[¶ 1] Kadrmas, Lee & Jackson, Inc., (“KLJ”) appeals from a district court judgment awarding the City of Valley City (“City”) $32,696.63 for costs and expenses the City incurred defending itself in the underlying lawsuit and pursuing its indemnity claim against KLJ. We conclude KLJ did not have a duty to defend the City in the underlying action under the plain language of the parties’ indemnity agreement. We reverse and remand.
I
[¶ 2] The City entered into a contract with KLJ to provide engineering services for a paving and sewer project. The City hired Geo. E. Haggart, Inc. (“Haggart”), to provide services as a general contractor for the рroject. The contract between the City and Haggart required Haggart to furnish all labor, materials, and equipment for the project. Haggart was required to provide a payment bond under the terms of its contract with the City, and St. Paul Fire & Marine Insurance Company (“St. Paul”) was the surety under the bond. Specialized Contracting, Inc. (“SCI”), entered into a subcontract with Haggart to complete some of the work on the project.
[¶3] In 2007, SCI sued St. Paul for breach of its duties under the payment bond, seeking compensation for additional work SCI alleged it completed on the project for which Haggart refused to pay. SCI alleged it was entitled to additional compensation for the removal and replacement of concrete that KLJ, as the project engineer, rejected because of cracking and inadequate drainage. In 2009, St. Paul served a third-party complaint against the City for breach of contract and indemnity, alleging the concrete repair work was outside the scope of the City’s contract with Haggart, the City was liable to Haggart for any additionаl compensation SCI was claiming against Haggart’s payment bond if SCI established KLJ’s decision to replace the concrete was beyond the scope of the contract, and the City was required to indemnify St. Paul for any judgments against it in favor of SCI arising from decisions made by KLJ. The City filed an answer to St. Paul’s complaint and served a third-party complaint against Haggart and KLJ, alleging Haggart and KLJ had an obligation to defend and indemnify the City from all allegations and liability arising from SCI and St. Paul’s claims and any damages were the direct and proximate result of Hаggart and KLJ’s negligence, malpractice, breach of contract, or breach of warranty.
[¶ 4] The City and KLJ moved for summary judgment seeking to be dismissed from the action. The court denied their motions. A jury trial was held. A special verdict form was used and the jury found SCI did not meet its burden of proof. The district court dismissed SCI’s claims and a judgment was entered. The court ordered the City’s duty to defend and indemnification claims against Hag-gart and KLJ were preserved.
[¶ 6] After a hearing, the court ordered KLJ to pay the City’s costs and expenses, including attorney’s fees, incurred in defending against SCI and St. Paul’s claims and in pursuing its indemnity claim against KLJ. The court applied N.D.C.C. § 22-02-07(4) and concluded KLJ had a statutory duty to defend the City. The court subsequently entered a judgment, ordering KLJ to pay the City $82,696.63 in costs, expenses, and attorney’s fees.
II
[¶ 7] KLJ argues the district court erred in concluding it had a duty to defend the City under the indemnity provision in KLJ’s contract with the City, which states:
Indemnification for Professional Services:
[KLJ] agrees to indemnify, save, and hold harmless the [City] from liability, including all costs, expenses, and reasonable attorneys’ fees, which may arise out of or result from [KLJ’s] negligent acts or omissions in rendering professional services under this agreement. [KLJ] shall not be responsible for an amount disproportionate to [KLJ’s] culpability.
[¶ 8] The district court concluded KLJ had a duty to defend the City against SCI аnd St. Paul’s claims, KLJ breached that duty, and the City’s costs and expenses were proximately caused by KLJ’s breach of the duty to defend:
The court finds that SCI’s claims, and St. Paul’s cross-claim against the City, were matters embraced by KLJ’s indemnity to the City against liability arising out of KLJ’s professional negligence. SCI was seeking additional compensation from Haggart and St. Paul on the theory that SCI’s work conformed to the plans and specifications, and therefore any defects were due to errors in KLJ’s plans and specifications and surveying work. The theory of St. Paul’s cross-complaint was that if SCI was entitled to more money for its work, it was because of KLJ’s actions as the City’s agent, and hence the City was liable for any monies owed to SCI. The order denying summary judgment identifies KLJ’s negligence as an issue of fact for the jury, and KLJ’s “fault” is referenced several times in the special verdict form. The Supreme Court has ruled there is a duty to defend under a professional liability policy “if the allegations in the complaint [against the insured] give rise to potential liability or a possibility of coverage under the insurance рolicy.” Schulte [Schultze ] v. Continential Ins. Co.,2000 ND 209 , ¶ 8,619 N.W.2d 510 , 513.
