Opinion ID: 777300
Heading Depth: 2
Heading Rank: 3

Heading: Indemnification Agreement between KUA and CSX

Text: 96 As previously mentioned, KUA entered into the Crossing Agreement with CSX to ensure that there would be vehicular and pedestrian access to the Plant. Under the Crossing Agreement, CSX granted KUA a license to construct, use, and maintain a private road grade crossing across CSX's railroad tracks. Section 14 of the Crossing Agreement, entitled RISK, LIABILITY, INDEMNITY, addresses KUA's duty to defend and indemnify CSX in return for receiving the license. Section 14.1 states: 97 Licensee [KUA], recognizing that Railroad's [CSX's] operations and any use of Railroad property, tracks and right-of-way involves increased risks, expressly assumes all risk of loss and damage to, and waives any right to ask or demand for, Property of Licensee, or any part thereof, at the Crossing including loss of or interference with the use of service thereof, regardless of cause.... 98 R53-1172 Exh. A at 14.1. Section 14.2 further provides that KUA assumes all liability for, and releases and agrees to defend, indemnify, protect and save Railroad harmless from and against [designated losses and casualties] regardless of cause, even if occurring or resulting from the sole or joint fault, failure or negligence of Railroad. Id. at 14.2. In addition, the Crossing Agreement requires that KUA not only defend and indemnify CSX, but also any other company ... whose property at [the crossing] may be leased or operated by the undersigned Railroad, as well as any parent, subsidiary or affiliated system companies of Railroad. Id. at 1.2. 99 Based on the indemnification provision found in the Crossing Agreement, the Rail Companies moved for summary judgment and asked the district court to rule as a matter of law that KUA had to indemnify them against all property loss or damage they incurred as a result of the collision. They also asked the court to rule that KUA had to defend them against all claims for property damage or personal injury in the turbine litigation, and to rule that KUA had to indemnify them against any liability incurred as a result of such claims. The court granted summary judgment in favor of CSX but denied Amtrak's motion because material issues of fact remained in dispute. Later, after the liability trial, the district court granted Amtrak's renewed motion for summary judgment, holding that KUA had to defend and indemnify Amtrak to the same extent that it had to defend and indemnify CSX because the Amtrak train constituted property that was operated by CSX at the time of the collision. See id. at 1.2. 100 On appeal, KUA and FMPA 28 (collectively, the Utility Appellants) present several arguments as to why we should reverse the district court's grant of summary judgment to the Rail Companies. The Utility Appellants' first assertion is that the indemnity provision is void and unenforceable because, absent specific legislative authority, KUA could not waive its sovereign immunity beyond what was authorized by Florida Statute § 768.28. 29 They also contend that the indemnity provision is void and unenforceable under Florida Statute § 725.06 because its terms failed to meet the requirements for such provisions when contained in construction contracts. Additionally, the Utility Appellants maintain that due to the indemnity provision, the Crossing Agreement constituted an exculpatory, or adhesion, contract and that, for this reason, there was a question of fact for the jury as to whether CSX possessed a superior bargaining position in the execution of the Crossing Agreement. They argue, moreover, that the indemnity provision is inapplicable under the facts of this case because the negligent actions of CSX occurred in a location separate and apart from the railroad crossing. Finally, the Utility Appellants contend that the district court erred in ruling that Amtrak was a beneficiary of the indemnity agreement between KUA and CSX. 101 We need not address all of the Utility Appellants' arguments at this time. As we shall explain, the state sovereign immunity issue raised by the Utility Appellants has not been directly resolved by the Supreme Court of Florida. The issue involves unsettled questions of state law that raise important public policy concerns, and so we have decided that, like the comparative fault issue raised in this case, it should be certified to Florida's highest court for resolution. Since the Florida Supreme Court's decision on the state sovereign immunity issue might be dispositive of the Crossing Agreement dispute, we refrain from addressing the Utility Appellants' other arguments challenging the indemnity provision until the Florida Supreme Court has spoken. 