Walsh Construction Company v. Chicago Explosive Services, LLC et al

Filing 27

OPINION AND ORDER denying 13 Motion to Dismiss Count II and III of Plaintiffs Complaint, filed by Defendant, Chicago Explosive Services, LLC. Signed by Judge Rudy Lozano on 10/20/14. (mc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
WALSH CONSTRUCTION CO.,
Plaintiff,
vs.
CHICAGO EXPLOSIVE
SERVICES, LLC, and
PMG INDUSTRIAL, LLC,

Defendants.

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No. 2:14-CV-084

OPINION AND ORDER
This

matter

is

before

the

Court

on

Defendant

Chicago

Explosive Services, LLC’s Motion to Dismiss Count II and III of
Plaintiff’s

Complaint,

filed

by

Defendant,

Services, LLC, on June 11, 2014 (DE #13).

Chicago

Explosive

For the reasons set

forth below, the motion is DENIED.

BACKGROUND
Plaintiff, Walsh Construction Company (“Walsh”), filed its
Complaint on March 17, 2014.

(DE #1.)

The Complaint lists the

following claims: Count I, Breach of Contract against Chicago
Explosive Services, LLC (“CES”); Count II, Breach of Contract for
Failure to Indemnify against CES; Count III, Breach of Contract
for Failure to Properly Procure Insurance against CES; Count IV,

Negligence

against

CES;

Count

V,

Negligence

against

PMG

Industrial, LLC (“PMG”); Count VI, Strict Liability against CES;
and Count VII, Strict Liability against PMG.

(DE #1.)

CES filed

a Motion for Enlargement of Time in which to Answer or Otherwise
Respond to Complaint on May 30, 2014.

(DE #11.)

CES then filed

its Answer to Complaint and Motion to Dismiss Count II and III of
Plaintiff’s Complaint on June 11, 2014.
filed its response on June 25, 2014.
reply on June 30, 2014.

(DE #18.)

(DE’s #13 & #15.)
(DE #17.)

Walsh

CES filed its

The motion is thus ripe for

adjudication.

DISCUSSION
Facts
Walsh, an Illinois corporation, was hired by the Indiana
Department of Transportation (“INDOT”) pursuant to INDOT Contract
IB-30997-A to demolish the Cline Avenue Bridge (“Bridge”) in East
Chicago, Indiana.
Indiana

limited

(Comp. ¶¶ 1, 8-9.)
liability

company,

Walsh retained CES, an

pursuant

to

a

subcontract

agreement (“Subcontract”) to perform certain “blasting” tasks
associated with the Bridge demolition.
also Subcontract, DE #1-1.)

(Id. at ¶¶ 2, 8-10; see

According to the Subcontract, the

scope of CES’s work was to include blasting of Spans 12 and 14 of
the Bridge, and it required that the “[b]lasting be performed
such that Span 12 falls away from the Indiana Harbor Canal on the
2

landward side of Pier 13 and Span 14 falls away from the Indiana
Harbor Canal on the landward side of Pier 14.”
see also Subcontract, DE #1-1, pp. 2-3.)

(Comp. ¶¶ 9-10;

Several documents,

labeled as exhibits A through M, were attached to and expressly
incorporated into the Subcontract.
Subcontract,

DE

#1-1,

p.

1.)

(see list of documents at

Exhibit

A

of

the

Subcontract

delineates the relevant Terms and Conditions and includes an
indemnification provision as follows:
Article 9 - Indemnification
9.1 Indemnification.
To the fullest extent
permitted
by
law,
Subcontractor
shall
indemnify, defend (with counsel reasonably
satisfactory
to
Contractor),
and
save
harmless
Owner,
Owner’s
Representative,
Architect/Engineer,
Contractor,
and
Contractor’s
surety,
as
well
as
any
individual and/or entity that Contractor is
required by contract to indemnify, defend
and/or hold harmless, and their partners,
insurers, parents, members, subsidiaries,
related corporations officers, directors,
agents and employees, and each of them,
(hereafter collectively “Indemnified Parties”
and individually “Indemnified Party”) from
and against any and all suits, actions, legal
or administrative proceedings, claims, debts,
demands,
damages,
consequential
damages,
liabilities, judgments, fines, penalties,
interest, actual attorney’s fees, costs and
expenses
of
whatever
kind
or
nature
(hereafter “Indemnified Claims”) and whether
they may arise before, during or after
performance of Subcontractor’s Work which are
in any manner directly or indirectly caused,
occasioned or contributed to, in whole or in
part, or claimed to be caused, occasioned, or
contributed to, in whole or in part, through
any act, omission, fault or negligence
whether active or passive of Subcontractor,
3

