North American Site Dev. V. Mrp Site Dev., No. 03-P-829.

• Citation: 63 Mass. App. Ct. 529,827 N.E.2d 251
• Decision Date: 16 May 2005
• Docket Number: No. 03-P-829.
• Parties: NORTH AMERICAN SITE DEVELOPERS, INC., & another<SMALL><SUP>1</SUP></SMALL> v. MRP SITE DEVELOPMENT, INC., & another.<SMALL><SUP>2</SUP></SMALL&gt
• Court: United States State Supreme Judicial Court of Massachusetts

827 N.E.2d 251

63 Mass. App. Ct. 529

NORTH AMERICAN SITE DEVELOPERS, INC., & another¹ v. MRP SITE DEVELOPMENT, INC., & another.²

No. 03-P-829.

Appeals Court of Massachusetts, Norfolk.

Argued May 14, 2004.

Decided May 16, 2005.

Gareth W. Notis, Boston, for MRP Site Development, Inc.

Richard B. Kirby, Boston, for North American Site Developers, Inc.

Present: PERRETTA, BERRY, & TRAINOR, JJ.

PERRETTA, J.

On its appeal from a judgment requiring it to defend and to indemnify fully North American Site Developers, Inc. (NASDI), MRP Site Development, Inc. (MRP), argues that its indemnity obligation is limited by its contract with NASDI to the portion of liability attributable to its own conduct. NASDI appeals from that part of the judgment that declares that Morse Diesel International, Inc. (Morse), is not entitled to a defense or indemnification from Travelers Indemnity Company of Illinois (Travelers), or from MRP. Neither Morse nor Travelers appeals from the judgment. We conclude that MRP's indemnity obligation to NASDI is proportional and that NASDI has failed to identify how it is harmed by the declaration that neither MRP nor Travelers has a duty to indemnify or defend Morse.

1. Background facts and procedural history. In February, 1998, Morse entered into a contract with the New Boston Corporation (NBGC) to provide construction management for NBGC on the Boston Garden Demolition and Fleet Center South Facade Renovation project. On March 11, 1998, having sought bids for demolition work on the project, Morse executed a letter of intent with NASDI, evidencing Morse's intention to issue a $1.325 million subcontract to NASDI. The letter authorized NASDI to proceed immediately with certain preparatory work "unless otherwise directed." Morse and NASDI executed the contract contemplated in the letter of intent on May 20, 1998.

On April 6, 1998, NASDI hired MRP to perform demolition on the project pursuant to a subcontract (MRP subcontract). MRP's work for NASDI under the MRP subcontract began on April 10, 1998. Scott Duclos, an MRP employee, was injured while working at the site on April 11, 1998. The MRP subcontract required MRP to maintain comprehensive general liability insurance and to endorse the policy in the names of NASDI, its subsidiaries, NBGC, and others. MRP was also required by the MRP subcontract to list Morse among the additional insureds on its policy. MRP's comprehensive general liability insurance policy was held by Travelers.

On April 14, 1999, Duclos brought an action in negligence (Duclos action) against the general contractor on the project, Morse, and Morse's subcontractor, NASDI. Morse cross-claimed against NASDI for indemnity, and NASDI brought a third-party claim against MRP. Duclos ultimately settled his negligence action against Morse and NASDI, and the parties eventually stipulated to the dismissal of Duclos's complaint against all named defendants as well as the third-party claim against MRP, and later, Morse's cross claim against NASDI.

While the Duclos action was pending, however, Morse and NASDI brought the present action against MRP and Travelers, seeking a declaration that they (Morse and NASDI) were entitled to a defense and indemnification under the indemnity and defense clause of the MRP subcontract as well as the general liability insurance policy issued by Travelers to MRP.³ Ruling on cross motions for summary judgment, a judge concluded that MRP and Travelers were obligated to defend and to indemnify fully NASDI but not Morse in the Duclos action. Because Morse chose to dismiss its appeal from the judgment, see Mass.R.A.P. 29(b), 365 Mass. 877 (1974), and Travelers failed to file a brief in the appeal, see Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975), we consider only the arguments raised by MRP and NASDI on their cross appeals from the judgment.

We are left with MRP's argument that its contractual indemnity obligation is limited to the share of liability attributed to its conduct and NASDI's contention that Travelers owes a duty both to defend and to indemnify Morse. These claims are based on several clauses set out in the MRP subcontract.

2. The MRP subcontract. Article 11.10 of the MRP subcontract, the indemnity clause, reads in relevant part:

"To the fullest extent permitted by law, [MRP] shall indemnify, hold harmless, and defend (with counsel reasonably acceptable to [NASDI]) [NASDI] ..., Owner, [and] Architect ... from and against claims, damages, losses and expenses ... arising out of or resulting from performance or non-performance of [MRP's] Work under this Subcontract, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death ... but only to the extent caused in whole or in part by the negligent or willful acts or omissions of [MRP] ... regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder"⁴ (emphasis supplied).

