Liberty Mutual Insurance v. Pine Bluff Sand & Gravel Co.

United States Court of Appeals,

Fifth Circuit.

No. 95-31038.

LIBERTY MUTUAL INSURANCE COMPANY; Gust K. Newberg Construction
Co./Hardaway Co., A Joint Venture, Plaintiffs-Appellants,

v.

PINE BLUFF SAND & GRAVEL CO., INC., Defendant-Appellee.

July 26, 1996.

Appeal from the United States District Court for the Western
District of Louisiana.

Before HIGGINBOTHAM, WIENER and PARKER, Circuit Judges.

WIENER, Circuit Judge:

Plaintiffs-Appellants Gust K. Newberg Construction Company

(Newberg) and its insurer, Liberty Mutual Insurance Company

(Liberty Mutual),1 appeal from the district court's grant of

summary judgment in favor of Defendant-Appellee Pine Bluff Sand and

Gravel Company, Inc. (Pine Bluff) on their indemnification claim.

Concluding that (1) an ambiguity in the indemnity provision of the

contract between Pine Bluff and Newberg prevents the contract from

being interpreted as a matter of law, and (2) Newberg is entitled

to a post-settlement determination of its fault, if any, with

regard to the underlying suit that gave rise to the indemnification

claim, we reverse the grant of summary judgment and remand the case

1
In discussing the facts and proceedings leading up to the
instant action, we refer to Newberg and Liberty Mutual
individually as "Newberg" and "Liberty Mutual." In discussing
the actions taken by Liberty Mutual and Newberg in the
prosecution of the instant action, however, we refer to Newberg
and Liberty Mutual collectively as "Newberg."

1
to the district court for further proceedings consistent with this

opinion.

I.

FACTS AND PROCEEDINGS

In 1988, in conjunction with an ongoing project designed to

render the Red River navigable, the United States Army Corps of

Engineers (the Corps) contracted with Newberg for the construction

of a lock and dam near Colfax, Louisiana. Newberg then

subcontracted the dredging work for the lock and dam to Pine Bluff.

The contract between Newberg and Pine Bluff (the Subcontract

Agreement) provides that Pine Bluff will indemnify Newberg for

specified claims arising out of Pine Bluff's performance of its

dredging operations, "provided that any such claim ... is caused in

whole or in part by any negligent act or omission of [Pine Bluff]

... except to the extent [the claim] is caused in part by

[Newberg]."2

2
The Subcontract Agreement between Newberg and Pine Bluff
originally required Pine Bluff to

indemnify and hold harmless the ... General Contractor
[Newberg] ... from and against all claims, damages,
causes of action, losses and expenses, including
attorney's fees, arising out of or resulting from the
performance of the work, provided that any such claim,
damage, loss or expense (1) is attributable to bodily
injury, sickness, disease or death, ... and (2) is
caused in whole or in part by any negligent act or
omission of the Subcontractor [Pine Bluff] ...
regardless of whether it is caused in part by a party
indemnified hereunder. (emphasis added)

In August 1988, however, Newberg and Pine Bluff amended
the Subcontract Agreement. Under the terms of the contract
after the amendments, Pine Bluff is required to

2
 Pursuant to its contract with Newberg, Pine Bluff excavated a

channel through the Red River and deposited the dredged silt from

the excavation in six different disposal areas around the location

selected for the construction of the lock and dam. In July 1990,

one of those disposal areas was the site of an automobile accident

involving Zane Lemoine, who was allegedly injured when the car in

which he was riding collided with one of Pine Bluff's dredge pipes.

In March 1992, Lemoine filed suit in federal district court

against, inter alia, Pine Bluff, the Corps, and Newberg. Newberg

demanded that Pine Bluff indemnify and defend it in the Lemoine

suit; however, Pine Bluff refused. Newberg's defense was provided

instead by Liberty Mutual.

The Lemoine suit settled before trial. Under the terms of the

settlement, Pine Bluff contributed $100,000; Newberg—through

Liberty Mutual, and after expressly reserving its rights to pursue

a contractual indemnity claim against Pine Bluff—contributed

$100,000; and the Corps contributed $25,000. The suit was then

dismissed.

Subsequently, in June 1994, Newberg filed this diversity

action in federal district court, seeking recovery, pursuant to the

indemnify and hold harmless the ... General Contractor
[Newberg] ... from and against all claims, damages,
causes of action, losses and expenses, including
attorney's fees, arising out of or resulting from the
performance of the work, provided that any such claim,
damage, loss or expense (1) is attributable to bodily
injury, sickness, disease or death, ... and (2) is
caused in whole or in part by any negligent act or
omission of the Subcontractor [Pine Bluff] ... except
to the extent it is caused in part by a party
indemnified hereunder. (emphasis added)

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indemnification provision of the Subcontract Agreement, of the

$100,000 that it had contributed to the Lemoine settlement and the

costs that it had incurred in defending against the Lemoine action.

