Shea v. Bay State Gas Co.

• Decision Date: 30 March 1981
• Citation: 383 Mass. 218,418 N.E.2d 597
• Parties: Donna M. SHEA et al. 1 v. BAY STATE GAS COMPANY et al. 2 Camp Dresser & McKee Inc., Third-Party Defendant.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 597

418 N.E.2d 597

383 Mass. 218

Donna M. SHEA et al. ¹ v. BAY STATE GAS COMPANY et al. ²

Camp Dresser & McKee Inc., Third-Party Defendant.

Supreme Judicial Court of Massachusetts, Norfolk.

Argued Dec. 1, 1980.

Decided March 30, 1981.

David W. Kelley, Boston, for J. Andreassi & Son, Inc.

Francis H. Fox, Boston (S. Elaine Renfro, Boston, with him), for Camp Dresser & McKee Inc.

Before HENNESSEY, C. J., and BRAUCHER, KAPLAN, WILKINS and ABRAMS, JJ.

ABRAMS, Justice.

The plaintiffs in this action sought damages from the defendants Bay State Gas Company (Bay State) and J. Andreassi & Son, Inc. (Andreassi), for injuries incurred when a gas pipe ruptured near 1044 Turnpike Street, in the town of Canton, causing an accumulation of natural gas and a subsequent explosion in the basement of the building occupied by the plaintiffs. The plaintiffs alleged that Bay State negligently maintained and serviced the gas pipe and that Andreassi was negligent in excavating, backfilling, and inspecting a sewer system in that area, causing the rupture.

Andreassi filed a third-party complaint against Camp Dresser & McKee Inc. (CDM), seeking contribution on the grounds that CDM negligently supervised, tested, and inspected the sewer construction. See G.L. c. 231B, §§ 1, 3. CDM moved for summary judgment on the third-party complaint, claiming that a clause on an insurance certificate requires Andreassi to indemnify CDM against CDM's concurrent negligence. CDM's motion was allowed and the judge entered a judgment dismissing the third-party complaint. The Appeals Court reversed the judgment. Shea v. Bay State Gas Co., --- Mass.App. --- ^a, 404 N.E.2d 683. We granted CDM's application for further appellate review. We affirm the judgment of the Superior Court.

The essential facts are not in dispute. In April, 1973, CDM and the town of Canton entered into a contract whereby CDM was to provide services as consulting engineers for the construction of a sewer system on Turnpike Street. Those services included basic engineering and inspection services, as well as the preparation of construction plans, specifications, and contract documents for the project. On October 18, 1973, Andreassi and Canton executed a contract, based on the documents prepared or provided by CDM, for construction of the sewer system.

Andreassi began construction on the project in September, 1974, and completed the work about one month later. On February 7, 1975, a gas pipe ruptured near 1044 Turnpike Street, causing the explosion which injured the plaintiffs (members of the public). The action against Bay State and Andreassi was filed on November 3, 1975, and, on January 21, 1980, a jury found Bay State and Andreassi negligent.

On May 19, 1978, CDM filed a motion for summary judgment, ³ going on the assumption that, for the purposes of the motion's disposition, CDM is equally at fault with the primary defendants. An affidavit of one of CDM's officers was filed in support of the motion, as well as copies of the contract between CDM and Canton and a certificate of insurance provided to CDM by Andreassi as a result of Andreassi's contract with the town. ⁴

CDM was responsible for drafting all documents for the town's use in contracting for the sewer construction. The certificate of insurance was one of these documents. It is signed by an authorized insurance representative and certifies that certain companies have issued policies to Andreassi providing comprehensive insurance protection. ⁵ At the bottom of the certificate, a paragraph entitled "Contractual Liability" reads in part as follows: "The Contractor (Andreassi) shall at all times indemnify and save harmless the OWNER, CAMP DRESSER & McKEE Inc.... on account of any and all claims, damages, losses, ... arising out of injuries ... caused in whole or in part by the acts, omissions, or neglect of the contractor ...." ⁶

The issue on appeal is whether the "contractual liability" clause, properly construed, shifts to Andreassi as the general contractor responsibility for CDM's negligence. Andreassi argues two basic points on its claim that CDM is responsible for its own negligence. First, Andreassi argues that the contract of indemnity should be strictly construed. See Boston & Maine R. R. v. T. Stuart & Son, 236 Mass. 98, 104, 127 N.E. 532 (1920); New York, N. H. & H. R. R. v. Walworth Co., 340 Mass. 1, 5, 162 N.E.2d 789 (1959). Secondly, Andreassi claims that since CDM drafted the clause at issue it should be construed against CDM, and that the failure to explicitly include in the clause CDM's concurrent negligence is fatal to CDM's claim that its concurrent negligence is covered by the clause. ⁷ We do not agree.

