Opinion ID: 1689483
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Heading: Express Contract for Indemnification.

Text: Under a contract for indemnification, one party (the indemnitor ) promises to hold another party (the indemnitee ) harmless for loss or damage of some kind.... II E. Allan Farnsworth, Farnsworth on Contracts § 6.3, at 108 (2d ed.1998). The indemnitor promises to indemnify... [the] indemnitee against liability of [the] indemnitee to a third person, or against loss resulting from [the] liability. 42 C.J.S. Indemnity § 2, at 72 (1991). Generally, no particular language is required to support indemnification, and a written agreement can be established without specifically expressing the obligation as indemnification. See Jenckes v. Rice, 119 Iowa 451, 452-53, 93 N.W. 384, 385 (1903); see also Royal Ins. Co. of Am. v. Whitaker Contracting Corp., 242 F.3d 1035, 1041 (11th Cir.2001) (particular language not required as long as intent is clear). An indemnification agreement is created when the words used express an intention by one party to reimburse or hold the other party harmless for any loss, damage, or liability. Robert L. Meyers III & Debra A. Perelman, Symposium, Risk Allocation Through Indemnity Obligations in Construction Contracts, 40 S.C. L.Rev. 989, 990 (1989) [hereinafter Meyers & Perelman]. Intent is the controlling consideration. See Bunce v. Skyline Harvestore Sys., Inc., 348 N.W.2d 248, 250 (Iowa 1984); Meyers & Perelman, 40 S.C. L.Rev. at 989. Indemnification is commonly utilized in construction contracts and rental agreements, as well as many other relationships where one party engages in an act at the request of the other or for the benefit of the other, or allows a party to use property belonging to the other. See Meyers & Perelman, 40 S.C. L.Rev. at 990-91; 42 C.J.S. Indemnity §§ 1, 2, at 72. A contract for indemnification is generally subject to the same rules of formation, validity and construction as other contracts. Evans v. Howard R. Green Co., 231 N.W.2d 907, 916 (Iowa 1975). However, we have crafted a special rule of construction for indemnification contracts when the contract is claimed 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. See McComas-Lacina Constr. Co., 641 N.W.2d at 845; Sears, Roebuck & Co. v. Poling, 248 Iowa 582, 588, 81 N.W.2d 462, 465 (1957). It is also the prevailing rule in other jurisdictions. United States v. Seckinger, 397 U.S. 203, 211, 90 S.Ct. 880, 885, 25 L.Ed.2d 224, 233 (1970). The traditional reluctance of courts to allow the burden of one who is negligent to be transferred to another who is not at fault, especially where there is a disparity in the bargaining power and economic resources of the parties, can be traced to public policy considerations. Id. at 212, 90 S.Ct. at 885, 25 L.Ed.2d at 233. Thus, indemnification contracts claimed to contain these provisions are construed more strictly than other contracts. Exide Corp. v. Millwright Riggers, Inc., 727 N.E.2d 473, 482 (Ind.Ct.App.2000); Amoco Prod. Co. v. EM Nominee P'ship, 2 P.3d 534, 541 (Wyo.2000). This principle of construction must be considered in this case because the legal claims for damages paid by McNally in settlement were based solely on the allegations of its own negligence. Neumann claims our strict rule of construction does not allow the contract to be interpreted to require it to indemnify McNally for its own negligence. For purposes of summary adjudication, we will consider the indemnification clauses in both the lease agreement and the rental agreement together. The lease agreement was broad and all-inclusive. It provided for indemnification for all damage claims arising from or in connection with the use or operation of the [crane]. The rental agreement also broadly encompassed liability for all damage while [the crane was] in [the] Lessee's possession, but specifically excluded damage caused by defects in the equipment. Since the time we first recognized our rule of construction against indemnification for the indemnitee's own negligence unless the intention to do so is clearly and unequivocally expressed, we have tended to apply the rule by distinguishing contracts permitting indemnification for the indemnitee's own negligence from those that do not by looking for specific language in the contract addressing the fault or negligence of the indemnitee. See Employers Mut. Cas. Co. v. Chicago & N.W. Transp. Co., 521 N.W.2d 692, 694 (Iowa 1994) (indemnitor agrees to indemnify the railroad `from any and all claims ... even though the operation of the Railway Company's railroad may have caused or contributed thereto'); Thornton v. Guthrie County Rural Elec. Coop. Ass'n, 467 N.W.2d 574, 576-77 (Iowa 1991) (indemnification imposed `regardless of whether [damages were] caused in part by [the indemnitee]'); Payne Plumbing & Heating Co. v. Bob McKiness Excavating & Grading, Inc., 382 N.W.2d 156, 160 (Iowa 1986) (indemnitor agreed to indemnify