102 Under Florida law, the baseline norm is that sovereign immunity applies to actions where the state is a party, but [p]rovision may be made by general law for bringing suit against the state as to all liabilities now existing or hereafter originating. Florida Const. art. X, § 13. Only the Florida Legislature has authority to enact a general law that waives the state's immunity. Manatee County v. Longboat Key, 365 So.2d 143, 147 (Fla. 1978). In the torts context, the Florida Legislature has authorized a limited waiver of state sovereign immunity through the enactment of Florida Statute § 768.28, which provides in part that: 103 Actions at law against the state or any of its agencies or subdivisions to recover damages in tort for money damages against the state or its agencies or subdivisions for injury or loss of property, personal injury, or death caused by the negligent or wrongful act or omission of any employee of the agency or subdivision while acting within the scope of his office or employment under circumstances in which the state or such agency or subdivision, if a private person, would be liable to the claimant, in accordance with the general laws of this state, may be prosecuted subject to the limitations specified in this act.... 104 Fla. Stat. Ann. § 768.28(1) (West 1997). 30 Section 768.28(5) further provides that state liability is limited to $100,000 per claimant and $200,000 per accident, unless the Florida Legislature enacts legislation to pay a particular claim in whole or in part. In contrast, the Supreme Court of Florida has held the limitations imposed by § 768.29 do not apply in actions brought against the state for breach of contract. Pan-Am Tobacco Corp. v. Department of Corrections, 471 So.2d 4, 5 (Fla.1984). 105 Based on these sovereign immunity principles, the Utility Appellants argue that the indemnification agreement between KUA and CSX waived state sovereign immunity in tort beyond the limits imposed by § 768.28. 31 The indemnification provision does not limit the amount KUA has to pay out per claimant and per accident, as specified in § 768.28(5). Nor does the provision limit payment by KUA to situations where the property loss or personal injury is caused by a negligent act or omission committed by one of its employees. See § 768.28(1). 106 In contrast, the indemnity provision does require KUA to defend and indemnify CSX against all claims and liability for property damage or personal injury connected in any manner with the construction, reconstruction, maintenance, existence, use, condition, repair, change, relocation or subsequent removal of [the] Crossing. R53-1172 Exh. A at 14.2(C). Indeed, in the present case, the Rail Companies seek reimbursement even though KUA was cleared of all negligence for the collision, and even though the Rail Companies never had to defend against a claim that they were vicariously liable for negligent misconduct by KUA. Thus, the Utility Appellants contend, the terms of the indemnification provision go far beyond what is authorized by Florida Statute § 768.28. They maintain that, as a result, we should not give effect to the terms of the indemnification provision. See Evanston Ins. Co. v. Homestead, 563 So.2d 755, 758 (Fla.Dist.Ct.App.1990) (per curiam) (A contract may not give validity to an illegal act, notwithstanding upon whom the hardship should fall). 107 There is case law that appears to support the Utility Appellants' position. For instance, in Evanston, a Florida city bought an excess professional liability insurance policy that provided coverage to the city for tort claims that exceeded $500,000. If the insurance company settled a claim, the policy required the city to reimburse the company for the retained limit, $500,000. The insurance company settled a medical malpractice claim against the city for $2,700,000 and sought reimbursement of $500,000. The city refused, instead agreeing to reimburse the company only for $200,000, the maximum waiver of sovereign immunity allowed under § 768.28. The insurance company brought suit, alleging that § 768.28 did not apply because the suit was for breach of contract. The Florida court disagreed, holding that the insurance contract could not be used to circumvent the limits of § 768.28. Evanston, 563 So.2d at 757-58. Similarly, in Seaboard Air Line Railroad Co. v. Sarasota-Fruitville Drainage District, the Fifth Circuit held that an unlimited indemnity agreement between a Florida drainage district and a railroad was void as against public policy because the district could not be compelled to do through an indemnification contract what it could not be compelled to do in a torts damages suit. 255 F.2d 622, 623-24 (5th Cir.1958). 108 Based on cases like Sarasota-Fruitville, the argument goes, an indemnification agreement between a state agency and a private company, like the one between KUA and CSX, cannot be used to circumvent the dictates of § 768.28. That is, KUA should not be compelled, based on an indemnification agreement, to pay out funds that it could not be compelled to pay out in a torts damages suit. This assertion is buttressed by another case, Donisi v. Trout, 415 So.2d 730 (Fla.Dist.Ct.App. 1981). In Donisi, the state appellate court held that an indemnification agreement between a city and its employee was void in so far as it required the city to reimburse the employee in an amount that exceeded the limits imposed by § 768.28. 415 So.2d at 730-31. 