Opinion ID: 2974348
Heading Depth: 1
Heading Rank: 2

Heading: The Indemnity Agreement Under Ohio Law

Text: The parties agree that the matters in dispute in this case are governed by Ohio law. The pertinent Ohio law provides: Where an employee brings a personal injury action against a company other than his employer, and that company files a third-party complaint against the employer (who is a [workers’ compensation program] complying employer) based upon an indemnification agreement between the company and the employer, summary judgment may properly be granted to the employer on the third-party complaint if the indemnification agreement does not specifically waive the employer’s immunity under Section 35, Article II of the Ohio Constitution and R.C. 4123.74. Davis v. Consol. Rail Corp., 442 N.E.2d 1310, 1311 (Ohio Ct. App. 1981), cited with approval in Kendall v. U.S. Dismantling Co., 485 N.E.2d 1047, 1051 (Ohio 1985). See also Pentaflex, Inc. v. 6 Express Servs. Inc., 719 N.E.2d 1016 (Ohio Ct. App. 1998); OHIO REV . CODE § 4123.74 (2006). In Davis v. Consolidated Rail, plaintiff Billy Davis was a forklift operator employed by Ford but injured while loading automotive transmissions onto a Conrail boxcar. The record was silent as to whose negligence, if any, caused the injury. After obtaining workers’ compensation benefits, Billy Davis sued Conrail for personal injury. Conrail filed a third-party complaint against Ford based on an indemnification agreement.1 The court reasoned that the Ohio workers’ compensation program provided a complying employer with immunity from law suits resulting from occupational injuries, under authority of the Ohio Constitution. Davis, 442 N.E.2d at 1312. The court therefore affirmed the grant of summary judgment in favor of the employer, Ford. Id. at 1313. In Kendall v. U.S. Dismantling, plaintiff Samuel Kendall was employed by U.S. Dismantling but injured while disassembling pipes at American Cyanamid. Samuel Kendall and his wife sued American Cyanamid for personal injury, alleging negligence. American Cyanamid filed a third-party complaint against U.S. Dismantling based on an indemnification agreement.2 Citing to Davis, the 1 The Ford-Consolidated Rail agreement was quoted in the case: “The Industry [Ford] also agrees to release, indemnify and hold harmless the Railroad [Conrail], its officers, employes and agents, for loss, damage or injury from any act or omission of the Industry, its officers, employes and agents, to the person or property of the parties hereto and their officers, employes and agents, and to the person or property of any other person or corporation, while on or about the side track. If any claim or liability, other than from fire caused by locomotives as aforesaid, shall arise from the joint or concurring negligence of both parties hereto it shall be borne by them equally.” Davis, 442 N.E.2d at 1312 (“employes” misspelled in original). 2 The U.S. Dismantling-American Cyanamid agreement was quoted in the case: “Subject to the terms and conditions of this contract, CONTRACTOR [appellee U.S. Dismantling] shall be liable for and protect, defend, indemnify and save CYANAMID, its officers, directors, and employees harmless against any and all claims, losses, demands, causes of action, and any and all related costs and expenses, of every kind and character (including reasonable attorneys fees) suffered by the parties hereto, their employees and/or any other person or corporation, on account of personal injuries or death, or damages to property occurring, growing out of, incident to, or 7 Ohio Supreme Court recognized the employer’s immunity from a workplace injury lawsuit and restated the requirement that an “express and specific” statement must be included in the indemnification agreement in order to waive that immunity. Kendall, 485 N.E.2d at 1051. Because the agreement did not contain the requisite specific language of waiver, the Ohio Supreme Court affirmed the trial court’s dismissal of the complaint against the employer, U.S. Dismantling. Id. In the present case, plaintiff Lynn James was employed by Lubrizol but injured while servicing equipment at Valvoline’s Cincinnati, Ohio, facility. The record is silent as to whose negligence caused the injury. Lynn James obtained workers’ compensation benefits, but sued Valvoline for personal injury, alleging negligence. Valvoline implicated Lubrizol through the aforementioned indemnification agreement in the equipment purchase contract. The structure of the agreement in the present case is virtually identical to those in the cited cases. Accordingly, under prevailing Ohio law, Lubrizol is immune from a third-party claim by Valvoline. See Davis, 442 N.E.2d at 1312; Kendall, 485 N.E.2d at 1051. The indemnity agreement between Valvoline and Lubrizol is unenforceable because it does not contain the language necessary to waive Lubrizol’s immunity under Ohio’s statute and Constitution. The district court reached a similar result through the application of Drewery v. Daspit Brothers Marine Divers, Inc., 317 F.2d 425 (5th Cir. 1963), which refused to connect employer and employee through vicarious liability without express language in the contract. However, application resulting directly or indirectly from the performance by CONTRACTOR hereunder whether such loss, damage, injury or liability is contributed to by the negligence of CYANAMID or its employees and whether due to imperfections of any material furnished by CYANAM ID, or by premises themselves or any equipment thereon, whether latent or patent, or from other causes whatsoever; except that CONTRACTOR shall have no liability for damages or the costs incident thereto caused by the sole negligence of CYANAMID.” Kendall, 485 N.E.2d at 1049-50 (emphasis in original). 