International Paper Co v. Deep South Equipment Co
5:11-cv-00017
W.D. La.Aug 11, 2017Background
- International Paper leased the Murphy Bonded Warehouse and insured the building and contents; Tango Transport operated the warehouse and rented a Hyster lift truck from Deep South under a Short Term Equipment Rental Agreement.
- A fire started near the rented lift truck and destroyed the warehouse and stored paper; IP and its insurer sued defendants alleging the fire was caused by defective lighting or paper entering the lift truck engine compartment.
- Deep South asserted a third-party indemnity claim against Tango based on the Rental Agreement provision requiring Tango to "indemnify and hold Lessor harmless from all loss, damage, liability, cost or expense of whatsoever nature or cause, arising out of Lessee’s use or possession of the equipment."
- Phoenix (Deep South’s insurer) paid approximately $1.2 million in Deep South’s defense costs and sued Hudson (Tango’s indemnitor for "trucking operations") to recover those defense costs by subrogation.
- Hudson moved for summary judgment arguing (1) the Rental Agreement’s indemnity did not cover fees paid to Phoenix and (2) Hudson’s indemnity covers only Tango’s "trucking operations," not warehouse operations; Phoenix cross-moved.
- The court concluded the Rental Agreement was broad enough to encompass attorneys’ fees and expenses, but Hudson’s indemnity for "trucking operations" did not cover Tango’s warehouse operation that caused the fire; Hudson’s motion granted, Phoenix’s denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Rental Agreement’s indemnity covers attorneys’ fees and litigation expenses | Phoenix: broad "cost or expense of whatsoever nature" includes attorneys’ fees so Phoenix (as subrogee) may recover | Hudson: provision never names Phoenix; fees paid to Phoenix not covered | Held: Indemnity language is broad enough to include attorneys’ fees and litigation expenses |
| Whether Phoenix (insurer) may recover as subrogee under the indemnity | Phoenix: paid defense on Deep South’s behalf and was contractually/legally subrogated to Deep South’s rights | Hudson: Phoenix is not the named indemnitee; subrogation inapplicable | Held: Phoenix was contractually and legally subrogated and may seek recovery if indemnity applies |
| Whether Hudson’s indemnity for Tango’s "trucking operations" covers the loss arising from warehouse operations | Phoenix: warehouse operation was part of Tango’s overall services (including transporting paper), so claim falls within trucking operations | Hudson: definition limits coverage to activities necessary to transporting property by vehicle for hire; warehouse operation is outside that scope | Held: The fire arose from warehouse operations, not trucking operations; Hudson’s indemnity does not apply |
| Whether Hudson is liable to reimburse Phoenix for the defense costs Phoenix paid on behalf of Deep South | Phoenix: indemnity clause + subrogation obligate Hudson to reimburse Phoenix | Hudson: no covered occurrence under Hudson’s indemnity contract | Held: No — Hudson not liable; summary judgment for Hudson; Phoenix’s motion denied |
Key Cases Cited
- Kinsinger v. Taco Tico, 861 So.2d 669 (La. Ct. App. 2003) (indemnity provisions construed by contract principles; scope controls obligation)
- Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co., 89 F.3d 243 (5th Cir. 1996) (contract terms unambiguous are construed as a matter of law)
- Jennings v. Ralston Purina Co., 201 So.2d 168 (La. Ct. App. 1967) (broad indemnity language including "loss, damage, liability and expense" can encompass reasonable attorneys’ fees)