Soverign Ins. Co. v. Texas Pipe Line Co.

Decision Date20 May 1986
Docket NumberNo. 85-C-1499,85-C-1499
Citation488 So.2d 982
PartiesSOVERIGN INSURANCE COMPANY v. The TEXAS PIPE LINE COMPANY v. ATLAS CONSTRUCTION COMPANY.
CourtLouisiana Supreme Court

Larry N. Port, Metairie, for defendant-applicant.

Gerard M. Dillon, Dillon & Cambre, New Orleans, James M. Funderburk, Duval, Funderburk, Sundbery & Lovell, Houma, for respondents.

DENNIS, Justice.

This court decided that a contract of indemnity whereby the indemnitee is indemnified against the consequences of his own negligence is strictly construed, and that such a contract will not be construed to indemnify an indemnitee against losses resulting to him through his own negligent acts, unless such an intention is expressed in unequivocal terms. Polozola v. Garlock, 343 So.2d 1000 (La.1977). The present case raises the question of whether a similar rule of contractual interpretation should be applied to determine if a contract provides indemnity against an indemnitee's strict liability under Civil Code article 2317 for damage to a third person caused by an unreasonably dangerous thing in the indemnitee's custody. The trial court decided that the instant contract did not afford indemnification against such a claim, and the Court of Appeal affirmed by an evenly divided en banc court. 470 So.2d 969 (La.App. 1st Cir.1985). We reverse. When a contract of indemnity makes no express provisions for indemnification against the consequences of the indemnitee's negligence, and an unequivocal intention to so indemnify cannot be found after interpreting each contractual provision in light of the whole contract and the general rules of contractual interpretation, the court will presume that the parties did not intend to hold the indemnitee harmless from such liability. On the other hand, this presumption does not apply to the question of whether the parties intended to indemnify against the indemnitee's strict liability under Civil Code article 2317. If the contract's provisions are doubtful or simply fail to address the question, the court may further interpret the contract on this point in light of everything that, by law, custom, usages or equity is considered as incidental or necessary to its effectuation.

Texas Pipeline Company leased a tract of land for purposes of operating a crude oil storage facility. On January 27, 1981, Texas entered into a contract with Atlas Construction Company, Inc. for the construction of three crude oil storage tank foundations. The contract provided that Atlas would indemnify Texas against any liability, cost, expense, damage or loss in connection with the contract, except that resulting solely from Texas' negligence. 1 On September 30, 1981, a roadbed on the leased premises collapsed, causing a cement truck owned by a subcontractor to overturn. The truck was a total loss except for its salvage value. The subcontractor's insurer, Soverign Insurance Company, paid most of the loss and received a conventional subrogation.

Soverign and the subcontractor sued Texas as custodian of the roadway, claiming strict liability based on Civil Code article 2317. Texas filed a third-party demand against Atlas for indemnity under the construction contract. The plaintiffs amended their petition to name Atlas and the landowner as defendants also.

After trial, the district court found that the damage was caused by a defective condition in the roadway on Texas' leased premises, held Texas strictly liable under Civil Code article 2317, rejected Texas' claim for indemnity under the contract, and dismissed all the other claims. The court of appeal, sitting en banc, affirmed by an evenly divided vote. An opinion subscribed to by a plurality reasoned that the strict construction rule of Polozola v. Garlock should be applied to decide whether the parties intended to indemnify the indemnitee against strict liability under Civil Code article 2317. We granted certiorari because incorrect results were reached below due to a failure to properly interpret the contract and a misunderstanding of the Polozola v. Garlock rule.

The general rules which govern the interpretation of other contracts apply in construing a contract of indemnity. See Polozola v. Garlock, supra. Interpretation of a contract is the determination of the common intent of the parties. See Civil Code arts. 1945, 1949, 1950 and 1956 (1870); Civil Code art. 2045 (1984). 2 When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. See Civil Code arts. 13 and 1945(3) (1870); Maloney v. Oak Builders Inc., 256 La. 85, 235 So.2d 386 (1970); Civil Code art. 2046 (1984). Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole. Civil Code art. 1955 (1870); see Civil Code art. 2050 (1984). Although a contract is worded in general terms, it must be interpreted to cover only those things it appears the parties intended to include. Civil Code art. 1959 (1870); see Civil Code art. 2051 (1984). When the parties intend a contract to have a general scope, but particularly describe a specific situation to eliminate doubt, the interpretation of the contract must not restrict its scope to that specific situation. Civil Code art. 1962 (1870); Civil Code art. 2052 (1984). The obligation of contracts extends not only to what is expressly stipulated, but also to everything that, by law, equity or custom, is considered as incidental to the particular contract, or necessary to carry it into effect. Civil Code art. 1903 (1870). 3 Equity is based on the principles that no one is allowed to take unfair advantage of another and that no one is allowed to enrich himself unjustly at the expense of another. Civil Code art. 1965 (1870); see Civil Code art. 2055 (1984).

Applying these interpretive rules to the contract in the present case, we conclude that the parties intended to provide for indemnity against Texas' strict liability to a third person under Civil Code art. 2317. The words of the contract are not clear and explicit regarding strict liability, so further interpretation may be made in search of the common intent. Although the contract provides that Atlas shall indemnify and hold Texas harmless against each and every claim, demand or cause of action and any liability, such general terms must be interpreted to cover only those things it appears the parties intended to include. When this provision is interpreted in light of the other provisions and the contract as a whole, however, it is evident that the parties intended to afford Texas indemnity against claims, causes of action and strict liability arising under Civil Code article 2317. In the other contractual provisions, Atlas represented that it had inspected the premises for hazardous conditions and had determined their nature and extent to its satisfaction; and Atlas promised to take any measures necessary to adequately protect all persons and property from injury or loss arising out of the work and to maintain all passageways for the protection of persons and property required by any local conditions. The contract excepts from the indemnity provision only claims, causes of action and liability resulting "solely from [Texas'] negligence."

The contract provides that Atlas is obliged to indemnify Texas "whether or not [Texas] may have jointly caused or contributed to, by its own negligence any such claim, demand, cause of action, liability...." The parties described this specific situation to eliminate doubt, however, and did not intend to restrict the scope of the contract to that situation alone.

Considering the contract as a whole, it is clear that the parties adverted to the possibility of claims, causes of actions and judgments based upon strict liability for damage caused by premises hazards or defects. Accordingly, strict liability was within their contemplation when they agreed that indemnity should cover each and every claim, demand or cause of action, and liability, except for those resulting solely from Texas' negligence. Hence, the contract as a whole indicates an intention to provide indemnity against Texas' strict liability under article 2317 for damage caused by premises defects...

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