8 of Drewery to the present circumstances is necessarily abridged by the holdings of Davis and Kendall. Lubrizol argues that this court should analyze the agreement under Allen v. Standard Oil Co., 443 N.E.2d 497 (Ohio 1982), which declined to adopt Drewery, and instead holds: When an indemnitor expressly agrees to indemnify an indemnitee except in certain specified instances and it is determined that the exceptions do not pertain, then indemnitor is obligated to indemnify the indemnity under the terms of the agreement. Despite any apparent contradiction between the limitation of Davis and the broad enforcement of Allen, Davis “has not been implicitly overruled by Allen.” Ehrhardt v. Baltimore & Ohio R.R., 493 N.E.2d 264, 266 (Ohio Ct. App. 1985), overruled on other grounds by King v. Safeco Ins. Co., 583 N.E.2d 1051, 1504 (Ohio Ct. App. 1990). The Ohio Supreme Court reconciled its rules as follows: Certain kinds of indemnity agreements are forbidden under Ohio law. See, e.g., R.C. 2305.31 and Kendall v. U.S. Dismantling Co. (1985), 20 Ohio St.3d 61, 20 OBR 360, 485 N.E.2d 1047 (construction contracts); R.C. 4123.82 and Ledex, Inc. v. Heatbath Corp. (1984), 10 Ohio St.3d 126, 10 OBR 449, 461 N.E.2d 1299 (workers’ compensation benefits); Cumpston v. Lambert (1849), 18 Ohio 81 (illegal agreements). In the absence of specific public policy exceptions, however, an agreement to indemnify another is generally enforceable. See, e.g., Allen v. Standard Oil Co., supra. Worth v. Aetna Cas. & Sur. Co., 513 N.E.2d 253, 257 (Ohio 1987). Therefore, we hold that the indemnity agreement between Lubrizol and Valvoline, as applied to the circumstances of this case, is not enforceable under Ohio law. III. The Indemnity Agreement Under the Terms of the Insurance Policy The oddity of this case is that Lubrizol seeks to enforce the indemnification agreement, and to assume liability from which Ohio law immunizes it. But, even if the indemnity agreement were enforceable under Ohio law, we agree with the district court that under the plain language of Lubrizol’s umbrella insurance policy with National Union, the indemnity agreement could not be 9 an “insured contract.” National Union’s umbrella policy provides that an insured contract is one under which Lubrizol “assumes the tort liability of another party to pay for Bodily Injury . . . to a third person or organization.” Therefore, in order to determine whether Lubrizol’s indemnity agreement is an insured contract under the policy, we must first look to the indemnity agreement itself and determine whether the agreement obligated Lubrizol to assume the tort liability of another. When interpreting an indemnity agreement between commercial parties of equal bargaining power, a court bound by Ohio law must construe the words used in the agreement “in their ordinary and popular sense.” Glaspell v. Ohio Edison Co., 505 N.E.2d 264, 267 (Ohio 1987). According to the Ohio Supreme Court, “the first general maxim of interpretation . . . is, that it is not allowable to interpret what has no need of interpretation. When a . . . [writing] is worded in clear and precise terms; when its meaning is evident, and tends to no absurd conclusion, there can be no reason for refusing to admit the meaning which . . . [it] naturally presents.” Allen, 443 N.E.2d at 499 (quoting Lawler v. Burt, 7 Ohio St. 340, 350 (Ohio 1857)). The agreement in this case is unambiguous. It provides that Lubrizol and Valvoline will indemnify one another for “claims, demands, and causes of action . . . for personal injury or death, or for loss of or damage to property that results from the indemnifying party’s negligence or willful misconduct hereunder.” The agreement, of course, is mutual. Hence, it is appropriate to look at it from the perspective of each of the parties singly. So, for example, from the perspective of Lubrizol, the indemnification agreement provides: [] Lubrizol shall indemnify, defend, and hold [Valvoline] harmless from claims, demands, and causes of action asserted against [Valvoline] by [Lubrizol’s employees] for personal injury or death, or for loss of or damage to property that results from [Lubrizol’s] negligence or willful misconduct hereunder. 10 Where personal injury, death, or loss of or damage to property is the result of the joint negligence or misconduct of Valvoline and Lubrizol, each party’s duty of indemnification shall be in proportion to that party’s allocable share of such joint negligence or misconduct. Therefore, by the plain language of the agreement, Lubrizol, as the indemnifying party, is required to indemnify Valvoline only for damage resulting from Lubrizol’s own negligence or willful misconduct. In the second clause, above, the agreement provides that where the negligence is joint, each party will be responsible only for its allocable share. The indemnity agreement cannot, then, be an insured contract under the umbrella insurance policy’s particular language, because it does not require the assumption by Lubrizol of the tort liability of another party. Because the indemnity agreement is not an insured contract, it does not obligate National Union to cover Lubrizol’s payment to Valvoline. The district court correctly granted summary judgment on this issue.