or
anyone
acting
under
its
direction,
control, or on its behalf or for which it is
legally responsible, in connection with or
incident to the Subcontractor’s Work or
arising out of any failure of Subcontractor
to perform any of the terms and conditions of
this
Subcontract:
without
limiting
the
generality of the foregoing, the same shall
include injury or death to any person or
persons (including Subcontractor’s employees)
and damage to any property, regardless of
where located, including the property of
Owner
and
Contractor.
Subcontractor’s
obligation to provide a defense for an
Indemnified Party shall arise regardless of
the merits of the matter and shall continue
until a final determination of fault is made.
Subcontractor’s
obligation
to
Indemnify,
defend and hold harmless an Indemnified Party
shall apply regardless of any allegations of
active and/or passive negligent acts or
omissions
of
an
Indemnified
Party.
Subcontractor, however, shall be relieved of
and shall have no further obligation to
Indemnify an Indemnified Party under the
Subcontract
Documents
upon
a
final
determination,
to
the
extent
that
an
Indemnified Claim is due to the negligence or
willful misconduct of that Indemnified Party
or
such
Party’s
agents
or
employees.
Contractor shall be entitled to recover
actual attorney fees and court costs and all
other
costs,
expenses
and
liabilities
incurred by Contractor in an action brought
to enforce all or any part of this Article 9.
Subcontractor’s obligations described in this
paragraph shall not be construed to negate,
abridge,
or
reduce
other
rights
or
obligations
of
indemnity
which
would
otherwise exist as to a party or person
described in this paragraph.
(Subcontract, DE #1-1, pp. 10-11.)

Exhibit B of the Subcontract

describes the “Scope, Clarification, Alternates, and Unit Prices”
of the agreement.

(Id. at pp. 2-3.)
4

As part of those terms, CES

agreed to obtain $2,000,000 in insurance coverage naming Walsh as
an insured and consisting of a combination of Commercial General
Liability

(“CGL”)

and

Excess

coverage,

plus

CES

agreed

to

purchase an additional $5,000,000 blasting insurance policy for
its

work

related

to

the

Subcontract.

Subcontract, DE #1-1, pp. 2-3 & 15-16.)

(Comp.

¶¶

12-13;

In Inclusion 18, the

parties agreed that:
Chicago Explosive Services will provide a $5
million
blasting
insurance
policy,
in
addition to the requirements listed in
Exhibit D of this agreement. A claim will be
made against this blasting insurance policy
for any costs Walsh Construction incurs that
results from Chicago Explosives Service's
non-conformance to the scope of work as
outline in inclusions 24 and 25.
(Subcontract, DE #1-1, pp. 2.)

The language of Inclusion 24

states that “[CES] will provide a skyjack forklift capable of
reach (sic) 45 ft.”

(Id.)

The language of Inclusion 25 states

the scope of work as follows:
Segment 1 Scope of Work includes:
a.
Blasting of Segment 1 Including Spans 2-6
b.
Drilling and Blasting of Piers 3-7
c.
Blasting of Pier 7 Additional Structural
Steel Support
d.
Blasting method must prevent damage
to Pier 2 substructure and footing.
(Id.)

The language of Inclusion 26 also describes the scope of

work and provides:
Segment 3 Scope of Work Includes:
a.
Blasting of Spans 12 & 14

5

b.

c.

d.

e.
f.

Blasting of Span 12 will include
Pier 12, Pier 13 and shoring tower
in Span 12.
Blasting of Span 14 will include
Pier 14, Pier 15 and shoring tower
in Span 14.
Blasting to be performed such that
Span 12 falls away from the Indiana
Harbor Canal on the landward side
of Pier 13 and Span 14 falls away
form the Indiana Harbor Canal on
the landward side of Pier 14.
Blasting will include H-Piles set
in Pier 13 and Pier 14 columns.
Blasting method must prevent damage
to Pier 13 and Pier 14 crash-walls.

(Id. at pp. 2-3.)
CES was assisted by PMG in completion of the blasting work
on Spans 12 and 14.

(Comp. ¶ 15.)

