Pritts v. J. I. Case Co.

• Decision Date: 27 July 1981
• Docket Number: Docket No. 46111,RAGNAR-BENSON,MI-JACK
• Citation: 310 N.W.2d 261,108 Mich.App. 22
• Parties: , 32 UCC Rep.Serv. 414 Merle PRITTS and Frances Pritts, Plaintiffs, v. J. I. CASE COMPANY, Defendant, and Drott Manufacturing, a division of J. I. Case Company, Defendant-Cross-Appellee, andPRODUCTS COMPANY, Defendant, Third-party-Plaintiff-Appellant, Cross-Appellee, v.COMPANY, Third-party-Defendant-Appellee, Cross-Appellant, and American Prestressed Concrete, Third-party defendant.
• Court: Court of Appeal of Michigan — District of US

Page 261

310 N.W.2d 261

108 Mich.App. 22, 32 UCC Rep.Serv. 414

Merle PRITTS and Frances Pritts, Plaintiffs, v. J. I. CASE COMPANY, Defendant, and Drott Manufacturing, a division of J. I. Case Company,

Defendant-Cross-Appellee, and MI-JACK PRODUCTS COMPANY, Defendant, Third-party-Plaintiff-Appellant, Cross-Appellee, v. RAGNAR-BENSON COMPANY, Third-party-Defendant-Appellee, Cross-Appellant, and American Prestressed Concrete, Third-party defendant.

Docket No. 46111.

Court of Appeals of Michigan.

July 27, 1981.

Released for Publication Sept. 28, 1981.

Roger F. Wardle, Farmington Hill, for plaintiffs.

John M. Heaphy, Detroit, for defendant and defendant-cross-appellee.

John A. Kruse, Detroit, for defendant, third-party-plaintiff-appellant, cross-appellee.

D. J. Watters, Detroit, for third-party defendant.

Before CAVANAGH, P. J., and WALSH and RILEY, JJ.

RILEY, Judge.

This appeal stems from a products liability action originally filed by Mr. Pritts against Mi-Jack Products Company and Drott Manufacturing Company, a division of J. I. Case Company, for injuries sustained in an industrial accident on August 9, 1973. The accident occurred when a coemployee drove a travel lift over plaintiff's legs while both were working for their employer, Ragnar-Benson Company.

It is undisputed that the travel lift was manufactured by Drott in 1971 pursuant to an order by Mi-Jack, one of its dealers. Mi-Jack leased the travel lift to American Prestressed Concrete Company, a firm engaged in the manufacturing of prestressed concrete components for Ragnar-Benson. In 1972, when American Prestressed encountered financial difficulties, it became controlled by Ragnar-Benson, who assumed its management and obligations.

On June 20, 1973, Ragnar-Benson and Mi-Jack entered into a lease agreement for the travel lift, using a form drafted by Mi-Jack, which contained the following indemnification clause:

"Lessee agrees that Lessor shall not be held responsible for any loss or damage to Lessee, its customers, or any third parties, caused by failure of the Equipment covered by this lease to function in whole or in part. Lessee shall indemnify Lessor against, and hold Lessor harmless from any and all claims, actions, suits, proceedings, costs, expenses, damages and liabilities, including attorney's fees, arising out of, connected with or resulting from the Equipment, including without limitation the manufacture, selection, delivery, possession, use, operation or return of the Equipment * * *." (Emphasis added.)

Ragnar-Benson's agent signed the lease, admittedly without reading the indemnification provision. According to his trial testimony, he knew all equipment leasing agreements contained such clauses, and he was more interested in the lease's description of the equipment and its price. The major issue on appeal is whether or not the indemnification clause can be construed to protect Mi-Jack, the indemnitee, from its own negligence.

The trial of Pritts' claims began as a jury trial. Pritts claimed that Mi-Jack was negligent by leasing the travel lift without certain safety devices. The evidence showed that, from 1972 until well after the time of the accident, the lift had been in the possession and control of Ragnar-Benson. During the trial, Mi-Jack, contending that the indemnity clause in the lease applied and that Ragnar-Benson would, therefore, be liable for Mi-Jack's negligence, tendered the defense to Ragnar-Benson and notified it of an impending settlement. Upon Ragnar-Benson's refusal to defend the claim, Mi-Jack settled the claim against it for $350,000. American Prestressed and Drott also settled the claims against them. ¹

Following the settlement, the jury was excused and the remaining issues were tried by the judge. The judge ruled that Mi-Jack's settlement with plaintiffs was reasonable and based upon Mi-Jack's potential liability. The judge further ruled that the indemnity provision was ambiguous and that, although Mi-Jack intended to be indemnified for injuries occurring when the travel lift was out of its control, there was no intent that Mi-Jack was to be indemnified for its own negligence. In short, the judge was not convinced that the language of the indemnity clause clearly and unequivocally indemnified Mi-Jack for its own negligence. Mi-Jack appeals that ruling as of right.

