Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-02369/USCOURTS-ca8-05-02369-0/pdf.json

Nature of Suit Code: 365
Nature of Suit: Personal Injury - Product Liability
Cause of Action: 

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The Honorable John A. Jarvey, United States Magistrate Judge for the

Northern District of Iowa, to whom the case was referred for final disposition by

consent of the parties pursuant to 28 U.S.C. § 636(c).

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-2369

___________

Angelo Cremona, S.p.A., *

*

Appellee, *

* Appeal from the United States

v. * District Court for the

* Northern District of Iowa.

R.S. Bacon Veneer Company, *

*

Appellant. *

__________

Submitted: December 14, 2005

Filed: January 6, 2006

___________

Before WOLLMAN, BEAM, and RILEY, Circuit Judges.

___________

RILEY, Circuit Judge.

This is a contract dispute diversity action between R.S. Bacon Veneer

Company (Bacon) and Angelo Cremona, S.p.A. (Cremona). Bacon appeals the

district court’s1

 denial of Bacon’s motion for summary judgment and the grant of

Cremona’s motion for summary judgment ordering Bacon to indemnify Cremona for

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liability deriving from a workplace accident lawsuit involving a machine sold to

Bacon by Cremona. We affirm.

I. BACKGROUND

In April 1997, Bacon, a manufacturing company with a wood veneer mill

facility in Grundy Center, Iowa, and Cremona, an Italian corporation, entered into a

written agreement by which Bacon agreed to purchase a wood veneer drying machine

from Cremona and Cremona agreed to deliver and install it. The purchase contract

contained the following liability section:

art. 6) MANUFACTURER’S LIABILITY

6.1 The Seller shall deliver to the Buyer the goods in compliance with

the laws in force in Italy. The Buyer shall check that the goods comply

with the laws of the country of destination and shall properly inform the

Seller, in any case prior to shipment of the goods, of any changes to be

made; in which case the Seller shall be free to refuse the order or to

charge a higher price. It is agreed that whatever liability may derive

from the goods, due to events occurring after the passage of risks to the

buyer, including any damage to person or to property (even when such

property includes parts or accessories of the machine), shall be borne

solely by the Buyer, who shall indemnify the Seller and further

undertakes to take out adequate insurance against all relative risks

without being entitled to make recourse to the Seller. The Buyer

henceforth agrees to be cited in any instance of legal proceedings taken

against the Seller in pursuance of the liability for herein.

(emphases added). Cremona delivered and installed the machine between late 1997

and early 1998.

In April 2001, Bacon’s employee Joshua Edwards (Edwards) severely injured

himself while cleaning the machine. Edwards sued Cremona, alleging product

liability theories. Cremona then filed a third-party complaint against Bacon, alleging

Bacon was obligated to indemnify and insure Cremona based on the purchase

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contract. All parties subsequently entered into a three-way settlement providing for,

inter alia, the survival of Cremona’s third-party complaint against Bacon for

indemnification and breach of the obligation to obtain insurance.

Bacon and Cremona agreed to submit their dispute via motions for summary

judgment. The district court, applying Iowa law in the diversity action, granted

Cremona’s motion and denied Bacon’s, holding the contract language “sufficiently

establishes that the intent of the provision was to indemnify Cremona for any liability

deriving from the [machine] due to events occurring once risk had passed to Bacon,

which would include liability due to negligence on the part of Cremona.” The district

court did not reach the issue whether Bacon breached the contract by not obtaining

insurance.

II. DISCUSSION

We review the district court’s grant of summary judgment de novo, applying

the same standard as the district court and examining the record in the light most

favorable to the nonmoving party. Woodland v. Joseph T. Ryerson & Son, Inc., 302

F.3d 839, 841-42 (8th Cir. 2002); Butler v. MFA Life Ins. Co., 591 F.2d 448, 451

(8th Cir. 1979). Summary judgment is appropriate if the evidence demonstrates there

is no genuine issue as to any material fact and the moving party is entitled to a

judgment as a matter of law. Fed. R. Civ. P. 56(c); see Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 247-48 (1986). Because this case involves only questions of law,

it is particularly appropriate for summary judgment. Lomar Wholesale Grocery, Inc.

v. Dieter’s Gourmet Foods, Inc., 824 F.2d 582, 585 (8th Cir. 1987).