KLJ contends, correctly, that since the jury found SCI was not entitled to additional compensation, the jury never made a finding that KLJ was negligent. KLJ is incorrect, however, in asserting that it had no duty to defend the City unless actual negligence was proven, and that the City “is asking the Court to legislate and rule ... that a clause providing for indemnity if one is negligent requires a duty to defend even if not negligent.” KLJ is wrong because it steadfastly refuses to acknowledge that the legislature has legislated that the “person indemnifying is bound, on the request of the person indemnified, to defend аctions brought against the latterin respect to matters embraced by the indemnity.” NDCC § 22-02-07(4). KLJ’s duty to defend arises from a statutory rule of interpretation applicable to indemnity contracts.
That statutory duty was activated when the demand was made on KLJ to defend the City “in respect to matters embraced by the indemnity” clause of their contract. KLJ was then required to defend the City “unless a contrary intention appears” in the indemnity clause. Section 22-02-07. KLJ asserts the indemnity provision “explicitly states that KLJ is only obligated to defend in situations when it is negligent”; that assеrtion is simply wrong as a matter of fact, however, since the “Indemnification for Professional Services” never even mentions a duty to defend. The indemnity provision could have explicitly disclaimed KLJ’s statutory duty to defend the City, or limited it to cases where KLJ was actually negligent — but it did not. The language of the contract governs its interpretation if it is clear and explicit, and does not involve an absurdity. NDCC § 9-07-02. It is not absurd — indeed, it is economically rational — for the indemnity contract to require the project engineer to defend its actions and decisions on the City’s behаlf, which was merely a passive participant in the dispute over SCI’s work.
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The Court concludes that KLJ breached its duty to defend the City, and that the City’s costs and expenses in defending SCI’s claims and pursuing indemnity from KLJ after the date of the demand (May 27, 2009), including attorney’s fees, were proximately caused by KLJ’s breach of the duty to defend.
A
[¶ 9] KLJ argues the issue of its contractual liability to the City was decided by the jury and the district court was precluded from further considering whether KLJ had a duty to defend the City under the doctrine of res judicata. KLJ claims the issue of contractual liability was submitted to the jury at the City’s request, the City agreed the jury would not have to separately decide whether KLJ was liable if the jury found SCI failed to meet its burden of proving it was entitled to additional compensation, the jury did not find KLJ was liable, and the City cannot ask the court to decide an issue that was submitted to the jury. KLJ contends the City waived any right to have the issue decided by the court.
[¶ 10] In Mills v. City of Grand Forks, this Court explained the doctrine of res judicata:
Res judicata, or claim preclusion, prevents relitigation of claims that were raised, or could have been raised, in prior actions between the same pаrties or their privies. Thus, res judicata means a valid, existing final judgment from a court of competent jurisdiction is conclusive with regard to claims raised, or those that could have been raised and determined, as to the parties and their privies in all other actions. Res judicata applies even if subsequent claims are based upon a different legal theory.
[¶ 11] In the jury trial, a thirty-one question special verdict form was used and included questions about whether the City met its burden of proof to demonstrate KLJ was liable under its contract with the City and whеther the City met its burden of proof to demonstrate KLJ was hable to the City for indemnity. The jury did not reach these questions because it determined SCI failed to meet its burden of
B
[¶ 12] KLJ argues the district court erred in finding it had a duty to defend the City. KLJ contends the indemnity provision required a determination of negligence before KLJ was required to defend or reimburse the City. KLJ argues the court erred in concluding N.D.C.C. § 22-02-07(4) applied and added a duty to defend to the language of the indemnity provision because the contrаct shows an intention contrary to the statutory provisions and indicates the parties only intended to indemnify if there was a determination that KLJ was negligent.
