McNally & Nimergood v. Neumann-Kiewit

• Decision Date: 17 July 2002
• Docket Number: No. 00-0550.,00-0550.
• Citation: 648 N.W.2d 564
• Parties: McNALLY & NIMERGOOD, United National Insurance Company, and Assicurazioni Generali S.P.A., Appellants, v. NEUMANN-KIEWIT CONSTRUCTORS, INC., Appellee.
• Court: Iowa Supreme Court

648 N.W.2d 564

McNALLY & NIMERGOOD, United National Insurance Company, and Assicurazioni Generali S.P.A., Appellants, v. NEUMANN-KIEWIT CONSTRUCTORS, INC., Appellee.

No. 00-0550.

Supreme Court of Iowa.

July 17, 2002.

William J. Koehn and Debra Rectenbaugh Pettit of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellants.

Jeffrey L. Goodman and Kurt S. Peterson of Pingel & Templer, P.C., West Des Moines, for appellee.

CADY, Justice.

The primary issue we confront in this case is whether a settlement by a lessor of a personal injury action by an employee of the lessee based solely on allegations of the lessor's own negligence precludes recovery in a subsequent action by the lessor for contractual indemnification against the lessee. We conclude the settlement precludes indemnification under the facts of this case. We affirm the order by the district court granting summary judgment.

I. Background Facts and Proceedings.

The facts of this case date back to 1994 when Neumann-Kiewit Constructors, Inc. (Neumann), a joint venture formed by Neumann Brothers, Inc. and Kiewit Construction Company for the purpose of constructing the Employers Mutual Casualty Insurance Company building in downtown Des Moines, leased a 150-ton crawler crane from McNally & Nimergood (McNally). McNally is a Michigan corporation, and Neumann needed the crane to assist in the construction of the building. The lease was a "bare rental," which meant the crane was leased without an operator.

The terms of the lease were developed by the parties through an exchange of their respective form agreements. McNally initiated the process when it sent Neumann its form lease agreement. The lease required Neumann to pay McNally $6000 a month for the use of the crane, and covered a twelve-month period. McNally was authorized to adjust the monthly payments if Neumann did not need the crane for the full twelve months. The agreement also included the following provisions:

C. ... Lessee shall be responsible for normal maintenance and for repair of any damage incurred....

D. INSURANCE AND LIABILITY OF LEASEE: ... Lessee assumes full responsibility for and indemnifies Lessor against and will protect and save Lessor against harm from any and all loss, liability, damage, and expense in connection with any injury or claim of injury of Lessee's employees and will save Lessor harmless from any and all loss, liability, damage, and expense to other persons or any property arising from or in connection with the use or operation of the leased equipment....

The McNally lease agreement was dated August 25, 1994. It was signed by an authorized representative of McNally.

After receiving the McNally lease agreement, Neumann sent McNally its own form rental agreement. Like the McNally lease, the lease rate was $6000 a month, but the term was designated to be between ten and twelve months, with no adjustments in the monthly rate. The rental agreement also included the following provisions:

[B.] (iii) DAMAGES. Lessee shall be liable for any and all damage to any persons or property while said equipment is in Lessee's possession, except for damage caused by defects in the equipment.

....

G. ATTORNEY'S FEES. In the event either party institutes suit in court against the other party in connection with any dispute or matter arising under this Agreement, the prevailing party shall be entitled to recover a reasonable attorney's fee in addition to any other relief granted by the court.

H. FULL AGREEMENT. The agreement constitutes the full and complete understanding between the parties....

The agreement also required Neumann to inspect and examine and replace or repair the crane if not found in good condition. It further required Neumann to keep the crane in good repair.

The unsigned rental agreement included a one-page attachment containing additional provisions. These documents were sent with a cover letter to McNally stating, "Enclosed is our rental agreement and attachments." The letter requested McNally to "sign both the rental agreement and attachments and return them to us for final execution." The lease agreement was also enclosed with the letter. It contained several handwritten changes made by Neumann. Like the rental agreement, the lease agreement was not signed by Neumann.

An authorized representative of McNally signed the rental agreement and returned the documents to Neumann. An authorized representative of Neumann then signed the rental agreement. Neumann, however, did not sign the lease agreement.