When Span 12 was improperly

and negligently blasted by CES and PMG, the Bridge did not fall
away

from

the

Indiana

Harbor

canal

onto

the

landward

side;

instead, it fell into the canal and severely damaged the crash
wall and sheet pile wall of Pier 13.
¶ 25.)

(Id. at ¶¶ 16-17, Count II,

Likewise, when Span 14 was improperly and negligently

blasted by CES and PMG, the Bridge did not fall away from the
Indiana Harbor Canal onto the landward side; instead it fell down
into the canal and damaged the crash wall and sheet pile wall of
Pier 14.
Contractor

(Id. at ¶ 18, Count II, ¶ 25.)
for

INDOT

Contract

Walsh, as the General

IB-30997-A,

was

contractually

obligated to repair the damage to the crash walls and sheet pile
walls caused by the negligent actions of CES and PMG.

6

(Id. at ¶

19,

Count

II

¶¶

25-26.)

Walsh

completed

such

repairs

and

incurred expenses for labor, equipment, materials, and overhead
totaling

approximately

$2,059,504.68.

(Id.

at

¶¶

20-21.)

Furthermore, as a result of the Bridge falling into the Indiana
Harbor Canal, debris fell into the channel, which required the
channel to be closed.

(Id. at ¶ 22.)

This closure affected the

work schedule of other construction companies working in the
area.

(Id.)

One such company, Kokosing Construction Company

(“Kokosing”), filed a claim for $67,745.51 against Walsh for
costs it incurred as a result of CES’s negligent actions.
at ¶¶ 22-23, Count II, ¶ 27.)

(Id.

Walsh tendered these claims to

CES, but CES denied Walsh’s tender.

(Id. at Count II, ¶ 28.)

Walsh ultimately incurred damages of approximately $2,127,250.19
in total and responded by filing the instant Complaint against
CES and PMG on March 17, 2014, to recover these damages.

(Id. at

Count II, ¶ 30.)

Analysis
In evaluating a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), a court must accept all facts alleged
in the complaint as true and draw all reasonable inferences in
the light most favorable to the plaintiff.
272 F.3d 519, 520 (7th Cir. 2001).

Johnson v. Rivera,

A complaint is not required

to contain detailed factual allegations; however, the plaintiff
7

must allege facts that state a claim to relief that is plausible
on its face.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

It is

not enough that there might be some conceivable set of facts that
entitle the plaintiff to relief.
550

U.S.

544,

553-56

Bell Atlantic Corp. v. Twombly,

(2007).

The

plaintiff’s

“requires more than labels and conclusions. . . .”

obligation
Id. at 555.

The Supreme Court has provided that “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice.”
When

reviewing

a

Iqbal, 556 U.S. at 678.

motion

to

dismiss,

a

court

generally

considers only the factual allegations of the complaint and any
reasonable inferences that can be drawn from those allegations;
however, a court may also examine information from documents “if
they are referred to in the plaintiff’s complaint and are central
to his claim.”

Adams v. City of Indianapolis, 742 F.3d 720, 729

(7th Cir. 2014); see Williamson v. Curran, 714 F.3d 432, 443 (7th
Cir. 2013) (noting the Seventh Circuit has taken “a relatively
expansive view of the documents that a district court properly
may

consider

exception

in

is

interpretation.
Cir. 1998).

disposing
applicable

of

a

in

motion
cases

to

dismiss.”).

concerning

Such

contract

Levenstein v. Salafsky, 164 F.3d 345, 347 (7th

In those cases the contract itself is “considered

part of the pleadings” as it is “central to [the plaintiff’s]
claim.”

Wright v. Assoc. Ins. Cos. Inc., 29 F.3d 1244, 1248 (7th
8

Cir. 1994).

Here, Walsh’s Complaint refers directly to the

Subcontract, and that Subcontract expressly incorporates various
exhibits, all of which may be considered by this Court in ruling
on the motion to dismiss without converting it into a motion for
summary judgment.

Count II - Breach of Contract for Failure to Indemnify
In Indiana, the essential elements of breach of contract are
“the existence of a contract, the defendant’s breach of that
contract, and damages resulting from the breach.”

Haegert v.

Univ. of Evansville, 977 N.E.2d 924, 937 (Ind. 2012).

Indiana

courts recognize and respect the freedom of parties to enter into
contracts, and there is a presumption that those contracts are
representative of the freely bargained for agreements of the
parties.
435

(7th

SAMS Hotel Group, LLC. V. Environs, Inc., 716 F.3d 432,
Cir.