109 The Utility Appellants also point to several opinions by the Attorney General of the State of Florida to solidify their position. 32 They argue that these opinions demonstrate that a state agency is prohibited from entering into an indemnity agreement if it fails to comply with the limits imposed by § 768.28 — like the agreement entered into between KUA and CSX — unless the agency is otherwise authorized to do so by the Florida Legislature. For instance, in Opinion 2000-22, the Florida Attorney General concluded that no state law authorized a county to enter into an indemnification agreement that increased the limits of liability beyond what § 768.28 allows. Fla. Op. Att'y Gen. 2000-22 (April 4, 2000). Similarly, in Opinion 90-21, the Attorney General concluded that the Department of Corrections did not have statutory authority to enter into an indemnity agreement with a private company that circumvented the limitations imposed by § 768.28. Fla. Op. Att'y Gen. 90-21 (March 20, 1990); see also Fla. Op. Att'y Gen. 95-12 (February 9, 1995) (stating that no statute authorized the Department of Health and Rehabilitative Services to agree by contract to indemnify another governmental entity in a manner that altered the state's immunity under § 768.28). 110 In rebuttal to these arguments, the Rail Companies assert that the Utility Appellants cannot rely on § 768.28 because it only governs torts actions. In Provident Management Corp. v. Treasure Island, the Florida Supreme Court stated that § 768.28 applies only when the government entity is being sued in tort and when the damages ... flow from ... tortious conduct. 796 So.2d 481, 486 (Fla. 2001). In contrast, the Rail Companies contend, the present case involves a suit for breach of contract, namely, the failure by KUA to fulfill its contractual obligation to defend and indemnify the Rail Companies. Breach of contract claims, the Rail Companies claim, are governed by the rule enunciated in Pan-Am. In Pan-Am, the Florida Supreme Court stated that [i]n section 768.28 ... the legislature has explicitly waived sovereign immunity in tort. There is no analogous waiver in contract. Nonetheless, the legislature has, by general law, explicitly empowered various state agencies to enter into contracts. 471 So.2d at 5. The court then went on to hold that where the state has entered into a contract fairly authorized by the powers granted by general law, sovereign immunity does not apply to the breach of contract action. Id. 111 According to the Rail Companies, Pan-Am indicates that, as long as KUA was fairly authorized by general law to enter into contracts like the Crossing Agreement, sovereign immunity does not protect KUA from the breach of its contractual duty to defend and indemnify the Rail Companies. To show that KUA was fairly authorized to enter into the Crossing Agreement, the Rail Companies point to several provisions of Florida law: (1) the powers given municipalities under article VIII, § 2(b) of the Florida Constitution; (2) the Municipal Home Rule Powers Act, Florida Statute § 166.021; (3) the Florida Interlocal Cooperation Act, Florida Statute § 163.01; and (4) the Joint Power Act, Florida Statute §§ 361.10-361.18. 112 The Rail Companies' argument is buttressed by the fact that the cases that appear to support the Utility Appellants' position can be distinguished. Evanston, for instance, failed to address Pan-Am and failed to discuss how the latter decision might affect the sovereign immunity analysis contained therein. Moreover, Donisi was decided prior to Pan-Am, as was Sarasota-Fruitville. Furthermore, in contrast to such cases, the Rail Companies point to a Florida case, Jacksonville v. Franco, where the court upheld an indemnification agreement between a city and a private railroad because the clear and unequivocal language of the contract put the city on notice of its contractual obligations. 361 So.2d 209, 211 (Fla.Dist.Ct. App.1978) (quotations omitted). 113 The Rail Companies also contrast the Fifth Circuit decision in Sarasota-Fruitville with Seaboard Air Line Railroad Co. v. Crisp, where the Fifth Circuit held that a Georgia county could not assert a sovereign immunity defense when it had entered into a license with a private railroad under which the county assumed liability for damage occasioned to a railroad embankment. 280 F.2d 873, 877 (5th Cir. 1960). The county had entered into the license as part of its efforts to build a hydroelectric dam. The Fifth Circuit distinguished the case from Sarasota-Fruitville and concluded that, because operation of the dam was a business operation, the county should be treated like any other business that breaches a contract, thus rendering sovereign immunity inapplicable. Id. Similarly, the Rail Companies argue that operation of the Plant by the Utility Appellants is itself a business operation, and so the Utility Appellants should be treated like any other business that breaches a contract. 