The crane was subsequently delivered by McNally to the construction site of the Employers' Mutual Insurance Company building in Des Moines. On November 28, 1994, William Lawson, Jr., an employee of Neumann, was seriously injured while erecting a tower crane needed to construct the building. The accident occurred when Lawson's arm was pinched between an erected section of the tower crane and another section of the tower crane that was being hoisted into place with the crawler crane.

Lawson brought an action against Neumann and McNally for the injuries he sustained. He claimed Neumann was negligent in failing to inspect the crawler crane, failing to maintain and service the crane, and failing to properly operate the crane. Lawson claimed McNally was negligent in failing to inspect the crawler crane prior to its delivery, failing to properly maintain the crane prior to its delivery, and delivering a crane with a defective pump. However, McNally asserted as an affirmative defense that Neumann was negligent and that the negligence of Neumann was a superceding cause of Lawson's injury. The district court subsequently dismissed the action against Neumann. It determined that recovery against Neumann was limited to workers' compensation benefits. The case proceeded to trial against McNally.

After four days of trial, Lawson and McNally settled the claim for $499,000. The settlement agreement released McNally from liability, but did not release Neumann. No liability was admitted by McNally and McNally did not give up any subsequent remedies.

Following the settlement, McNally made repeated demands on Neumann for indemnification under the lease agreement. After Neumann declined to reimburse McNally for the settlement, McNally filed an action against Neumann for indemnification. The petition was filed on August 25, 1998.

McNally claimed both the rental agreement and the lease agreement combined to form the terms of the parties' complete agreement, which included the duty of Neumann to provide indemnification. McNally claimed indemnification was also provided under the damage clause in the rental agreement based on the language that made Neumann "liable for any and all damage to any persons or property while said equipment is in Lessee's possession, except for damage caused by defects in the equipment." It claimed indemnification was required by the lease agreement under the "INSURANCE AND LIABILITY OF LESSEE" clause providing that Neumann assume "full responsibility for and indemnifies Lessor against and will protect and save Lessor against harm from any and all loss, liability, damage, and expense in connection with any injury or claim of injury of Lessee's employees." In addition to the expressed contractual obligations for indemnification, McNally claimed the duties under both agreements requiring Neumann to inspect, maintain and repair the crane also formed the basis for implied indemnification.

On October 12, 1999, Neumann moved for summary judgment. It asserted the agreement between the parties was limited to the terms of the signed rental agreement, which excluded indemnification for damages caused by defects in the equipment and was not broad enough to require indemnification for McNally's own acts of negligence.

The district court granted summary judgment. It found the parties' agreement was confined to the rental agreement under the integration clause. It determined this agreement did not provide for indemnification for McNally's own negligence. The district court also awarded Neumann attorney fees for defending the indemnification claim of $77,828.50.

McNally appeals. It claims summary judgment was improper because a factual dispute exists over the scope of the parties' written agreement. Additionally, McNally asserts that it does not seek indemnification for liability based on its own negligence or for any defect in the crane which existed prior to delivery, but seeks indemnification based on the breach of Neumann's contractual promise to indemnify it for Neumann's own acts of negligence. McNally claims both the expressed and implied contracts require Neumann to indemnify it for the settlement it paid to Lawson as long as it can show Neumann was negligent and that Neumann's negligence was a cause of the injury. McNally argues that it is entitled to a trial to make this showing. It also argues the trial court abused its discretion in awarding the amount of attorney fees to Neumann for defending the action.

II. Standard of Review.

We review the grant of a summary judgment motion for errors at law. McComas-Lacina Constr. Co. v. Able Constructors, 641 N.W.2d 841, 843 (Iowa 2002). In reviewing the district court's decision, we consider the evidence presented in a "light most favorable to the party opposing the motion...." Id. We will uphold the grant of summary judgment if the district court correctly applied the law to find a lack of a genuine issue of material fact. Id. We review an award of attorney fees for an abuse of discretion. Olson v. Nieman's, Ltd., 579 N.W.2d 299, 316 (Iowa 1998).

III. Indemnification.

"Indemnification is a form of restitution...." Iowa Elec. Light & Power Co. v. Gen. Elec. Co., 352 N.W.2d 231, 236 (Iowa 1984). It can be implied by law in tort claims to shift liability for an obligation to the party who should bear ultimate responsibility for it under principles of equity, or it can be based on contract. See Hansen...