West Virginia Update: If you do not intend to indemnify for another’s negligence, say exactly that in the contract.
In Elk Run Coal Company, Inc. v. Canopius US Insurance, Inc., filed June 9, 2015, the West Virginia Supreme Court of Appeals ruled that very broad indemnity language sufficed to require a contracting trucker to indemnify Elk Run Coal Company for injuries to the trucker’s employee caused entirely by Elk Run’s negligence. The contract’s indemnity agreement did not mention in specific terms that the trucker agreed to indemnify Elk Run for harm caused by its negligence; nevertheless, the language was deemed sufficiently “clear and definite” to support that construction.
Elk Run entered into a “Hauling and Delivery Agreement” with Medford in which Medford agreed to indemnify Elk Run “from and against any and all demands . . . relating to, resulting from, arising out of, caused by or sustained in connection with, directly or indirectly, [Medford’s] performance of the Work.” The contract required Medford to purchase general liability and automobile liability coverage, and name Elk Run as an additional insured on the policies.
Timothy Walker, a truck driver for Medford Trucking, LLC, sustained injuries while sitting in his truck when an Elk Run Coal Co. employee operating a front-end loader allegedly lost consciousness as he was loading coal onto the truck and struck Mr. Walker’s truck, causing it to overturn. Mr. Walker sued and eventually settled with Elk Run and its employee. After the insurance companies refused to indemnify Elk Run pursuant to the H & D Agreement, Elk Run named them as defendants in a third-party complaint. The circuit court granted summary judgment to the insurance companies, and Elk Run appealed to the Supreme Court of Appeals of West Virginia.
Medford purchased four insurance policies: a commercial general liability policy from Canopius, a related commercial excess liability policy from RSUI, a commercial automobile liability policy from National, and a related commercial automobile excess liability policy from Scottsdale. The Canopius policy included a “Blanket Additional Insured Endorsement” which limited coverage for additional insureds to liability cause in whole or in part by the acts or omissions of Medford, or the acts or omissions of those acting on Medford’s behalf. Canopius contended that the endorsement did not afford Elk Run additional insured status because the harm was “not caused in whole or in part by Medford’s acts or omissions or those of someone acting on its behalf, as is required for coverage”, as the endorsement required. There was no allegation that Medford caused or contributed to the accident in any way.
First, the Court determined whether Elk Run was entitled to coverage under the primary policies. Elk Run argued that the H & D Agreement it had with Medford qualified as an “insured contract,” which would allow Elk Run to stand in the shoes of Medford for coverage purposes. The policy included the typical definition of the term: “That part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.” Relying on the plain language of the H & D Agreement, the Court agreed with Elk Run that its contract with Medford was an “insured contract”. The Court also reasoned that “in loading the coal onto the Medford truck, Elk Run was acting on Medford’s behalf.” Therefore, the endorsement’s limitation of coverage for additional insureds to “the acts or omissions of those acting on [Medford’s] behalf” did not limit coverage here, because at the time of the incident, Elk Run was assisting Medford, even though it was no longer contractually required to provide such assistance.
The Court also held that W. Va. Code § 55-8-14 does not prohibit indemnity contracts for the sole negligence of the indemnitee because the statute applies only to types of contracts that were not at issue. And if the statute were applicable, “it does not prohibit indemnity contracts for the sole negligence of the indemnitee where the contract includes an agreement to purchase insurance”. The Court reaffirmed that “[c]ontracts of indemnity against one’s own negligence do not contravene public policy and are valid.” See Sellers v. Owens-Illinois Glass Co., 156 W. Va. 87, 191 S.E.2d 166 (1972). Furthermore, the Court found that, although broad, the language in the D & H Agreement was “sufficiently clear and definite” as to express the intentions of the parties that Medford agreed to indemnify Elk Run “for Elk Run’s sole negligence so long as that negligence bore some relation” to Medford’s work.
The Court found that the auto exclusion in the Canopius policy did not apply because the front-end loader used by the Elk Run employee to load coal onto Medford’s truck is considered a “mechanical device,” not an auto, and is, therefore, insured under the policy. Finally, the Court rejected RSUI’s argument that the employer liability exclusion in its policy applied. That exclusion barred coverage for “bodily injury . . . to: . . . [a]n employee of the insured arising out of and in the course of employment by the insured. This exclusion applies: . . . [w]hether the insured may be liable as an employer or in any other capacity; and [t]o any obligation to share damages with or repay someone else who must pay damages because of the injury.” The Court ruled that the exclusion did not apply, because “Elk Run is neither seeking coverage for an injury to its own employee, nor seeking to repay someone else who must pay damages because of the injury.”