A. Iowa Law on Interpretation of Indemnification Contracts

Under Iowa law, “[a] contract for indemnification is generally subject to the

same rules of formation, validity and construction as other contracts.” McNally &

Nimergood v. Neumann-Kiewit Constructors, Inc., 648 N.W.2d 564, 571 (Iowa 2002)

(citing Evans v. Howard R. Green Co., 231 N.W.2d 907, 916 (Iowa 1975)). In

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interpreting and construing a contract’s indemnity provision, a court must resolve two

questions: “(1) for whose negligent acts causing damage is indemnity promised? and

(2) what is the scope of the area in which indemnity is available?” Modern Piping,

Inc. v. Blackhawk Automatic Sprinklers, Inc., 581 N.W.2d 616, 624 (Iowa 1998),

overruled on other grounds by Wesley Retirement Servs., Inc. v. Hansen Lind Meyer,

Inc., 594 N.W.2d 22 (Iowa 1999).

Regarding “contracts purporting to provide for indemnity for an indemnitee’s

own negligence,” we see no reason to try to improve on the succinct recitation of how

Iowa courts interpret such provisions provided by Chief District Judge Bennett in

Cochran v. Gehrke, Inc., 293 F. Supp. 2d 986, 994-95 (N.D. Iowa 2003):

Although indemnity contracts are generally subject to the same

rules of construction as other contracts, Iowa courts have crafted a

special rule of construction for indemnification contracts when, as here,

such contracts purport to relieve the indemnitee from liability for its own

negligence. This rule provides that indemnification contracts will not

be construed to permit an indemnitee to recover for its own negligence

unless the intention of the parties is clearly and unambiguously

expressed. Thus, indemnification contracts claimed to contain these

provisions are construed more strictly than other contracts.

However, . . . express language relieving the indemnitee of its

own negligence is not required, if the words of the agreement clearly

import that intent. . . . [Iowa courts’] rule of construction does not

actually require the contract to specifically mention the indemnitee’s

negligence or fault as long as this intention is otherwise clearly

expressed by other words of the agreement. . . . In each case, the intent

of the parties will control as revealed by the language of the agreement,

and we should not impose any special requirement that specific

language be used to express that intent. Thus, even broad indemnity

language may reveal an intent to indemnify an indemnitee for its own

negligence.

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(citing McNally & Nimergood, 648 N.W.2d at 571-72; McComas-Lacina Constr. Co.

v. Able Constr., 641 N.W.2d 841, 845 (Iowa 2002); Martin & Pitz Assocs., Inc. v.

Hudson Constr. Servs., Inc., 602 N.W.2d 805, 809 (Iowa 1999); Herter v.

Ringland-Johnson-Crowley Co., 492 N.W.2d 672, 674 (Iowa 1992); Payne Plumbing

& Heating Co. v. Bob McKiness Excavating & Grading, Inc., 382 N.W.2d 156, 160

(Iowa 1986)) (internal quotations and alterations omitted).

B. Analysis of the Purchase Contract

Following the Iowa Supreme Court’s instruction in Modern Piping, we first ask

“for whose negligent acts causing damage is indemnity promised?” Modern Piping,

581 N.W.2d at 624. While the contract never expressly announces liability for

negligent acts as a contender for indemnification, we conclude the agreement

unambiguously intended the indemnity provision to include liability for damages

from either party’s negligent acts. Section 6.1 of the contract provides “whatever

liability may derive from the goods, due to events occurring after the passage of risks

to the buyer, including any damage to person or to property . . . shall be borne solely

by the Buyer, who shall indemnify the Seller.” The broad inclusive language is clear.