Through article 10, Exhibit B to the MRP subcontract required MRP to maintain a comprehensive general liability insurance policy endorsed to name NASDI as an additional insured.⁵ It also required that insurance certificates name NASDI and Morse, among others, as additional insureds.

MRP's policy with Travelers, as effective on the date of Duclos's injuries, also contained a "BLANKET ADDITIONAL INSURED" endorsement (endorsement) amending the policy to include as an insured "any person or organization [the named insured is] required by written contract to include as an insured, but only with respect to liability arising out of [the named insured's work]." Coverage under the endorsement applied only if the written contract was "executed prior to the occurrence of any loss."

3. MRP's appeal. To put MRP's argument in focus, we repeat that provision in article 11.10 of the MRP subcontract previously set out and emphasized, that is, that MRP agreed to "indemnify ... [NASDI] ... from and against claims, damages, losses, and expenses ... but only to the extent caused in whole or in part by the negligent or willful acts or omissions of [MRP]." Based on this language and the established principle that "[c]ontracts of indemnity are to be fairly and reasonably construed in order to ascertain the intention of the parties and to effectuate the purpose sought to be accomplished," New York, N.H. & H.R.R. v. Walworth Co., 340 Mass. 1, 3, 162 N.E.2d 789 (1959), quoting from Century Indem. Co. v. Bloom, 325 Mass. 52, 56, 88 N.E.2d 906 (1949); see Shea v. Bay State Gas Co., 383 Mass. 218, 222, 418 N.E.2d 597 (1981), MRP argues that its indemnity obligation is proportionately limited to its causal fault. Put another way, MRP contends that the prefatory phrase "but only to the extent" is a clear expression of intent to restrict its indemnity obligations to "only" those losses caused by the negligent or wilful conduct of MRP. NASDI contends first, that principles of negligence should not be brought to bear on questions of indemnity, because negligence on the part of an indemnitor is not generally required in order to trigger an obligation to indemnify; and second, that the public policy underlying the enforcement of construction contract indemnification provisions, namely, clarifying where the burden of acquiring insurance lies, would be undermined by MRP's interpretation of the clause, which would require a judicial determination of negligence and comparative negligence.

While not raised by the parties, it appears that the instant indemnity clause is based upon the standard indemnity language contained in the 1987 edition of AIA Document A401, Standard Form of Agreement Between Contractor and Subcontractor, and the cognate provision of AIA Document A201, General Conditions of the Contract for Construction. The parties have not cited and we have not found any reported Massachusetts appellate decision construing similar language.⁶ However, other jurisdictions construing this language have concluded that it creates a proportionate indemnity obligation. See, e.g., East Harding, Inc. v. Horace A. Piazza & Assocs., 80 Ark.App. 143, 149-150, 91 S.W.3d 547 (2002); Hagerman Constr. Corp. v. Long Elec. Co., 741 N.E.2d 390, 393-394 (Ind.App.2000); MSI Constr. Managers, Inc. v. Corvo Iron Works, Inc., 208 Mich.App. 340, 343-344, 527 N.W.2d 79 (1995); Braegelmann v. Horizon Dev. Co., 371 N.W.2d 644, 646 (Minn.App.1985); Dillard v. Shaughnessy, Fickel & Scott Architects, Inc., 884 S.W.2d 722, 724-725 (Mo.App.1994) (applying Kansas law); Nusbaum v. Kansas City, 100 S.W.3d 101, 106-107 (Mo.2003); Mautz v. J.P. Patti Co., 298 N.J.Super. 13, 21, 688 A.2d 1088 (App.Div.1997); Greer v. Philadelphia, 568 Pa. 244, 250-251, 795 A.2d 376 (2002); Brown v. Boyer-Washington Blvd. Assocs., 856 P.2d 352, 355 (Utah 1993).

Although many of the cited cases seem to apply the rule that indemnity agreements are to be strictly construed against the indemnitee, a rule not followed in Massachusetts, see Herson v. New Boston Garden Corp., 40 Mass.App.Ct. 779, 782, 667 N.E.2d 907 (1996) ("[i]ndemnifcation provisions are to be read without any bias for the indemnitor or against the indemnitee"), we do not read those holdings as having turned on a narrow reading of an ambiguous indemnity provision. But see Braegelmann, supra. Rather, the phrase "to the extent caused in whole or part" is generally treated as a reasonably clear expression of the parties' intent to limit a contractual indemnity obligation to losses caused by the indemnitor's conduct. This latter aspect of reasoning in the holdings from other jurisdictions is consistent with the law of Massachusetts. See Herson v. New Boston Garden Corp., 40 Mass.App.Ct. at 782, 667 N.E.2d 907 (indemnification provisions "are to be interpreted like any other contract, with attention to language, background, and purpose"). Consequently, we conclude MRP's indemnity obligation is limited under the MRP subcontract to losses caused by...