, there is no

Oregon case holding that a capitalized topical heading is sufficient to make the

ensuing text of the warranty disclaimer or indemnity provision conspicuous if it

otherwise is not. Cf. Atlas Mutual Insurance Co. v. Moore Dry Kiln Co., 589 P.2d

1134, 1135–36 (Or. Ct. App. 1979) (holding that a warranty disclaimer was

conspicuous in part because the words “There are no warranties, express or

implied, including the warranty of merchantability, except as specifically set forth

herein” were themselves capitalized); Duyck v. Northwest Chemical Corp., 764

P.2d 943, 945 (Or. Ct. App. 1988) (holding that a warranty disclaimer was

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conspicuous in part because the words “Seller makes no warranty whatsoever,

express or implied, of merchantability or fitness for a particular purpose” were

themselves capitalized). Particularly in light of the separate, conspicuous, and

much more readable indemnity provision that does not cover negligence, the vague

heading does not render the indemnity for negligence conspicuous.

Moreover, it is relevant to the conspicuousness determination that these

provisions were not part of the contract document at all but of a separate document,

rejected by Kindercare at the time it was submitted, dating from a year and a half

earlier, and incorporated by reference but not attached to the actual contract. As

such, it was certainly not conspicuous in the actual contract document signed by

the parties.

For these reasons, we have little difficulty concluding that the indemnity

provision that covers negligence is not conspicuous and is therefore

unenforceable.1

REVERSED and REMANDED.

1
As the indemnity provision is not conspicuous and so not enforceable, we
do not reach American International’s argument that the indemnity obligation is
capped at $1 million by a provision in the vendor information packet specifying
“Insurance Requirements.”

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