Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00611/USCOURTS-azd-2_09-cv-00611-1/pdf.json

Nature of Suit Code: 240
Nature of Suit: Torts to Land
Cause of Action: 28:1332 Diversity-Torts to Land

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NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

SRK Consulting (U.S.) Inc, an out of state

corporation, and AIG Commercial

Insurance Company of Canada, a foreign

corporation, 

Plaintiffs, 

vs.

MMLA PSOMAS, Inc., an Arizona

corporation,

Defendant. 

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No. CV-09-611-PHX-GMS

ORDER

Pending before the Court is the Motion for Partial Summary Judgment filed by

Plaintiffs SRK Consulting (“SRK”) and AIG Commercial Insurance Company of Canada

(“AIG”). (Dkt. # 38.) Specifically, SRK and AIG (collectively “Plaintiffs”) assert that

Defendant MMLA PSOMAS, INC. (“PSOMAS”) agreed to indemnify SRK for any

damages, including those caused by SRK, related to a drainage plan designed by PSOMAS.

(Id.) For the reasons set forth below, the Court denies the Motion. 

BACKGROUND

This case arises out of the closure of the San Manuel Mine in Pinal County, Arizona.

(Dkt. # 39 at ¶ 1; Dkt. # 41 at ¶ 1.) In conjunction with the mine’s closure, SRK agreed to

provide BHP Copper, Inc. (“BHP”), who owned and operated the mine, with certain

engineering services. (Dkt. # 39 at ¶ 2; Dkt. # 41 at ¶ 2.) SRK further agreed to indemnify

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BHP for any damage caused by SRK’s negligence in rendering these services. 

Shortly thereafter, in November 2003, SRK entered into a contract with PSOMAS,

whereby the latter agreed to provide “detailed regrading and drainage plans” in connection

with the mine’s closure. (Dkt. # 39, Ex. 1.) The contract contained the following indemnity

obligation in SRK’s favor:

Indemnification. [PSOMAS] agrees to defend, hold harmless

and indemnify SRK for all claims, costs or damages of any

description (including all expenses and attorneys’ fees) resulting

or alleged to result from [PSOMAS’s] errors, omissions,

negligence or other failure and defects in design, engineering

and related services. It is the intent of the parties that any

liability of any kind arising out of or alleged to arise out of work

for which [PSOMAS] is responsible shall fall upon [PSOMAS]

and upon no other person or entity.

(Id.)

In July 2006, a series of monsoon storms struck the San Manuel area and caused

damage to a portion of the mine known as the Heap Leach Facility (“HLF”). (Dkt. # 39 at

¶ 5; Dkt. # 41 at ¶ 3.) As a result of this damage, BHP sought indemnification from SRK for

a portion of the cost of repairs. (Dkt. # 39, Exs. 2–3.) According to BHP, the damage was

caused by the inadequate design of the drainage and erosion control systems. (Id.) A

subsequent evaluation of the drainage plan, conducted by Rimkus Consulting Group, Inc.

(“RCG”), indicated that SRK, PSOMAS, and BHP were equally “responsib[le] for the

inadequate HLF storm water collection system design” which caused the damage to the mine.

(Dkt. # 41, Ex. 1.) Based on its contract with PSOMAS, SRK then filed the instant action

seeking indemnification from PSOMAS for the costs incurred by SRK as a result of the

damages to the HLF.

Plaintiffs now move for partial summary judgment with respect to their interpretation

of PSOMAS’s indemnity obligation. According to Plaintiffs, the indemnity provision is a

“specific indemnity” provision which obligated PSOMAS to “indemnify SRK even if SRK

was partially at fault for damages to” the HLF design. (Dkt. # 38 at 3.) 

LEGAL STANDARD

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A party seeking summary judgment “always bears the initial responsibility of

informing the district court of the basis for its motion, and identifying those portions of

[the record] which it believes demonstrate the absence of a genuine issue of material fact.”

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the

evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no

genuine issue as to any material fact and that the movant is entitled to judgment as a matter

of law.” Fed. R. Civ. P. 56(c). Only disputes over facts that might affect the outcome of the

suit will preclude the entry of summary judgment, and the disputed evidence must be “such

that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986).

DISCUSSION

General principles of contract law provide that when parties bind themselves to a

lawful contract, the terms of which are clear and unambiguous, courts must give effect to the

contract as written. Estes Co. v. Aztec Constr., Inc., 139 Ariz. 166, 168, 677 P.2d 939, 941

(Ct. App. 1983). Indemnity provisions are “strictly construed and generally will not protect

an indemnitee against its own negligence unless the indemnitor’s obligation to do so is

expressed in clear and unequivocal terms.” Wash. Elem. Sch. Dist. v. Baglino Corp. # 6, 169

Ariz. 58, 61, 817 P.2d 3, 6 (2006). “When language in an indemnity agreement does not

specifically discuss what effect the indemnitee’s negligence has upon the obligation to

indemnify, the agreement is generally considered a general indemnity agreement.”

Cunningham v. Goettl Air Conditioning, Inc., 194 Ariz. 236, 240, 980 P.2d 489, 493 (1999).

Grubb, 213 Ariz. at 86, 138 P.3d at 1213. For example, a provision whereby the indemnitor

agrees to “indemnify and hold harmless of and from any and all liability incurred by it for

any reason whatsoever” has been found as a general indemnity agreement. Grubb & Ellis

Mgmt. Servs. Inc. v. 407417 B.C., LLC., 213 Ariz. 83, 87, 138 P.3d 1210, 1214 (Ct. App.