indemnitee ` regardless of whether or not [damage] is caused in part by [the indemnitee]' ). Thus, we have permitted indemnity based on the indemnitee's own negligence when the indemnitee's own negligence is specifically addressed in the indemnification agreement. On the other hand, general indemnity language in a contract has been deemed insufficient to impose indemnity for the indemnitee's own negligence. See Trushcheff v. Abell-Howe Co., 239 N.W.2d 116, 134 (Iowa 1976) (`Sub-Contractor will indemnify ... the General Contractor and the Owner from and against ... all claims ...' caused by or growing out of `the work to be performed under this contract regardless of whether such claim is alleged to be caused ... by negligence... of the Sub-Contractor....'); Evans, 231 N.W.2d at 915-16 (`In the event of any suit against the Owner ... on account of any ... act or omission of the Contractor, the Contractor ... shall pay ... any judgments ... or settlements.'). However, the distinction between contracts that explicitly mention the indemnitee's own fault or negligence and those that do not was never intended to create a fixed limitation on our rule of construction. We have long recognized that indemnity contracts do not need to expressly state that the indemnitee will be indemnified for its own negligence if the clear intent of the contractual language provides for such indemnification. See Weik v. Ace Rents Inc., 249 Iowa 510, 515, 87 N.W.2d 314, 317-18 (1958). More recently, we emphasized that the contract need not expressly relieve the indemnitee of its own negligence if the words of the agreement clearly import that intent. Herter v. Ringland-Johnson-Crowley Co., 492 N.W.2d 672, 674 (Iowa 1992). Thus, our 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. See id. Moreover, our tendency to find general, all-inclusive indemnification contracts to be insufficient to create indemnity for an indemnitee's own negligence is only a guideline, not a strict principle. See Evans, 231 N.W.2d at 916 (broad and all-inclusive language is generally insufficient to show intent to indemnify for an indemnitee's own negligence). To hold otherwise would, in effect, mean that the contract would need to contain a specific reference to the indemnitee's own negligence before such indemnification would be permitted. See Hader v. St. Louis Southwestern Ry., 207 Ill.App.3d 1001-1012, 152 Ill.Dec. 859, 865-86, 566 N.E.2d 736, 742-43 (1991). This is not our rule. In fact, those justifications that helped establish our rule against indemnity for an indemnitee's own negligence do not always reveal which party actually needs protection from its own bargain, at least in the type of commercial transaction at issue in this case where parties may freely choose to allocate risk arising from their transaction without regard to fault. See Reliance Ins. Co. of Ill., Inc. v. Richfield Hospitality Servs., Inc., 92 F.Supp.2d 1329, 1336 & n. 6 (N.D.Ga.2000). 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. See id. at 1335-36; N.P.P. Contractors, Inc. v. John Canning & Co., 715 A.2d 139, 142 (D.C.1998). Nevertheless, the rental agreement specifically addressed the issue of causation by excluding indemnification for damage[s] caused by defects in the equipment. Thus, even if the broad lease provisions were construed to provide for indemnification without regard to fault, the language in the rental agreement, which both parties agree was part of the contract, expressed the clear intention of the parties that Neumann would have no obligation to indemnify McNally if damage was the result of a defect in the crane. This specific clause trumps the general clause. The only purpose of this exclusion would be to express the intent for Neumann to be responsible for all damages, regardless of the cause, except those damages relating to a defect in the crane. Thus, the contract entered into by the parties expressed a clear intent for McNally to be indemnified for its own negligence, unless that negligence was based on or attributable to a defect in the crane. The defect exclusion would also apply to any negligence of McNally that was responsible for the existence of a defect, such as the failure to inspect the crane for defects prior to its delivery and a failure to maintain the crane free from defects prior to its delivery. In such instances, the defect remains the ultimate cause of the injury and makes the failure to inspect and maintain actionable. Consequently, it is not important to our analysis to decide whether the indemnification clause was limited to the terms of the rental agreement or also included the terms of the lease agreement. Even assuming the district court improperly limited the contract to the terms of the rental agreement, the additional terms of the lease agreement do not impact the analysis. The parties contracted for indemnity under both agreements, but not in the event the damage resulted from a defect in the crane.