2013).

Parties

are

free

to

negotiate

an

indemnification clause that “may obligate one party to insure
against and/or to indemnify certain acts or omissions of the
other party.”

Gaffney v. Riverboat Servs. Of Ind., Inc., 451

F.3d 424, 469 (7th Cir. 2006).

The duty to indemnify, however,

does not usually arise until the party seeking indemnity “suffers
loss or incurs damage.”

Essex Group, Inc. v. Nill, 594 N.E.2d

503, 507 (Ind. Ct. App. 1992).

This may occur when the party

seeking indemnity pays an underlying claim, pays judgment on an
9

underlying

claim,

underlying claim.

or

tenders

payment

in

settlement

of

an

Id.

Here, CES argues that Walsh’s Breach of Contract for Failure
to Indemnify claim must fail because CES is not obligated to
indemnify Walsh for Walsh’s own negligence.

CES states that the

Complaint is unclear as to the nature of any alleged “claims”
made against it by third parties such as INDOT and/or Kokosing,
which

leaves

speculation

as

to

whether

Walsh

is

seeking

indemnification for its own negligence or for that of CES.

CES

also argues that Walsh’s “failure to elaborate” creates an issue
as to whether CES’s duty to indemnify Walsh has been triggered
because Walsh has presented no facts showing that it has paid any
underlying claim via judgment or settlement or that its liability
based on the negligence of CES has become fixed.

In response,

Walsh states that the Complaint clearly alleges that CES must
indemnify Walsh for CES’s negligence (rather than for Walsh’s own
negligence) and that the damages at issue are identifiable as
being caused by CES.
The Court finds that Count II of the Complaint adequately
states a claim.

Specifically, Walsh alleges the following: (1)

that Walsh and CES entered into a Subcontract which included an
indemnification provision; (2) that the indemnification provision
provides
debts,

that

and

CES

demands

will
made

indemnify
against
10

Walsh
Walsh

for
as

a

damages,
result

claims,
of

CES’s

negligent acts or omissions; (3) that the Subcontract sets forth
specific requirements related to the blasting actions performed
by CES; (4) that CES and PMG improperly and negligently blasted
certain Bridge spans defined in the Subcontract; (5) that, as a
result of CES and PMG’s improper and negligent blasting, crash
walls and sheet pile walls were damaged; (6) that Walsh was
contractually obligated to INDOT to repair the damage caused by
the negligent actions of CES and PMG; (7) that INDOT demanded
that the repairs be completed by Walsh; (8) that Kokosing also
made a claim and demand on Walsh for damages sustained as a
result of CES’s negligence; (9) that Walsh tendered such claims
to CES; (10) that CES denied Walsh’s tender; and (11) that Walsh
completed

the

required

repairs

and,

in

doing

so,

incurred

expenses for labor, equipment, materials, and overhead totaling
approximately $2,127,250.19.

Taking these allegations as true

and drawing all reasonable inferences in Walsh’s favor as must be
done at this point, the Complaint adequately alleges that CES
breached the Subcontract by failing to indemnify Walsh for CES’s
negligence.
claim

has

To the extent that CES argues that no underlying
triggered

operation

of

the

indemnification

clause

because there are no facts in the Complaint showing that Walsh
has paid any underlying claim, this argument is without merit.
Again, giving Walsh the benefit of all reasonable inferences to
which it is entitled at this stage, Walsh has adequately alleged
11

that damages occurred because of CES’s negligence, that it was
required by INDOT to repair the damage caused by CES, and that it
did repair those damages, incurring significant costs for labor,
equipment,

materials,

and

overhead

in

the

process.

Walsh’s

allegations are sufficient to withstand Rule 12(b)(6) scrutiny.
Thus, the motion to dismiss Count II is DENIED.

Count III - Breach of Contract for Failure to Properly
Procure Insurance
“Under

Indiana

law,

the

primary

goal

of

contract

interpretation is to give effect to the parties’ intent.”
of Forum Grp., Inc., 82 F.3d 159, 163 (7th Cir. 1996).

Matter

Terms of

an agreement will usually be given their “plain and ordinary
meaning” as written.
2008).
evidence

Bailey v. Mann, 895 N.E.2d 1215, 1217 (Ind.