"Contracts 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., supra at 3, 162 N.E.2d 789, quoting from Century Indem. Co. v. Bloom, 325 Mass. 52, 56, 88 N.E.2d 906 (1949). Bullard v. Central Vermont Ry., 565 F.2d 193, 199 (1st Cir. 1977). See Bachmann, Shifting Risks Through Insurance and "Hold-Harmless" Agreements, 28 Ins. Counsel J. 617 (1961); Potamkin & Plotka, Indemnification Against Tort Liability The "Hold Harmless" Clause Its Interpretation and Effect Upon Insurance, 92 U.Pa.L.Rev. 347 (1944). ⁸ "By the overwhelming weight of authority, something less than an express reference in the contract to losses from the indemnitee's negligence as indemnifiable will suffice to make them so if the intent otherwise sufficiently appears from language and circumstances." Stern v. Larocca, 49 N.J.Super. 496, 503-504, 140 A.2d 403 (1958). See United States v. Seckinger, 397 U.S. 203, 213 n. 17, 90 S.Ct. 880, 886 n. 17, 25 L.Ed.2d 224 (1970) ("a clause that is intended to encompass indemnification for the indemnitee's negligence ... (need not) explicitly state that indemnification extends to injuries occasioned by the indemnitee's negligence"). The present rule of construction recognizes that "(c)ontract interpretation is largely an individualized process, with the conclusion in a particular case turning on the particular language used against the background of other indicia of the parties' intention." Id. We therefore "construe the contract with reference to the situation of the parties when they made it and to the objects sought to be accomplished." Bryne v. Gloucester, 297 Mass. 156, 158, 8 N.E.2d 170 (1937). See New Bedford Gas & Edison Light Co. v. Maritime Terminal, Inc., --- Mass. ---, --- - --- ^b, 405 N.E.2d 653 (1980); Massachusetts Turnpike Auth. v. Perini Corp., 349 Mass. 448, 452, 208 N.E.2d 807 (1965); New York, N. H. & H. R. R. v. Walworth Co., supra 340 Mass. at 3, 162 N.E.2d 789.

Andreassi and CDM each has a written contract with the town. CDM is not engaged in excavation or construction work and Andreassi is not an agent, servant or employee of CDM. CDM relies on the contractual liability clause on the bottom of the certificate of insurance naming CDM. See note 6 supra. CDM asserts that if the clause is not construed to provide CDM with indemnification against its own concurrent negligence, the clause has no content or purpose. The question is, what construction of the contractual liability clause reflects the intent of the parties?

CDM is protected at common law without the agreement if its liability were purely vicarious. See Afienko v. Harvard Club of Boston, 365 Mass. 320, 336, 312 N.E.2d 196 (1974); Ford v. Flaherty, 364 Mass. 382, 385-86, 305 N.E.2d 112 (1973); Stewart v. Roy Bros., 358 Mass. 446, 459, 265 N.E.2d 357 (1970). If the only purpose of the certificate of insurance was to assure the town and CDM that Andreassi had obtained adequate insurance coverage for his work, the "contractual liability" clause would have been surplusage, since the certificate of insurance without the clause is adequate for that purpose. The contention that the contractual liability clause does not cover CDM's concurrent negligence and is only evidence of adequate insurance robs the clause of vitality and "a sensible, practical construction." Massachusetts Turnpike Auth. v. Perini Corp., supra 349 Mass. at 454, 208 N.E.2d 807. See Rice v. Pennsylvania, 202 F.2d 861, 862 (2d Cir. 1953); Clark v. State St. Trust Co., 270 Mass. 140, 155, 169 N.E. 897 (1930); Stern v. Larocca, 49 N.J.Super. 496, 506, 140 A.2d 403 (1958); Barrons v. J. H. Findorff & Sons, 89 Wis.2d 444, 453-454, 278 N.W.2d 827 (1979). See also McMahon v. Monarch Life Ins. Co., 345 Mass. 261, 264, 186 N.E.2d 827 (1962); Berger v. Siegel, 329 Mass. 74, 77-78, 106 N.E.2d 429 (1952). "Realistically viewed, the shift of liability is a shift in the burden of providing adequate insurance coverage." Cozzi v. Owens-Corning Fiber Glass Corp., 63 N.J.Super. 117, 128, 164 A.2d 69 (1960). ⁹ See American Agricultural Chem. Co. v. Tampa Armature Works, Inc., 315 F.2d 856, 860 (5th Cir. 1963); Day v. Ocean Drilling & Exploration Co., 353 F.Supp. 1350, 1353 (E.D.La.1973); Buscaglia v. Owens-Corning Fiberglass, 68 N.J.Super. 508, 515, 172 A.2d 703 (1961), aff'd 36 N.J. 532, 178 A.2d 208 (1962). We conclude that in order to give the contractual liability clause meaning, it must be construed to protect CDM against its own concurrent negligence.

Granted, the language of the clause in issue here is less broad and less precise than that in clauses we have previously construed to encompass the indemnitee's negligence, see, e. g., Boston & Maine R. R. v. Hall, 284 F.2d 474 (1st Cir. 1960), cert. denied, 365 U.S. 817, 81 S.Ct. 698, 5 L.Ed.2d 695 (1961); Brown v. Wong Gow Sue, 354 Mass. 646, 241 N.E.2d 919 (1968); New York, N. H. & H. R. R. v. Walworth Co., 340 Mass. 1, 162 N.E.2d 789 (1959); Clarke v. Ames, 267 Mass. 44, 165 N.E. 696 (1929). Nevertheless, we cannot ignore the basic rule of construction that we must give effect to the parties' intentions and construe the language to give it...