2006). Under a general indemnity agreement, an indemnitee is usually entitled to

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Active negligence is found if an indemnitee has “personally participated in an

affirmative act of negligence, was connected with negligent acts or omissions by knowledge

or acquiescence, or has failed to perform a precise duty which the indemnitee has agreed to

perform.” Estes, 139 Ariz. at 169, 677 P.2d at 943. Passive negligence is found in mere

nonfeasance, “such as the failure to discover a dangerous condition, perform a duty imposed

by law, or take adequate precautions against certain hazards inherent in employment.” Id.

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indemnification for a loss resulting from its passive negligence, but not active negligence.1

Specific indemnity agreements, on the other hand, impose upon an indemnitor an

obligation to indemnify for any type of damage, even if caused by the negligence of the

indemnitor. Id. For instance, a provision whereby a party agrees “regardless of whether or

not [the injury] is caused in whole or part by any negligent act or omission of the

[indemnitee]” is interpreted as a specific indemnification agreement because it is clear and

unambiguous that the indemnitee is protected from its own negligence. Id. (quoting Baglino

Corp., 169 Ariz. at 61–62, 817 P.2d at 6–7). Nonetheless, “[t]here is . . . no requirement that

the term negligence actually be used, or that specific reference be made to liability arising

out of the indemnitee’s negligence.” Baglino, 169 Ariz. at 61; 817 P.2d at 6 (citation

omitted). Where “the language of an indemnity agreement ‘clearly and unequivocally

indicates that one party is to be indemnified, regardless of whether or not that injury was

caused in part by that party, indemnification is required notwithstanding the indemnitee’s

active negligence.’” See Cunningham, 194 Ariz. at 240, 980 P.2d at 493. 

The contract language employed by SRK and PSOMAS does not clearly and

unambiguously state that PSOMAS intended to protect SRK from its own negligence. The

relevant indemnity provision provides only that PSOMAS “agrees to . . . indemnify SRK for

all . . . costs or damages of any description . . . resulting . . . from [PSOMAS’s] errors,

omissions, negligence or other failure and defects in design, engineering and related

services.” (Dkt. # 39 at ¶ 4.) The agreement also provides, “It is the intent of the parties that

any liability of any kind arising out of . . . work for which [PSOMAS] is responsible shall

fall upon [PSOMAS] and upon no other person or entity.” (Id.) While this provision indicates

PSOMAS’s intent to indemnify SRK for damages resulting from PSOMAS’s negligence, it

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does not provide “clear and unambiguous” amenability to indemnification for SRK’s

conduct. 

SRK’s reliance on Baglino and Cunningham is misplaced. Each of these cases

involved indemnity provisions that specifically defined the circumstances under which the

indemnitee was entitled to indemnification. In Baglino, for instance, the parties’

indemnification clause contained language requiring indemnification “regardless of whether

or not the injury is caused in part by a party indemnified hereunder.” 169 Ariz. at 61, 817

P.2d at 6 (emphasis added). Similarly, the indemnification agreement in Cunningham

required the indemnitor to “indemnify and hold [the indemnitee] harmless against any and

all claims and expenses . . . arising from any accident or other occurrence . . . when such

injury will be caused in part or in whole by the act, neglect, fault of or omission of any duty

or negligence of [the indemnitor].” 980 P.2d at 493 (internal marks omitted) (emphasis

added). 

These cases are distinguishable from the instant case. Though the indemnification

clause at issue provides that PSOMAS shall indemnify SRK for “liability of any kind,” this

provision is immediately modified by language that limits liability to damages resulting from

“work for which [PSOMAS] is responsible.” The clause does not require that PSOMAS

indemnify SRK for harms caused in part by SRK or damages for which PSOMAS was

partially responsible. Instead, reading the clause as a whole, it simply requires

indemnification for “errors, omissions, negligence, or other failure and defects in design and

related services . . . for which [PSOMAS] is responsible.” (Dkt. # 39 at ¶ 4.) Given that an

indemnity provision is usually considered a general indemnity agreement unless the contract

language clearly and unambiguously provides otherwise, PSOMAS is not liable under the

contract for the portion of damages caused by SRK’s active negligence. See Grubb, 213 Ariz.

at 87, 138 P.3d at 1214 (“[A]n agreement to ‘indemnify and hold [the indemnitee] harmless

of and from any and all liability incurred by it for any reason whatsoever’ has been construed

as a general indemnity clause that does not protect an indemnitee against its own active

negligence notwithstanding the agreement’s broad language.”) (quoting Royal Props., Inc.

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In its Response to SRK’s Motion for Partial Summary Judgment, PSOMAS denies

that it breached the standard of care in the work that it performed in the HLF. (Dkt. # 41 at

¶ 13.) According to PSOMAS, the HLF failed for a number of reasons unconnected to its

design. (Id. at ¶ 14.) The issue of PSOMAS’s alleged negligence, however, is not now

properly before the Court. The instant motion pertains only to the question of whether the

indemnification clause requires PSOMAS to indemnify SRK for the portion of damages

attributed to SRK. The Court, therefore, need not address PSOMAS’s contention that its

conduct was not negligent. 

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v. Ariz. Title Ins. & Trust, 13 Ariz.App. 376, 378, 476 P.2d 897, 899 (1970)).2

IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Partial Summary

Judgment (Dkt. # 38) is DENIED.

DATED this 20th day of July, 2010.

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