However, “[r]ules of contract construction and extrinsic
may

be

employed

in

giving

effect

to

the

parties’

reasonable expectations” when a contract’s terms are ambiguous or
uncertain.

Johnson v. Johnson, 920 N.E.2d 253, 256 (Ind. 2010).

Here, CES argues that Count III of the Complaint fails to
state a claim because the clear language of the Subcontract did
not

require

CES

to

obtain

an

additional

$5,000,000

blasting

insurance policy for the specific work that is the subject of
this dispute.

CES points out that Inclusion 18 states that CES

was to provide the additional blasting insurance policy “for any
12

costs

Walsh

.

.

.

incurs

that

results

from

[CES’s]

non-

conformance to the scope of work as outlined in inclusions 24 and
25.”

Inclusion 24 states that CES was to provide “a skyjack

forklift capable of reaching 45 ft,” and Inclusion 25 describes
the scope of work related to blasting Spans 2-6 and Piers 3-7.
Thus,

according

to

CES,

because

the

subject

of

the

dispute

relates to Piers 13 and 14 only, a claim by Walsh for breach of
contract

for

insurance

CES’s

policy

failure

fails

on

to

obtain
face.

its

an

additional

CES

states

blasting

that

Walsh

specifically identified the piers requiring additional blasting
insurance, which did not include Piers 13 and 14.

In response,

Walsh argues that, when reading the Subcontract as a whole, it is
clear that the intent of the parties was to require an additional
blasting

insurance

policy

for

the

two

inclusions

related

to

blasting (Inclusions 25 and 26) and that the reference to the
line item requiring CES to provide a forklift (Inclusion 24) was
simply a typographical error.
reasonable

basis

to

assume

Walsh points out that there is no
the

Subcontract

would

require

a

blasting policy for a provision related to a forklift rather than
the blasting work CES was to perform, as such blasting work was
central to the entire agreement.
After

review

attached/incorporated

of

the

exhibits,

Subcontract
the

Court

and
finds

relevant
that

the

contractual language is not as “clear and unambiguous” as CES
13

maintains.

Inclusion

18

states

that

CES

was

to

provide

an

additional “$5 million blasting insurance policy” for its “nonconformance to the scope of work as outlined in inclusions 24 and
25” (emphasis added).

Inclusion 24 simply refers to forklift

specifications, and it does not reference “scope of work” or
blasting requirements at all.

Inclusions 25 and 26, however, are

entitled “scope of work” and outline CES’s obligations as related
to their blasting work on the Bridge.

Giving Walsh the benefits

to which it is entitled at this stage, it is reasonable to infer
that a typographical error was made and that the intent of the
parties was to reference Inclusions 25 and 26 in Inclusion 18 of
Exhibit B of the Subcontract.
the

“scope

of

work”

for

Inclusions 25 and 26 both refer to

blasting,

while

inclusions specifically use that phrase.

no

other

numbered

Inclusion 26 references

Spans 12 and 14 (which were allegedly negligently blasted by CES)
and

Piers

negligent

13

and

14

blasting),

Walsh’s Complaint.

(which
all

of

were
which

allegedly
relate

damaged

to

the

by

CES’s

subject

of

Thus, the Court does not agree that Walsh has

pled itself out of Court as CES argues, and CES’s motion to
dismiss Count III is DENIED.1
1

In its reply, CES also belatedly argues that Walsh has not stated a claim
for breach of contract in Count III because Walsh’s Complaint does not allege
that CES failed to secure and/or maintain the required $2,000,000 in CGL and
Excess insurance coverage described in Exhibit D of the Subcontract. This
argument is without merit. As Walsh points out, the Complaint states that the
parties agreed CES would provide $2,000,000 in CGL and Excess coverage, that
it would name Walsh as an additional insured under the policies, that Walsh
tendered the claims to the insurers who failed to respond or provide Walsh
with coverage, and that the Subcontract was thus breached as a result of CES’s

14

CONCLUSION
For the aforementioned reasons, Defendant Chicago Explosive
Services, LLC’s Motion to Dismiss Count II and III of Plaintiff’s
Complaint, filed by Defendant, Chicago Explosive Services, LLC,
on June 11, 2014 (DE #13), is DENIED.

DATED: October 20, 2014

/s/ RUDY LOZANO, Judge
United States District Court

failure to procure the required insurance.

15

(See Comp., Count III, ¶¶ 25-28.)