Vaughn v. Konecranes, Inc.

Filing 148

MEMORANDUM OPINION AND ORDER: it is ORDERED as follows: 1. Third-party Dft CMWA's 105 Motion for Summary Judgment is GRANTED, in part, re Konecranes' common law indemnity claim, & DENIED re Konecranes' contractual indemnity claim; 2. Third-party Pla Konecranes' 112 motion for summary judgment is GRANTED, in part, re contractual indemnity, & DENIED as it relates to the common law indemnity claim. Signed by Judge Danny C. Reeves on May 29, 2015. (MWZ) cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
(at Lexington)
GEORGE VINCENT VAUGHN,
Plaintiff,
V.
KONECRANES, INC.,
Defendant/Third Party Plaintiff,
V.
DEMAG CRANES AND COMPONENTS
CORP.; HETRONIC USA, INC.; and
CENTRAL MOTOR WHEEL OF
AMERICA, INC.,
Third Party Defendants.

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Civil Action No. 5: 14-136-DCR

MEMORANDUM OPINION
AND ORDER

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In this personal injury action, Third-Party Plaintiff Konecranes, Inc. (“Konecranes”)
seeks indemnification from Third-Party Defendant Central Motor Wheel of America, Inc.
(“CMWA”). The matter is pending for consideration of the CMWA’s motion for summary
judgment on Konecranes’ indemnification claims. [Record No. 105] Konecranes opposes
the motion, urging the Court to grant summary judgment in its favor instead. [Record No.
112] For the reasons discussed below, summary judgment will be granted in favor of
CMWA on Konecranes’ common law indemnity claims but in favor of Konecranes’ on its
contractual indemnity claims.

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I.
This action arises from a warehouse accident involving an industrial overhead crane.
On May 8, 2012, while working at CMWA, Plaintiff George Vincent Vaughn was injured
when a crane, allegedly moving “independent of human control,” pinned his foot. [Record
No. 1-2, p. 21] Vaughn filed suit in Boubon Circuit Court in Kentucky against Konecranes
on April 18, 2013. [Record No. 1-1] CMWA’s involvement in this lawsuit arises by virtue
of third-party indemnity, contribution, and apportionment claims subsequently filed by
Konecranes. [Record No. 24] Because Vaughn’s claims against Konecranes have been
dismissed, [Record No. 138] only the third-party indemnification claims remain pending.
II.
This action is in federal court on the basis of diversity jurisdiction. 28 U.S.C. § 1332.
Because Kentucky is the forum state, its substantive law will be used. Erie Railroad v.
Tompkins, 304 U.S. 64, 58 (1938); Raw v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 526 (6th
Cir. 2006).

However, federal procedural law will govern as applicable, including

establishing the standard for summary judgment. Weaver v. Caldwell Tanks, Inc. 190 F.
App’x 404, 408 (6th Cir. 2006).
Summary judgment is appropriate when there are no genuine disputes regarding any
material facts and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Chao v. Hall Holding Co.,
285 F.3d 415, 424 (6th Cir. 2002). A dispute over a material fact is not “genuine” unless a
reasonable jury could return a verdict for the nonmoving party. That is, the determination
must be “whether the evidence presents a sufficient disagreement to require submission to a
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jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986); see Harrison v. Ash, 539 F.3d 510, 516
(6th Cir. 2008).
The party moving for summary judgment bears the burden of showing conclusively
that no genuine issue of material fact exists. CenTra, Inc. v. Estrin, 538 F.3d 402, 412 (6th
Cir. 2008). Once the moving party has met its burden of production, the nonmoving party
must present “significant probative evidence” of a genuine dispute to defeat a motion for
summary judgment. Chao, 285 F.3d at 424. The nonmoving party cannot rely upon the
assertions in its pleadings; rather, it must come forward with probative evidence, such as
sworn affidavits, to support its claims. Celotex, 477 U.S. at 324. In deciding whether to
grant summary judgment, the Court views all the facts and inferences drawn from the
evidence in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
III.
Kentucky law distinguishes between contractual and common law indemnity claims.
Thompson v. The Budd Company, 199 F.3d 799, 806 (6th Cir. 1999).

Accordingly,

Konecranes’ claims will be addressed separately.
A.

