Allen v. Standard Oil Co.

• Decision Date: 29 December 1982
• Docket Number: No. 82-47,82-47
• Citation: 443 N.E.2d 497,2 Ohio St.3d 122,2 OBR 671
• Court: Ohio Supreme Court
• Parties: , 2 O.B.R. 671 ALLEN et al. v. STANDARD OIL COMPANY, Appellant; Refiners Transport & Terminal Corporation et al., Appellees.

Page 122

2 Ohio St.3d 122

443 N.E.2d 497, 2 O.B.R. 671

ALLEN et al. v. STANDARD OIL COMPANY, Appellant Refiners Transport & Terminal Corporation et al., Appellees.

No. 82-47.

Supreme Court of Ohio.

Dec. 29, 1982.

Syllabus by the Court

1. When an indemnitor expressly agrees to indemnify an indemnitee except in certain specified instances and it is determined that the exceptions do not pertain, the indemnitor is obligated to indemnify the indemnitee under the terms of the agreement.

2. When an indemnitor wrongfully refuses to defend an action against an indemnitee, the indemnitor is liable for the costs, including attorney fees and expenses, incurred by the indemnitee in defending the initial action and in vindicating its right to indemnity in a third-party action brought against the indemnitor.

Appellant, Standard Oil Company (Sohio), and appellee Refiners Transport & Terminal Corporation (Refiners) entered into an agreement in January 1974, entitled the "Columbus Bulk Products Transportation Agreement." Appellant drafted this lengthy agreement, which contained an indemnity provision, whereby appellee agreed to indemnify appellant for certain claims and the expenses relating thereto. The agreement also required appellee to add appellant as an additional insured to appellee's insurance policy with appellee Insurance Company of North America (INA). ¹

In July 1974, Bobby Lee Allen, an employee of Refiners, suffered injuries on appellant's premises. Allen and his wife initiated an action against appellant, alleging that the injuries resulted from appellant's negligence. Appellant tendered the defense of the action to Refiners and INA pursuant to the indemnity provision of the agreement. Appellees refused the tender whereupon appellant retained counsel to defend the Allens' action and filed a third-party complaint against Refiners and INA, alleging breach of the indemnity provision of the agreement.

The trial court bifurcated the Allens' negligence action and Sohio's third-party action for trial. The negligence claim was tried to a jury, which found that Allen's injuries were caused by his sole negligence. ² The court thereafter granted Sohio's motion for summary judgment on the third-party complaint.

Appellees appealed to the court of appeals, which reversed the trial court's summary judgment in the third-party action and entered judgment for appellees. The court held that the contractual language of the agreement "excuse[d] Refiners from defending the lawsuit * * *."

The cause is now before this court upon the allowance of a motion to certify the record.

Squire, Sanders & Dempsey and Frederick R. Nance, Cleveland, for appellant.

Estabrook, Finn & McKee and Charles H. Horn, Dayton, for appellees.

SWEENEY, Justice.

The question before this court is whether and to what extent appellant is entitled to be indemnified pursuant to the indemnity provision of its agreement with Refiners. The controverted contractual language states as follows:

"Carrier [Refiners] agrees to indemnify, save harmless, and defend Sohio from and against all and any liabilities, losses, obligations, claims, damages, penalties, suits, actions, judgments, costs and expenses of whatsoever nature which are incurred or brought against Sohio as the result of injury to or death of persons or damages to or loss of property caused by acts or omission to act by Carrier, its agents, servants and employees in the performance of work under this Agreement, except where the separate intervening negligence of Sohio or third persons is the proximate cause of the accident."

By its terms, this provision requires Refiners to indemnify appellant "except where the * * * negligence of Sohio or third persons is the proximate cause of the accident." The court below held this exceptions clause to be applicable and relieved Refiners of its obligation to defend. We disagree.

The contractual provision established two exceptions whereby Refiners could have justifiably refused to indemnify Sohio: (1) if the separate intervening negligence of Sohio was the proximate cause of the accident or (2) if the separate intervening negligence of third persons was the proximate cause of the accident. Our review of the indemnity provision and the record indicates that neither exception applies.

Refiners clearly may not invoke the first exception because the jury specifically found that Allen's own negligence was "the sole proximate cause of his injuries." Nor may Refiners rely on the second exception because no "third persons" were involved. The claims arising from the injuries sustained by Allen in the course of performing his duties as a Refiners' employee appear to be precisely the type of claims Sohio sought to be indemnified against. The indemnity provision expressly covers " * * * claims, damages, penalties, suits, actions, judgments, costs and expenses * * * caused by acts * * * by Carrier [Refiners], its agents, servants and employees * * *." For this reason the case at bar is distinguishable from the case of Drewery v. Daspit Bros. Marine Divers, Inc. (C.A.5, 1963), 317 F.2d 425, upon which appellee would rely.

In Drewery the court refused to impute the agent's negligence, which caused self-injury, to the master so as to require the master to indemnify. The contractual language in Drewery, however, as appellant notes, did not specifically cover the negligence of "agents" and "employees" as does the contractual provision herein. Appellant cites other federal cases that support its anti-Drewery position, see, e.g., Shenker v. United States (C.A.2, 1963), 322 F.2d 622, certiorari denied 376 U.S. 907, 84 S.Ct. 659, 11 L.Ed.2d 606 (Drewery specifically rejected at page 629); United States v. Hollis (C.A. 4, 1970), 424 F.2d 188. Appellant directs us to the Hollis court's disposition of the issue:

"Charleston Drydock undertook to indemnify the United States for any damages arising from injury to anyone other than the Government or its employees caused 'in the whole or in part' by Charleston Drydock or its employees. Therefore, if the accident resulted from Hollis' [Charleston Drydock's employee's] negligence in any degree, the United States is entitled to indemnification from his employer." 424 F.2d at 190.

To paraphrase Hollis in terms of the disputed contractual language in the case at bar, Refiners undertook to indemnify Sohio from any damages and expenses arising from injury to anyone, expressly including injury caused by Refiners' "agents, servants and employees," unless the "intervening negligence of Sohio or third persons * * * [was] the proximate cause of the accident." Applying this rationale, Refiners is clearly liable under the indemnity provisions of the agreement.

Appellee nevertheless contends that the contractual language of indemnity is ambiguous and must be strictly construed against the drafter, in this instance, appellant. McKay Machine Co. v. Rodman (1967), 11 Ohio St.2d 77, 80, 228 N.E.2d 304 . We find the meaning and import of the controverted indemnity clause to be unambiguous and as appellant reminds us, " '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. * *...