Eight months later, the district court granted a summary judgment

of dismissal in favor of Pine Bluff. Newberg timely appealed to

this court.

II.

ANALYSIS

A. STANDARD OF REVIEW

We will affirm a grant of summary judgment only if we are

"convinced, after an independent review of the record, that there

is no genuine issue as to any material fact and that the movant is

entitled to judgment as a matter of law."3 Fact questions must be

considered with deference to the non-movant; questions of law are

reviewed de novo.4 Our de novo review of legal questions includes

the interpretation and application of indemnity agreements.5 The

preliminary determination whether an agreement is ambiguous also

constitutes a question of law that is reviewed de novo.6

B. THE MERITS

3
Herrera v. Millsap, 862 F.2d 1157, 1159 (5th Cir.1989)
(internal quotations omitted).
4
See id.
5
See James v. Hyatt Corp. of Delaware, 981 F.2d 810, 814-15
(5th Cir.1993); see also id. at 812 ("The interpretation of the
terms of indemnity ... contracts are [sic] matters of law which
we review de novo.").
6
See City of Austin, Texas v. Decker Coal Co., 701 F.2d 420
(5th Cir.1983), cert. denied, 464 U.S. 938, 104 S.Ct. 348, 78
L.Ed.2d 314 (1983).

4
 Under Louisiana law, indemnity provisions are construed in

accordance with general rules governing contract interpretation.7

When the terms of a contract are unambiguous and lead to no absurd

consequences, we interpret them as a matter of law.8 On the other

hand, ambiguity in the terms of a contract gives rise to a fact

question concerning the intent of the parties.9

Here, the indemnity provision of the Subcontract Agreement

specifies that Pine Bluff will indemnify Newberg

from and against all claims, damages, causes of action, losses
and expenses, including attorney's fees, arising out of or
resulting from the performance of the work, provided that any
such claim, damage, loss or expense (1) is attributable to
bodily injury, sickness, disease or death, ... and (2) is
caused in whole or in part by any negligent act or omission of
[Pine Bluff] ... except to the extent it is caused in part by
[Newberg].

7
See Abbott v. Equity Group, Inc., 2 F.3d 613, 626 (5th
Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1219, 127
L.Ed.2d 565 (1994).
8
See id. (citing Carter v. BRMAP, 591 So.2d 1184, 1188
(La.Ct.App.1991)).
9
See, e.g. Couvillion v. Shelter Mut. Ins. Co., 672 So.2d
277 (La.Ct.App.1996) ("Where there is anything doubtful in
indemnity agreements, the court must endeavor to ascertain the
common intent of the parties.") (citing Poole v. Ocean Drilling &
Exploration Co., 439 So.2d 510, 511 (La.Ct.App.)), writ denied,
443 So.2d 590 (La.1983); Amoco Prod. Co. v. Fina Oil & Chem.
Co., 670 So.2d 502, 511 (La.Ct.App.) ("In cases in which the
contract is ambiguous, the agreement shall be construed according
to the intent of the parties. Intent is an issue of fact which
is to be inferred from all the surrounding circumstances.")
(citations omitted), writ denied, 673 So.2d 1037 (La.1996);
McDuffie v. Riverwood Int'l Corp., 660 So.2d 158, 160
(La.Ct.App.1995) ("[W]hen the terms of a written contract are
susceptible to more than one interpretation, or where there is
uncertainty or ambiguity as to its provisions, or the intent of
the parties cannot be ascertained from the language employed,
extrinsic evidence is admissible to clarify the ambiguity or to
show the parties' intent.").

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At the heart of this appeal is a dispute over the meaning and

significance of the indemnity provision's stipulation that Pine

Bluff is not required to indemnify Newberg "to the extent that"

Newberg causes the loss.

1. The Dispute

The two parties proffer antithetical interpretations of the

pertinent language from the Subcontract Agreement. Pine Bluff

argues that under the terms of the Subcontract Agreement, it is

required to indemnify Newberg only if Newberg is not in any way

responsible for an underlying claim. Stated differently, Pine

Bluff reads the indemnity provision as freeing it from any

obligation to indemnify Newberg if an underlying claim is caused in

any part by Newberg. In a related argument, Pine Bluff asserts

that Newberg's decision to participate in the Lemoine settlement

amounts to a waiver of its right to seek indemnification from Pine

Bluff, as the settlement precluded a trial on the merits to

determine whether Newberg was free from fault.

For its part, Newberg contends that the indemnity provision

incorporates the principles of comparative negligence.

Specifically, Newberg argues that Pine Bluff is required to

indemnify it for the total sum of its expenses or losses resulting

from an underlying claim, less the portion of those expenses or

losses that corresponds to Newberg's degree of fault.