Common Law Indemnity

In support of its motion for summary judgment on Konecranes’ common law
indemnity claims, CMWA argues that it is self-insured for workers’ compensation claims
and that it has paid all of Vaughn’s reasonable and necessary medical expenses related to the
accident. [Record No. 105, p. 6] According to CMWA, Kentucky limits an employer’s
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liability to a third party indemnitee to the amount paid under the Worker’s Compensation Act
and Konecranes’ claims are precluded on the basis of double recovery. See Ky. Rev. Stat. §§
342.690, 342.700. However, the Court need not reach this issue because liability has not
been imposed against Konecranes.
In addressing common law indemnity claims under Kentucky’s common law, courts
have repeatedly recognized liability as a prerequisite. See, e.g., Clark v. Hauck Mfg. Co.,
910 S.W.2d 247, 253 (Ky. 1995) (“Indemnity is not an issue until fault has been determined.
… There can be no indemnity without liability.”); Poole Truck Line, Inc. v. Commonwealth,
892 S.W.2d 611, 614 (Ky. Ct. App. 1995) (“Both indemnity and contribution depend upon
liability by one or both parties to the original claimant who suffered the original loss.
Without such liability, there is no independent right to indemnity or contribution.”). In
general, then, a party cannot recover under a common law indemnity claim if it has not been
held liable to a third party. Konecranes is not liable to Vaughn; [Record No. 138] thus, there
is nothing for CMWA to indemnify, and Konecranes’ common law indemnity claims fail.
To the extent that Konecranes’ common law indemnity claims also involve claims for
attorney fees, these fail as well. Generally, each party is responsible for its own attorney fees
and expenses. See Nucor Corp. v. General Elec. Co., 812 S.W.2d 136, 147 (Ky. 1991).
While Kentucky courts have recognized an exception where equity indicates that attorney
fees should be indemnified under common law, liability for the underlying claim is a
prerequisite. Chittum v. Abell, 485 S.W.2d 231, 237 (Ky. Ct. App. 1972). Based on the
foregoing, Konecranes is not entitled to common law indemnity.

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B.

Contractual Indemnity

CMWA’s motion for summary judgment also challenges the contractual bases for
Konecranes’ indemnity claims. For contractual indemnity under Kentucky law, it is not
dispositive that Konecranes has not been held liable in the underlying claim. United States
Fidelity & Guar. Co. v. Napier Elec. & Constr. Co., Inc., 571 S.W.2d 644, 644 (Ky. Ct. App.
1978).

Kentucky law provides that “the nature of an indemnitor’s liability under an

indemnity contract shall be determined by the provisions of the indemnity agreement itself.”
See Napier, 571 S.W.2d 644.

Under Napier, parties may contractually provide for

indemnification for, inter alia, the costs incident to potential legal liability as well as for the
legal liability itself. Such a contract is “not against public policy and will be enforced if the
indemnitee has suffered loss thereunder and has complied with its terms.” Id. However, if
there is doubt as to the meaning of an indemnity clause or doubt as to whether a contract
provides for indemnity, courts should interpret the contract against a finding of
indemnification. Amerco Marketing Company of Memphis, Inc. v. Myers, 494 F.2d 904,
913-14 (6th Cir. 1974).
Konecranes and CMWA agree that two documents represent their contractual
agreement: Konecranes’ offer accepted on October 24, 2011, for annual inspection and
preventative maintenance (“October 2011 Offer”) and Konecranes’ offer accepted in April of
2012 for the sale and installation of a Konecranes hoist and trolley (“April 2012 Offer”).
[Record Nos. 112-1; 112-2] In terms of the actual indemnity language, both the October
2011 Offer and April 2012 Offer contain the following provision:

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INDEMNIFICATION. KONECRANES SHALL NOT BE LIABLE FOR
AND BUYER SHALL RELEASE, INDEMNIFY, AND HOLD
KONECRANES … HARMLESS FROM ANY CLAIMS, DEMANDS,
DAMAGES, REGARDLESS OF THEIR TYPE INCLUDING, BUT NOT
LIMITED TO, DIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE
OR SPECIAL, ACCOUNTS, GRIEVANCES, LOSSES AND EXPENSES,
WHETHER KNOWN OR UNKNOWN, PRESENT OR FUTURE, ANY
AND ALL LIABILITY, OR AND FROM ANY AND ALL MANNER OF
ACTIONS, CAUSE[S] OF ACTIONS, ALL SUITS IN LAW, IN EQUITY,
OR UNDER STATUTE, STATE OR FEDERAL, OF WHATEVER KIND
OR NATURE, THIRD PARTY ACTIONS, INCLUDING SUITS FOR
CONTRIBUTION AND/OR INDEMNTIY ON ACCOUNT OF OR IN ANY
WAY ARISING OUT OF ACTS OR OMISSIONS OF THE BUYER, ITS
AGENTS OR EMPLOYEES AND RELATING IN ANY WAY TO THE
GOODS AND/OR SERVICES PROVIDED UNDER THE QUOTATION OR
THE EQUIPMENT RELATED THERETO, INCLUDING, BUT NOT
LIMITED TO BUYER’S USE, INSTALLATION, INCORPORATION OR
SELECTION THEREOF AND CAUSES (FOR INSPECTION SERVICES):
(I) OUTSIDE THE SCOPE OF THE INSPECTION AS IDENTIFIED IN
PARAGRAPH 9.B HEREOF, (II) ANY CONDITION THAT OCCURS
FOLLOWING THE CRANE’S USE AFTER AN INSPECTION AS
IDENTIFIED IN PARAGRAPH 9.C HEREOF, (III) FAILURE OF BUYER
TO REPAIR OR REPLACE ANY DEFECTIVE CRANE OR COMPONENT
AS IDENTIFIED IN PARAGRAPH 9.D HEREOF OR ANY OTHER
CAUSE IDENTIFIED HEREIN OR THAT MAY BE REASONABLY
INFERRED HEREFROM EXCEPT TO THE EXTENT CAUSED BY THE
SOLE NEGLIGENCE OF KONECRANES.