[¶ 13] Construction of a written contract to determine its legal effect is a question of law, which is fully reviewable on appeal. Hoge v. Burleigh Cnty. Water Mgmt. Dist.,
[¶ 14] An indemnity is “a contract by which one engages to save another from a legal consequence of the conduct of one of the parties or of some other person.” N.D.C.C. § 22-02-01. “ ‘Indemnification is a remedy which allows a party to recover reimbursement from another for the discharge of a liability which, as between them, should have been discharged by the other.’ ” Olander Contracting Co. v. Gail Wachter Inv.,
[¶ 16] Here, the indemnity provision provides that KLJ agreed to indemnify the City from “liability ... which may arise out of or result from [KLJ’s] negligent acts or omissions,” and further states that KLJ “shall not be responsible for an amount disproportionate to [its] culpability.” The plain language reflects the parties’ intent that KLJ would indemnify the City only for liability arising out of or resulting from KLJ’s negligence and only for an amount that is proportionate to KLJ’s culpability. The language of the indemnity provision is limited to liability and culpability and does not specifically require KLJ to defend against claims or allegations. The indemnity provision only applies when there has been a determination that KLJ was negligent and when the City’s liability arising out оf or resulting from that negligence has been established.
[¶ 17] However, N.D.C.C. § 22-02-07 also provides statutory rules for interpreting an indemnity contract, and states:
In the interpretation of a contract of indemnity, unless a contrary intention appears, the following rules are to be applied:
1. Upon an indemnity against liability, expressly or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable.
2. Upon an indemnity against claims, demands, damages, or costs, expressly or in other equivalent terms, the person indemnified is not entitled to recover without payment thereof.
3. An indemnity against claims, demands, or liability, expressly or inother equivalent terms, embraces thе costs of defense against such claims, demands, or liability incurred in good faith and in the exercise of reasonable discretion.
4. The person indemnifying is bound, on the request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct such defense if that person chooses to do so.
5. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter, suffered by the lаtter in good faith, is conclusive in the latter’s favor against the former.
6. If the person indemnifying, whether that person is a principal or a surety in the agreement, has not had reasonable notice of action or proceedings against the person indemnified or is not allowed to control its defense, judgment against the latter is only presumptive evidence against the former.
7. A stipulation that a judgment against the person indemnified shall be conclusive upon the person indemnifying is inapplicable if the person indemnifying had a good dеfense upon the merits which, by want of ordinary care, the person indemnifying failed to establish in the action.
(Emphasis added).
[¶ 18] The district court concluded N.D.C.C. § 22-02-07(4) applies and adds a duty to defend to the parties’ indemnity agreement because the agreement does not specifically state KLJ does not have a duty to defend. The provisions of N.D.C.C. § 22-02-07 for interpreting indemnity contracts apply “unless a contrary intention appears” in the contract. We have not interpreted what is required to express a contrary intention in an indemnity agreement. Other jurisdictions have adopted statutes similar to N.D.C.C. § 22-02-07. See Cal. Civil Code § 2778; 18 Guam Code Ann. § 30107; MontCode Ann. §§ 28-11-313 to 28-11-317; Okla. Stat. tit. 15, § 427; S.D. Codified Laws §§ 56-3-7 to 56-3-15. However, ease law interpreting and applying these other statutes to indemnity contracts is scarce.