The interpretation of indemnification provisions purporting to absolve a party from liability for loss caused by its own negligence has "traditionally plagued both drafters and courts alike". Levine v. Shell Oil Co., 28 N.Y.2d 205, 269 N.E.2d 799, 321 N.Y.S.2d 81 (1971). The Levine Court succinctly stated the reasons why indemnification clauses have caused so much difficulty.

"Since one who is actively negligent has no right to indemnification unless he can point to a contractual provision granting him that right, a rule has evolved under which courts have carefully scrutinized these agreements for an expression of an intent to indemnify and for some indication of the scope of that indemnification." Levine, supra, 211, 269 N.E.2d 799.

In Michigan, the rule appears to be that broad, all-inclusive indemnification language may be interpreted to protect the indemnitee against its own negligence if such intent can be ascertained from other language in the contract, surrounding circumstances, or from the purpose sought to be accomplished by the parties. Vanden Bosch v. Consumers Power Co., 394 Mich. 428, 230 N.W.2d 271 (1975). In Vanden Bosch, Ferro-Cast had agreed to indemnify Consumers Power against loss "arising in connection with or as a direct or indirect result of a location of such building under the transmission and/or distribution line wires of said second party". This Court ruled that it was "only a matter of inference as to whether or not the agreement covers the negligence of the indemnitee" and that "(s)ince the agreement did not specifically state that it covered the negligent acts of the indemnitee" held that the trial court was correct in ruling that indemnification should not be permitted. Vanden Bosch v. Consumers Power Co., 56 Mich.App. 543, 559, 224 N.W.2d 900 (1974).

The Michigan Supreme Court reversed, however, holding that:

"Although not 'expressly' stated in the agreement, we are persuaded from our reading of that agreement, in light of the surrounding circumstances, that the parties intended that Consumers Power be indemnified against liability for its own negligence * * *." 394 Mich. 428, 230 N.W.2d 271.

Before turning to the indemnity clause at issue in the present case, we note several well-established rules of construction. An indemnity contract is construed in accordance with the rules for the construction of contracts generally. Meadows v. Depco Equipment Co., 4 Mich.App. 370, 144 N.W.2d 844 (1966). The cardinal rule in the construction of indemnity contracts is to enforce them so as to effectuate the intentions of the parties. Title Guaranty & Surety Co. v. Roehm, 215 Mich. 586, 184 N.W. 414 (1921). Intention is determined by considering not only the language of the contract but also the situation of the parties and the circumstances surrounding the contract. Id. Indemnity contracts are construed most strictly against the party who drafts them and against the party who is the indemnitee. Gartside v. Young Men's Christian Ass'n, 87 Mich.App. 335, 274 N.W.2d 58 (1978); Fireman's Fund American Ins. Co. v. General Electric Co., 74 Mich.App. 318, 253 N.W.2d 748 (1977). It has also been said of the construction of indemnity contracts that in order to be effective, the terms must be unequivocal. Hayes v. General Motors Corp. & Darin & Armstrong Inc., 106 Mich.App. 188, 308 N.W.2d 452 (1981). See generally, 41 Am.Jur.2d, Indemnity, §§ 13-15, pp. 697-702.

The findings concerning intent are factual and may not be reversed on appeal unless clearly erroneous. GCR 1963, 517.1. A finding is clearly erroneous where, although there is evidence to support it, the reviewing court considering the record as a whole is left with the definite and firm conviction that a mistake has been committed. Tuttle v. Dep't of State Highways, 397 Mich. 44, 46, 243 N.W.2d 244 (1976).

Although the indemnity clause at issue did not go so far as to explicitly say that the indemnitee should be held harmless from its own negligence, we are of the opinion that the clause as written should have put any indemnitor reading it on notice that this was its purpose. The clause clearly states that the lessor "shall not be held responsible for any loss " and that the "lessee shall indemnify lessor against, and hold lessor harmless from, any and all claims, damages * * * including without limitation the manufacture, solicitation, delivery, possession, use, operation or return of the equipment * * *". (Emphasis added.)

As the Court held in Laudano v. General Motors Corp., 34 Conn.Supp. 684, 388 A.2d 842, 845 (1977):

"(T)here cannot be any broader classification than the word 'all'. In 'its ordinary and natural meaning, the word "all" leaves no room for exceptions.' " (Citations omitted.)

That the instant clause was intended to indemnify Mi-Jack from even its own negligence is buttressed by the examples following the phrase "without limitation": manufacture, selection, and delivery. The manufacture, selection, and delivery of the travel lift are all activities that would most probably be attributable to the lessor-indemnitee Mi-Jack and not to the potential lessee-indemnitor. We believe that to construe the clause otherwise would render much of the language employed a nullity, a result the parties surely did not intend. This interpretation is consistent with the rule of construction that an indemnity agreement should be construed so as to give reasonable meaning to all its provisions, a result which is preferable to one that leaves part of the language useless or inexplicable or creates surplusage. Herchelroth v. Mahar, 36 Wis.2d 140, 153 N.W.2d 6 (...