[Record Nos. 105-4, pp. 9-10; 105-5, pp. 6-7] This language is very broad. It requires
indemnification not only for damages, but also for losses, expenses, and various other
liabilities and obligations. Under the terms of the contract, CMWA can avoid its obligation
to indemnify Konecranes only “to the extent caused by the sole negligence of Konecranes.”
[See Record No. 105-4, p. 10.]
CMWA argues that it is entitled to summary judgment because the indemnification
provisions contain exculpatory language relieving Konecranes of liability for its own

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negligence. In interpreting “sole negligence” indemnity provisions under Kentucky law, the
United States Court of Appeals for the Sixth Circuit has previously reasoned that “an
indemnitee may recover under the indemnity agreement as long as it was not 100%
responsible for the plaintiff’s injuries.” Thompson, 199 F.3d at 811. Only where the costs
are “clearly shown to have resulted solely and directly from [Konecranes’] gross negligence”
can CMWA avoid liability under the contractual provision. See id.
The Court has already found that there is no genuine issue of material fact regarding
Konecranes’ negligence. [See Record No. 138] In fact, the only admissible evidence of
causation is the testimony of Konecranes’ expert witness, finding no indication that
Vaughn’s injury resulted from any act or omission by Konecranes. [Record No. 70-3] The
indemnification provision is not applied in this instance to defend against Konecranes’ sole
negligence. See Speedway Superamerica, LLC v. Erwin, 250 S.W.3d 339, 344 (Ky. App.
2008).

The terms of the exclusion, under their plain and ordinary meaning, do not

encompass circumstances other than Konecranes’ sole negligence and therefore do not
absolve CMWA from its obligation to indemnify Konecranes in this matter.
CMWA further challenges the enforceability of the indemnity provision, arguing that
“no evidence suggests that any party at CMWA examined or accepted the standard terms and
conditions [of the contracts], including any agreement to indemnify Konecranes for its
negligence, to take responsibility for any negligence on Konecranes’ behalf.” [Record No.
130, p. 7] Instead, CMWA argues that, because the indemnification provision is essentially
“boilerplate language that Konecranes includes in all their Agreements,” it should not be
enforceable against CMWA.

[Id.]

However, given that the contracts at issue were
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negotiated as part of arm’s-length transactions between two business corporations with
presumably equal bargaining power, there is no compelling reason to disturb their written
contract. See Cumberland Valley Contractors, Inc. v. Bell Cnty. Coal Corp., 238 S.W.3d
644, 646 (Ky. 2007) (where the parties were dealing at arm’s length and upon an equal
footing, enforcing the exculpatory clause was not against public policy).

CMWA, a

sophisticated entity, entered into a broad indemnification agreement with Konecranes –
twice. If CMWA were not satisfied with the breadth of the indemnity provision, it could
have negotiated different terms, as it evidently did with other portions of the contract.
[Record No. 130, p. 3] Having failed to do so, CMWA cannot now be excused from the
agreed terms.
IV.
In summary, the indemnity provision at issue is enforceable and is not against
Kentucky’s public policy. There is no evidence that the “sole negligence” exemption applies
under these facts. Therefore, as a matter of law, the parties’ agreement obligates CMWA to
indemnify Konecranes in this action. However, Konecranes’ common law indemnity claim
necessarily fails because liability has not been imposed against it. Accordingly, it is hereby
ORDERED as follows:
1.

Third-party Defendant CMWA’s Motion for Summary Judgment [Record No.

105] is GRANTED, in part, regarding Konecranes’ common law indemnity claim, and
DENIED regarding Konecranes’ contractual indemnity claim.

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2.

Third-party Plaintiff Konecranes’ motion for summary judgment [Record No.

112] is GRANTED, in part, regarding contractual indemnity, and DENIED as it relates to
the common law indemnity claim.
This 29th day of May, 2015.

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