DOSTER CONSTR. v. MARATHON ELEC. CONTRACT.

• Decision Date: 25 September 2009
• Docket Number: 1061471.
• Citation: 32 So.3d 1277
• Parties: DOSTER CONSTRUCTION COMPANY, INC. v. MARATHON ELECTRICAL CONTRACTORS, INC.
• Court: Alabama Supreme Court

32 So.3d 1277

DOSTER CONSTRUCTION COMPANY, INC. v. MARATHON ELECTRICAL CONTRACTORS, INC.

1061471.

Supreme Court of Alabama.

September 25, 2009.

COPYRIGHT MATERIAL OMITTED

Stanley A. Cash and Joseph R. Duncan, Jr., of Huie, Fernambucq & Stewart, Birmingham, for appellant.

Thomas S. Hale and J. Michael Keel of Burgess & Hale, L.L.C., Birmingham, for appellee.

PER CURIAM.

Doster Construction Company, Inc. ("Doster"), appeals from the denial by the Jefferson Circuit Court of Doster's motion to reconsider the summary judgment in favor of Marathon Electrical Contractors, Inc. ("Marathon"), concerning Doster's third-party complaint alleging breach of contract and failure to procure insurance. We affirm in part, reverse in part, and remand.

I. Facts and Procedural History

Doster was the general contractor at a job site for an automobile-parts manufacturer referred to in the record as "Oxford Automotive" in Bessemer. It entered into a subcontract with Marathon, pursuant to which Marathon was to provide electrical work at the job site. The contract between Doster and Marathon contained two provisions pertinent to this action: an indemnity clause ("the indemnity clause") and a clause concerning the provision of liability insurance ("the liability-insurance clause"). The indemnity clause provides as follows:

"Indemnity. $100.00 of the Subcontract Price is specific consideration for Marathon's agreement to defend and indemnify Doster and others as provided in this Paragraph. To the fullest extent permitted by law, Marathon shall defend and indemnify Doster, Owner, and Architect, and their respective directors, officers, agents, employees, successors, insurers, sureties, affiliates, and assigns (collectively, the `Indemnitees') against, and assume any obligations of the Indemnitees for, all liabilities, claims, suits, actions, proceedings, damages, losses, judgments, and expenses (collectively, `Indemnified Losses') including, but not limited to attorneys' fees, that arise in any way, directly or indirectly, out of a failure by Marathon (including the Marathon Design Professionals) to: (a) carry out the Work in a safe manner; (b) strictly comply with any applicable laws, regulations, building codes, rules, or industry standards; (c) exercise reasonable care in the performance of the Work or to execute the Work in a non-negligent manner; or (d) strictly comply with the requirements of this Subcontract. Marathon's obligation to defend and indemnify the Indemnitees shall not be diminished or excused merely because the negligence or other breach of a legal duty on the part of any Indemnitee also contributed to the Indemnified Loss. Provided, however, that if in any proceeding initiated by a third party, there is an apportionment of the relative contributions to the Indemnified Loss by the Indemnitees on the one hand, and Marathon on the other, then Marathon shall only be required to defend and indemnify the Indemnitees to the extent of Marathon's proportionate contribution. Marathon's obligations under this Paragraph do not limit any other right or obligation of indemnity that exists in favor of any Indemnitee. In the event that a claim is made by an employee of Subcontractor against an Indemnitee, Marathon shall defend and indemnify such Indemnitee to the same extent as if such claim were made by a non-employee, notwithstanding any statute or judicial decision that would otherwise limit Marathon's liability. If and to the extent that the indemnification provided by this Paragraph should be construed to exceed any restriction established by law, then it is the intent of the parties that this Paragraph be deemed to be reformed and modified such that it affords to the Indemnitees the maximum indemnification allowed by such law, and any terms, words, and provisions of this Paragraph shall be deemed modified or deleted to the extent necessary to make this Paragraph valid and enforceable."

The liability-insurance clause provides, in pertinent part:

"Liability Insurance. Marathon shall maintain at its own expense (a) all insurance required by applicable law; (b) all insurance required for subcontractors by the Prime Contract; and (c) the forms of insurance identified below in at least the amounts specified. Marathon shall have Doster designated and included as an additional insured on all such insurance. Coverage of Doster as an additional insured shall be primary, and not contributory or excess. Marathon waives all rights of recovery against Doster, Owner, and Architect for any loss or damage covered by any insurance, including all rights that might otherwise accrue to any subrogee."

