Martin County Coal Corporation v. Universal Underwriters Ins.
727 F.3d 589
6th Cir.2013Background
- Crum Motor Sales entered a 1997 indemnification agreement with Martin County Coal (MCC) to access MCC property for vehicle service, with Crum signing a broad release and hold-harmless clause.
- Crum obtained insurance from Universal, effective Sept 2000–Sept 2001, covering the indemnity obligations.
- Philip Crum, Crum’s employee, was severely injured on MCC premises in Jan 2001 during a service visit, leading to extensive medical trauma and later settlement discussions.
- MCC and Crum settled in 2008 for $3,650,000, with Crum agreeing to an agreed judgment against Crum in MCC’s counterclaim and to assign rights against Universal.
- MCC, in Crum’s shoes, sued Universal in federal court seeking indemnity for the settlement; Universal defended on the basis of no actual liability under Crum’s policy.
- District court granted summary judgment for MCC’s indemnity claim, holding Crum was actually liable; Sixth Circuit affirmed, holding the indemnity agreement was void as against public policy and Crum was not actually liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Universal must indemnify MCC standing in Crum’s shoes | MCC argues Crum’s settlement was within policy coverage regardless of formal liability. | Under policy, indemnity arises only for sums Crum legally must pay; Crum had no actual liability due to void indemnity. | No indemnity; actual-liability requirement controls and is not met here. |
| Whether the 1997 indemnification agreement is void as against public policy | Agreement was a standard business provision enabling access to MCC premises. | Agreement was coerced due to bargaining power disparity and shifted statutory duty away from MCC. | Void as against public policy due to bargaining-power disparity and shift of safety-duty liability. |
| Whether MCC could enforce indemnity to avoid statutory compliance liability | Indemnity should preserve MCC’s ability to recover costs. | Public policy prohibits contracts that excuse MCC from statutory duties; indemnity cannot shift such liability. | Indemnity invalid; MCC cannot recover against Universal for the settlement. |
Key Cases Cited
- Travelers Prop. Cas. Co. of Am. v. Hillerich & Bradsby Co., Inc., 598 F.3d 257 (6th Cir.2010) (actual-liability rule for indemnity coverage)
- Kentucky School Boards Insurance Trust v. State Farm Mutual Insurance, 907 F. Supp. 1036 (E.D. Ky.1995) (need actual liability for indemnity; exculpatory constraints discussed)
- Barnes v. Pennsylvania Casualty Co., 208 S.W.2d 314 (Ky.1958) (liability is determined by negligence; insurer not liable absent liability)
- Cumberland Valley Contractors, Inc. v. Bell Cnty. Coal Corp., 238 S.W.3d 644 (Ky.2007) (exculpatory clauses require bargaining-power parity)
- Hargis v. Baize, 168 S.W.3d 36 (Ky.2005) (public policy against exculpatory contracts in unequal bargaining)
- Speedway Superamerica, LLC v. Erwin, 250 S.W.3d 339 (Ky.App.2008) (indemnification provisions not favored when akin to exculpatory releases)