[¶ 19] In Crawford,
[¶ 20] In Regan Roofing Co. v. Superior Court,
[¶ 21] In Crawford,
[¶22] Like the California statute, N.D.C.C. § 22-02-07(4) provides for a statutory duty to defend in an indemnity contract, unless a contrary intention appears in the agreement, and the duty to defend requires the indemnitor to defend the indemnitee, upon request, against actions or proceedings in respect to the matters embraced by the indemnity. The statute only requires a contrary intention; it does not require the contract explicitly state there is not a duty to defend. In this case, the parties’ indemnity agreement is very limited and unambiguously expresses an intent that is contrary to the statute. Under the agreement, KLJ was only required to indemnify the City from liability that may arise out of or result from KLJ’s negligence and only in an amount proportionate to KLJ’s culpability. The language of the parties’ agreement expresses a clear intent to limit the indemnity to liability. The duty to defend and the duty to indemnify are separate and the duty to defend аrises when a claim is made and indicates the indemnitor has an active responsibility to the indemnitee from the beginning for the defense against claims. See Crawford,
[¶ 28] The City argues that under Bridston v. Dover Corp.,
[¶ 24] The language of the indemnity provision in this case is different from the language of the indemnity provision in Bridston. The indemnity provision in this case uses “save harmless” language, but it also uses language limiting the indemnity and only indemnifies against “liability,” not “any and all claims.” In other cases, this Court has recognized that there is a difference between indemnifying against “claims” and indemnifying against “liability.” See Barsness v. General Diesel & Equip. Co., Inc.,
[¶ 25] Although KLJ did not have a duty to defend, the agreement would require KLJ to reimburse the City for all costs, expenses, and reasonable attorney’s fees the City incurred if the City was held liable arising out of or resulting from KLJ’s negligence. Furthermore, N.D.C.C. § 22-02-07(5) provides that if the indemni
[¶ 26] The indemnity language in this case was limited to indemnifying the City for liability resulting from KLJ’s negligence and only in an amount proportionate to KLJ’s culpability. We conclude the statutory duty to defend in N.D.C.C. § 22-02-07(4) does not apply because the indemnity provision expresses a contrary intent.
Ill
[¶ 27] KLJ also argues the district court erred in various pre-trial decisions. The City contends this Court does not have jurisdiction to consider these issues because KLJ only appealed from the duty to defend judgment and did not appeal the other orders. Rule 3(c), N.D.R.App.P., states that the notice of appeal must designate the judgment, order, or part thereof being appealed. Nonap-pealable interlocutory orders are renewable on appeal from a finаl judgment. Woodward v. Woodward,
[¶ 28] KLJ argues the claims against the City and the City’s third-part complaint against KLJ should have been dismissed before trial because Haggart released the City from liability by certifying it had been paid in full, the City’s claim for professional negligence was barred by the statute of limitations, and the City did not produce expert testimony establishing KLJ’s professional negligence. These issues are related to the claims that were decided by the jury and were dismissed after the jury found SCI failed to establish its claim. There is no available remedy for these issues, and they are either without merit or would not change the outcome of the appeal.
IV
[¶ 29] KLJ argues the City is required to indemnify KLJ for its defense costs under a separate indemnity provision, which provides:
[The City] further agrees to indemnify and hold [KLJ] harmless from any and all costs, liability, real or alleged, in connection with the performance of work on this project, excepting liability proximately arising from the sole negligence of [KLJ],
However, KLJ’s answer to the City’s third-party complaint did not raise this issue as a counterclaim. A party may bring any claim against an opposing party as a counterclaim in its pleading and some claims against an opposing party must be brought as a counterclaim in the pleadings. N.D.R.Civ.P. 13; see also Leo Lumber Co. v. Williams,
[¶ 30] KLJ also contends it is entitled to recover its costs and expenses as a prevailing party. In KLJ’s memorandum on the remaining issues, KLJ argued it was entitled to recover its costs and expenses as the prevailing party because the City sued KLJ for negligenсe and it did not recover anything. A district court has discretion to award costs under N.D.C.C. § 28-26-10, and a court’s decision whether to award disbursements under N.D.C.C. § 28-26-06 will not be overturned on appeal unless the court abuses its discretion. WFND, LLC v. Fargo Marc, LLC,
VI
[¶ 31] We conclude KLJ did not have a duty to defend the City. We reverse the district court’s judgment awarding the City $32,696.63 for costs and expenses, and we remand for a determination of whether KLJ is entitled to recover its costs and expenses as a prevailing party.