Additionally, Newberg urges that it did not waive its right to seek

indemnification from Pine Bluff by participating in the Lemoine

settlement. Instead, insists Newberg, the case should be remanded

6
for proceedings on the issue of its fault, if any, for Lemoine's

injuries, and if fault be found, then to what degree.

2. Assessing the Issues

a. Interpreting the Indemnity Provision

We examine first the issue of the meaning of the indemnity

provision's stipulation that Newberg is not entitled to

indemnification from Pine Bluff "to the extent that" a claim is

"caused in part" by Newberg. As detailed above, both Pine Bluff

and Newberg have advanced reasonable interpretations of this

language. Each interpretation is consistent with the substance of

the Subcontract Agreement as a whole; neither produces an absurd

result; and the intent of the parties to the contract "cannot be

ascertained from the language employed."10 Accordingly, the

indemnity provision is "ambiguous and uncertain as to the intention

of the parties"11; and the district court erred in interpreting the

provision as a matter of law.12 For these reasons, the issue must

be remanded to the district court for additional proceedings

consistent with this opinion.

b. Waiver of Right to Pursue Indemnity

(1) Pine Bluff's Contribution Theory

Pine Bluff urges that remand is not necessary. Specifically,

it insists that, irrespective of how the contested language is

10
Dixie Campers, Inc. v. Vesely Co., 398 So.2d 1087, 1089
(La.1981).
11
Id.
12
See cases cited supra note 9.

7
interpreted, Newberg waived its right to seek indemnification by

participating in and contributing to the Lemoine settlement. Pine

Bluff presents two formulations of this waiver argument. It first

argues as follows: (1) the Subcontract Agreement actually

incorporates a contribution provision, rather than an

indemnification provision, because the contract requires an

apportionment of fault between Pine Bluff and Newberg; (2) under

general principles of Louisiana tort law, a settling party is not

entitled to seek contribution from joint tortfeasors13; (3)

therefore, as a settling party, Newberg is not entitled to seek

contribution from Pine Bluff.

Although we applaud Pine Bluff's creativity, we decline to

impose this novel approach on the law of Louisiana that governs

indemnity agreements. First, as a fundamental matter, indemnity

agreements are controlled by the law of contracts, not torts.14

Thus, tort principles governing contribution and indemnification

are inapplicable to the instant case.15

Second, we note that under Louisiana law, "an indemnification

13
See, e.g. Diggs v. Hood, 772 F.2d 190 (5th Cir.1985).
14
See, e.g., Brown v. Drillers, Inc., 630 So.2d 741, 758
(La.1994).
15
See Rouillier v. Illinois Cent. Gulf R.R., 886 F.2d 105,
108 (5th Cir.1989) (noting that indemnity agreements "give rise
to contractual indemnity claims not to claims in tort") (applying
Louisiana law); see also Anthony v. Louisiana & Arkansas Ry Co.,
316 F.2d 858, 866 (8th Cir.) ("Since we have held that the loss
here is covered by contractual indemnity, liability is controlled
by the provisions of the contract and consideration need not be
given to common law standards of indemnity or contribution
between joint tortfeasors."), cert. denied, 375 U.S. 830, 84
S.Ct. 74, 11 L.Ed.2d 61 (1963).

8
agreement will not be construed to cover losses arising from an

indemnitee's negligence unless a mutual intent to provide such

indemnification is expressed in unequivocal terms."16 In effect,

then, under Louisiana law indemnity agreements are frequently

presumed to contemplate some apportionment of fault. Yet Pine

Bluff has not cited, and independent research has failed to reveal,

any authority for the proposition that indemnity provisions that

apportion fault should be treated as "contribution provisions" and

subjected to general tort-based contribution principles. All in

all, we are not persuaded by this formulation of Pine Bluff's

argument.

(2) Pine Bluff's Alternate Theory

Not to be so easily deterred, Pine Bluff contends in the

alternative that, even if the Subcontract Agreement is not governed

by general contribution principles, Newberg's decision to

participate in the Lemoine settlement constitutes a waiver of its

right to seek indemnification from Pine Bluff. Pine Bluff's

reasoning is as follows:

If the Lemoine case had gone to trial and Newberg was
determined to be free from fault, Newberg would not be
indebted to Lemoine and no indemnity would be owed. On the
other hand, if Newberg was [sic] determined [after a trial] to
be negligent, any amount awarded to Zane Lemoine would not be
indemnified by Pine Bluff under the subcontract. However,
instead of going to trial on the merits, Newberg chose to

16
Amoco Prod. Co. v. Forest Oil Corp., 844 F.2d 251 (5th
Cir.1988) (citing Graham v. Milky Way Barge, Inc., 824 F.2d 376
(5th Cir.1987)); see also See Couvillion v. Shelter Mut. Ins.
Co., 672 So.2d 277, 284 (La.Ct.App.1996); Carr v. City of New
Orleans, 626 So.2d 374, 381-82 (La.Ct.App.1993), writ denied, 634
So.2d 398 (La.1994); Soverign Ins. Co. v. Texas Pipe Line Co.,
488 So.2d 982 (La.1986).