Doster also entered into a subcontract with Steel City, Inc. ("Steel City), pursuant to which Steel City was to provide Doster with the weights and personnel necessary for testing an overhead crane. Though the timing of its execution is disputed by the parties,¹ both parties acknowledge that an employee of Doster signed a one-page invoice for overtime work that contained the following paragraph:

"Doster shall defend and indemnify Steel City and hold Steel City harmless from any and all losses, claims, costs ... and liability for personal injury or any other casualty losses (including property damage) arising from the performance of this Agreement, except in the case of reckless or willful misconduct by Steel City's employees or agents who at such time are acting under the authority and control of Steel City, provided however, during the performance of this Agreement, any and all of Steel City's equipment operators, maintenance personnel or other employees or agents whose services are required for the operation of the equipment used hereunder are agreed and deemed to be under the ultimate power and control of Doster and as such are `loaned servants.'"

Les Unland was employed by Marathon as an electrician. On July 18, 2003, Steel City employees were testing an overhead crane when it malfunctioned. Unland had finished his work for the day when he was called back to the work site to troubleshoot the electrical system of the crane. In order to fix the problem, Unland used a scissor lift to raise himself to the overhead crane. Upon reaching the "cab" of the crane, Unland lowered to the project floor a remote that operated the crane. After working on the crane, Unland remounted the scissor lift to lower himself back to the floor. Both parties state that a Steel City employee picked up the crane remote and engaged the device, causing the crane to start moving. The crane collided with the scissor lift, knocking it over and causing Unland to fall 25 feet to the project floor. Unland sustained injuries and was taken to the hospital.

Unland sought and received workers' compensation benefits from Marathon for the accident. On July 1, 2004, Unland sued Doster and Steel City, alleging that "Defendants Doster and Steel City placed the crane in motion causing it to push over the scissor lift" and that such action was "negligent, reckless, and careless" and resulted in Unland's injuries. Pursuant to the indemnity clause of the contract between Doster and Marathon, Doster tendered Unland's claims to Marathon, and Marathon, through its insurer, Amerisure Insurance Company, defended Doster. Amerisure eventually settled Unland's claims against Doster for $400,000 in January 2006.

Steel City tendered Unland's claims against it to Doster based on the invoice for overtime work, contending that the invoice constituted a contract for indemnification between Steel City and Doster. Doster refused to defend and indemnify Steel City, and Steel City filed a third-party cross-claim for defense and indemnification against Doster. Doster tendered the claim to Marathon, but Marathon viewed its defense and indemnity responsibility to have been completed after the settlement of Unland's claims against Doster, and it therefore refused the tender. At the same time, Steel City sought to settle Unland's claims against it, and its insurer, Zurich American Insurance Company ("Zurich"), settled the claims for $600,000 on January 17, 2006.

Following the settlement of Unland's claims against Doster, the counsel Amerisure provided to Doster withdrew and counsel provided by Doster's insurer, which was also Zurich, stepped in to defend Doster on Steel City's cross-claim. On March 29, 2006, Doster filed a third-party complaint against Marathon containing two claims. First, Doster alleged that Marathon had breached the indemnity clause by refusing to defend and indemnify Doster on Steel City's cross-claim. Second, Doster alleged that Marathon had breached the liability-insurance clause by failing to procure insurance coverage for Steel City's cross-claim against Doster.

On February 7, 2007, Marathon moved for a summary judgment as to both claims asserted in Doster's third-party complaint, contending that its contract with Doster did not cover Doster's relationship with Steel City. Doster submitted a response to the motion, along with an affidavit from construction-safety consultant Jerry Gillis. In the affidavit, Gillis testified that, in his opinion, Unland failed to carry out his work in a safe manner, failed to comply with the industry standards, and, in short, failed to meet the standard of care in performing his work. Specifically, Gillis stated that proper procedure required Unland to lock out the controls to the overhead crane or to tag out the electrical-power source to the crane while he was disembarking the crane via the scissor lift. By failing to lock out the controls, Unland did not ensure that he was clear of the path of the crane before others could control it.

After entertaining arguments, the trial court on March 2, 2007, entered a summary judgment in favor of Marathon regarding both of Doster's claims, without explaining its reasons for doing so. Doster then filed a motion to reconsider the judgment. The trial court denied the motion on May 31, 2007. Doster...