The only reasonable interpretation is “whatever liability” deriving from “events”

covers liability stemming from both parties’ negligent acts.

Despite this unambiguous language, Bacon argues the parties never intended

for Bacon to indemnify Cremona for Cremona’s own negligence, i.e., the defective

design of the machine. Bacon’s argument boils down to a contention that the term

“event” in the contract is ambiguous because “[a]ny number of ‘events’ could serve

as the source from which liability is ‘derive[d]’ in relation to the Cremona machine.”

Bacon claims the “event” giving rise to its liability was not Edwards’s 2001 accident,

but Cremona’s defective design of the machine before the passage of risks when

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Bacon does not dispute the passage of risks occurred when Bacon took

possession of the machine.

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Bacon took possession. Thus, Bacon claims, this “event” is not covered by the

provision and Bacon owes no indemnification duty to Cremona.2

While cleverly conceived, we disagree with Bacon’s claim, for as C.S. Lewis

said, “[n]o clever arrangement of bad eggs ever made a good omelet.” The precise

event giving rise to a tort suit is the event causing the actual injury or damages. As

Cremona points out, “there can be no tort liability without damage to persons or

property.” See, e.g., Cunningham v. Kartridg Pak Co., 332 N.W.2d 881, 885 (Iowa

1983) (“Implicit in [product liability] law is the notion that the defective product

caused physical harm to the plaintiff or his property.”). Edwards had no right to sue

under a product liability theory for a design defect until he was actually injured, and

Cremona or Bacon could only be liable after that point in time. See, e.g., Osborn v.

Massey-Ferguson, Inc., 290 N.W.2d 893, 901 (Iowa 1980) (stating plaintiff’s burden

in establishing a prima facie case of strict liability in tort includes demonstrating

“damages suffered by the user or consumer”). The issue here is not what proximately

caused Edwards’s injury, which may include a design defect, see id., but what “event”

gave rise to liability. The only event that ultimately could give rise to liability was

the event resulting in the injury to Edwards, not the infinite number of events leading

up to the defective product appearing in Bacon’s facility and leading to Edwards’s

injury.

Given the parties intended the contract’s indemnity provision to cover liability

resulting from both their negligent acts, we next ask “what is the scope of the area in

which indemnity is available?” Modern Piping, 581 N.W.2d at 624. Again, the

language is unambiguous. The indemnity provision covers all liability and any

damage deriving from the wood veneer drying machine due to events occurring after

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the passage of risks to Bacon. This clearly includes Edwards’s accident, which

derived from the machine and occurred after the passage of risks to Bacon.

Our decision to affirm the district court and hold Bacon must indemnify

Cremona is empathetic to the reasonable expectations of these sophisticated

commercial parties. The contract imposed liability on Cremona for “damages[] to

people or things” up to and including delivery and installation of the machine by

Cremona employees, then the contract expressly shifted liability to Bacon for all

damages once Cremona was out of the picture. It certainly is sensible Cremona

would contractually limit its liability once its employees were no longer present and

had no control over the machine’s operation. As the district court noted by quoting

our decision in Union Electric Co. v. Southwestern Bell Telephone L.P., 378 F.3d

781, 786-87 (8th Cir. 2004),

An agreement making each of these large commercial entities

responsible [via the indemnity provision] for injuries to their own

customers, agents, contractors and employees is a sensible allocation of

loss because each is in a better position to protect and insure against

those losses by virtue of the ability to instruct and train those persons

who access the [machine] with their permission. [Bacon and Cremona]

have little or no ability to control, train or instruct the customers, agents,

contractors and employees of the other.

Finally, because we affirm the district court on the ground Bacon must

indemnify Cremona under the purchase contract’s indemnity provision, we need not

reach the issue whether Cremona should be granted summary judgment based on

Bacon’s alleged failure to procure insurance protecting Cremona.

III. CONCLUSION

For the reasons stated, we affirm the district court’s grant of summary judgment

to Cremona.

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