114 In addition, the Rail Companies respond to the Utility Appellants' citation to opinions of the Florida Attorney General. The Rail Companies argue that these opinions are misleading because the Attorney General, in issuing his opinions, has applied a stricter standard than that provided for in Pan-Am. They maintain that the Attorney General has erroneously failed to apply Pan-Am and has instead concluded that state agencies have no authority to enter into indemnification agreements that exceed the dictates of § 768.28, unless a Florida statute specifically indicates otherwise. In contrast, the Rail Companies contend that Pan-Am makes clear that an indemnification agreement between a state agency and private party is binding and enforceable as long as it is part and parcel of a contract that itself was fairly authorized by Florida law. 471 So.2d at 5. 115 Finally, the Rail Companies argue that, even if Pan-Am does not apply and § 768.28 controls, the Utility Appellants did not violate § 768.28 by entering into the indemnification agreement. 33 The Rail Companies note that § 768.28(18) specifically provides that when state agencies contract with one another, [s]uch a contract must not contain any provision that requires one party to indemnify or insure the other party for the other party's negligence or to assume any liability for the other party's negligence. Fla. Stat. Ann. § 768.28(18). By negative implication, they assert, § 768.28 authorizes state agencies to agree by contract to defend and indemnify private parties as they so choose. In any event, the Rail Companies contend that the Florida Interlocal Cooperation Act, Florida Statute § 163.01(15)(k), 34 exempts the Utility Appellants from the limitations of § 768.28. 116 In reply to the arguments of the Rail Companies, the Utility Appellants argue that Pan-Am is irrelevant to the present case and that § 768.28 applies. They claim that there is a distinction between contracts in which a state agency offers to pay for goods or services, and indemnification contracts, where the agency agrees to assume the tort liability of a private party. Pan-Am, the Utility Appellants maintain, was limited to situations where a state agency breaches a contract to pay for goods or services from a private party. Furthermore, they assert that, even if Pan-Am does apply, KUA was not fairly authorized under any Florida statute to enter into the species of contract at issue here, namely, an indemnification contract in which it assumed the tort liability of a private party. 471 So.2d at 5. In contrast, other state agencies explicitly have been given the authority to enter into indemnification agreements. See Florida Statute § 161.101(4) (authorizing the Department of Environmental Protection to enter into indemnification agreements to effectuate beach erosion control); § 255.559(1) (authorizing state agencies to enter into indemnification agreements with asbestos consultants). 117 Upon reviewing all of these arguments, we have concluded that there is no clear answer, based on Florida precedent, for resolving this sovereign immunity dispute and the important public policy concerns associated therewith. It is an unsettled question whether the indemnification agreement entered into between KUA and CSX is controlled by § 768.28. It also is unsettled whether the agreement should be governed by the sovereign immunity rule for breach-of-contract actions, as laid down in Pan-Am. Indemnification agreements appear to occupy a grey area between two lines of Florida precedent that address state sovereign immunity, one of which deals with torts actions, the other with breach-of-contract actions. Moreover, even if Pan-Am applies, it is unclear, under existing Florida precedent, if KUA loses its sovereign immunity protection only if it had statutory authority to enter into the particular species of contract at issue here, an indemnification contract, or if KUA loses such protection as long as it had general statutory authority to contract with private parties. 118 Concluding that the sovereign immunity issues raised in this case involve unanswered questions of Florida law that are not specifically addressed by controlling state precedent, we certify the following three questions of law to the Supreme Court of Florida for review: 119 GIVEN THAT KISSIMMEE UTILITY AUTHORITY, A MUNICIPAL AGENCY UNDER FLORIDA LAW, AGREED BY CONTRACT TO INDEMNIFY A PRIVATE PARTY, IS THE AGREEMENT CONTROLLED BY THE RESTRICTIONS ON WAIVER OF SOVEREIGN IMMUNITY FOUND IN FLORIDA STATUTE § 768.28? 120 IS THE INDEMNIFICATION AGREEMENT INSTEAD CONTROLLED BY THE RULE FOR BREACH-OF-CONTRACT ACTIONS ENUNCIATED IN PAN-AM TOBACCO CORP. V. DEPARTMENT OF CORRECTIONS, 471 So.2d 4 (Fla. 1985)? 121 IF PAN-AM APPLIES, DOES A MUNICIPAL AGENCY LIKE KISSIMMEE UTILITY AUTHORITY LOSE THE PROTECTION OF SOVEREIGN IMMUNITY ONLY IF IT HAS SPECIFIC STATUTORY AUTHORIZATION TO ENTER INTO INDEMNIFICATION AGREEMENTS, OR IS IT SUFFICIENT THAT THE AGENCY MORE GENERALLY HAS STATUTORY AUTHORIZATION TO CONTRACT WITH PRIVATE PARTIES? 122 Our phrasing of the certified questions is not meant to limit, in any way, how the Florida Supreme Court responds to the questions or analyzes the state law issues involved therein, should the court decide to accept this certification.