Kennecott Copper Corp. v. General Motors Corp., Terex Div., 81-2151

• Decision Date: 30 March 1984
• Docket Number: No. 81-2151,81-2151
• Citation: 730 F.2d 1380
• Parties: KENNECOTT COPPER CORPORATION and The St. Paul Fire and Marine Insurance Company, Plaintiffs-Appellees, v. GENERAL MOTORS CORPORATION, TEREX DIVISION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1380

730 F.2d 1380

KENNECOTT COPPER CORPORATION and The St. Paul Fire and Marine Insurance Company, Plaintiffs-Appellees, v. GENERAL MOTORS CORPORATION, TEREX DIVISION, Defendant-Appellant.

No. 81-2151.

United States Court of Appeals, Tenth Circuit.

March 30, 1984.

Harold G. Christensen, Salt Lake City, Utah (with Richard K. Crandall, Salt Lake City, Utah, on the brief) of Snow, Christensen & Martineau, Salt Lake City, Utah (and with Otis M. Smith, Gen. Counsel; Douglas E. Brown and Nicholas J. Wittner, General Motors Corp., Detroit, Mich., on the brief), for defendant-appellant.

Tim Dalton Dunn, Salt Lake City, Utah (with Shirlynn White Fenstermaker, Salt Lake City, Utah, on the brief) of Hanson, Russon, Hanson & Dunn, Salt Lake City, Utah, for plaintiffs-appellees.

Before McWILLIAMS, BARRETT and McKAY, Circuit Judges.

McKAY, Circuit Judge.

Kennecott Copper Corporation issued a purchase order for the lease of five Terex dump trucks from General Motors Corporation. ¹ That purchase order stated that "Kennecott will provide liability and property insurance related to possession and operation of the units." Record, vol. 1, at 40. The trucks were ultimately delivered pursuant to the purchase order agreement and Kennecott obtained an insurance policy from St. Paul Fire and Marine Insurance Company with a $100,000 deductible. ² Thereafter the brakes on one of the trucks failed, causing the truck to roll down a road and collide into an earthen berm. The truck sustained substantial damage. Kennecott and St. Paul paid for the necessary repairs and instituted this action against G.M. for breach of express and implied warranties and products liability. A jury found on a special verdict that the truck was defective and unreasonably dangerous and that the condition of the truck was in breach of express and implied warranties.

G.M. appeals the trial court's denial of its motion for directed verdict, the granting of Kennecott's and St. Paul's motion for directed verdict, and denial of a motion for judgment notwithstanding the verdict, all addressing the same issue: whether the provision of the purchase order regarding Kennecott's acquisition of insurance required Kennecott to obtain insurance indemnifying against the lessor's (G.M.'s) own negligence thereby precluding recovery by Kennecott and St. Paul from G.M. ³

Utah law governs this diversity action. It clearly provides in cases involving indemnification that "[t]he intention of the parties govern but the presumption is against any such intention and is not achieved by inference from general language." Union Pacific Railroad v. Intermountain Farmers Association, 568 P.2d 724, 726 (Utah 1977).

The intention of the parties is to be determined in the first instance from the agreement under which they proceeded, in this case the purchase order. On its face the purchase order applies only to the "operation and possession" of the trucks. As an agreement, it lacks the kind of clarity contemplated by the Utah cases. In light of the presumption against indemnification, the agreement could not even be said to be ambiguous in the matter of indemnification. The trial court correctly held that indemnification was settled against G.M. as a matter of law based on the contractual language.

G.M. argues that since Kennecott's policy was broad enough to cover this particular accident, G.M. was a beneficiary of that policy and therefore immune under the cases ⁴ from subrogation by the owner of the policy and the insurance company. Whatever the rules may be under normal insurance law, Union Pacific Railroad makes clear that in an action which sounds as an action for indemnification, the agreement of the parties governs. Here the agreement was to cover the lessee's "possession and operation" of the units. The trial court was not required to reach the issue of what principles would govern in some other kind of case.

G.M. has tried to distinguish the indemnification cases by arguing that there is a difference between an agreement to purchase insurance to cover the lessor's own acts and an indemnification agreement. There is no support for that position in the Utah cases. See Union Pacific Railroad, 568 P.2d at 725, and cases cited therein. It is clear from reading the Utah cases that Utah looks to the purpose of the agreement. If the purpose...