9
 avoid the "hazards of litigation".... In such circumstances,
Newberg cannot recover indemnity for the money paid either in
settlement or for cost of defense.

We disagree. Louisiana law does not bar Newberg from pursuing a

post-settlement determination of fault through an action against

Pine Bluff to enforce the terms of their indemnification

agreement.17 Indeed, such a bar would conflict with firmly

established public policy encouraging settlements.18

The nature of the Lemoine settlement makes evident the

inadvisability of precluding Newberg from having its day in court

on the apportionment of fault issue: Newberg was simply one of

several players participating in a single, global settlement. It

contributed a lump sum equal to the amount contributed by Pine

Bluff, and it expressly reserved its right to pursue an

indemnification claim against Pine Bluff. The manifest object of

the settlement was the avoidance of an expensive and time-consuming

lawsuit with Lemoine and the "capping" of the quantum of any

17
In James v. Hyatt Corp. of Delaware, 981 F.2d 810 (5th
Cir.1993), for instance, a service agreement between Hyatt
Corporation and Schindler Elevator provided that Schindler would
indemnify Hyatt for claims directly caused by Schindler's
negligence. In an underlying lawsuit, Grace James filed an
action against Hyatt claiming that she had been injured as a
result of an escalator malfunction in a Hyatt hotel. Id. at 812.
Hyatt settled with James and pursued a third party action against
Schindler. Id. After a (post-settlement) trial, the magistrate
judge found no negligence on the part of Schindler, and concluded
that under the terms of the indemnity provision Schindler was
therefore not obligated to indemnify Hyatt for the amount of its
settlement with James. Id. Without questioning the propriety of
a post-settlement determination of fault, we affirmed. Id. at
815.
18
See Bass v. Phoenix Seadrill/78, Ltd., 749 F.2d 1154, 1164
(5th Cir.1985); St. Romain v. Lambert, 521 So.2d 618, 620
(La.Ct.App.), writ denied, 523 So.2d 233 (La.1988).

10
eventual judgment regardless of who might be cast—precisely the

result that is contemplated by the public policy that promotes

settlements. Pine Bluff essentially invites us to punish Newberg

for its willingness to help advance a multi-party settlement; for

obvious reasons, we decline that invitation.

Pine Bluff maintains that our decision in Tanksley v. Gulf Oil

Corp.19 mandates a different conclusion. We again disagree. In

Tanksley, we held the Louisiana Oilfield Indemnity Act20 nullified

an indemnity agreement between a platform owner (the indemnitee)

and an injured worker's employer (the indemnitor) for the reason

that the platform owner had settled with the injured worker prior

to seeking indemnification from the employer.21 We noted in

Tanksley that our holding

is in tension with the established precept that "public policy
favors voluntary settlements which obviate the need for
expensive and time-consuming litigation." ... Regardless, we
are convinced that the Louisiana [Oilfield Indemnity Act], as
interpreted by the Louisiana Supreme Court, mandates this
result.22

The Oilfield Indemnity Act is in no way implicated by the instant

appeal; and we are confronted by no comparable legislation

compelling us to create an exception to established public policy.

Accordingly, Pine Bluff's reliance on Tanksley is unavailing.

With that thread removed from its analysis, Pine Bluff's

19
848 F.2d 515 (5th Cir.1988).
20
LA.REV.STAT.ANN. § 9:2780 (West 1991).
21
Tanksley, 848 F.2d 515.
22
Id. at 518 (citations omitted).

11
argument unravels: Having already contributed $100,000 to the

global settlement in the Lemoine case, Newberg would be entitled to

indemnity if post-settlement proceedings were to determine that

Newberg was free from fault. Moreover, if the language of the

Subcontract Agreement were construed as incorporating principles of

comparative negligence, Newberg would be entitled to

indemnification, less its ratable share of the loss based on its

degree of fault. Conversely, even if the indemnification provision

were interpreted to free Pine Bluff from its indemnification

obligation in the event that Newberg is at fault to any degree,

post-settlement proceedings would still be needed to establish

whether Newberg was in fact at fault at all. Thus, we remand the

instant case for (1) an interpretation of the indemnity provision

(comparative fault or any fault), (2) a determination whether

Newberg was guilty of any fault whatsoever, and (3) if so—and if

comparative fault is determined to be the standard—then for an

apportionment of fault.

III.

CONCLUSION

For the foregoing reasons, the district court's grant of

summary judgment in favor of Pine Bluff is reversed; and the case

is remanded for further consideration consistent with this opinion.

REVERSED AND REMANDED.

12