812 F. 2d 590 - Hull v. Chevron Usa Inc a

The single issue for review is whether a written contractual provision for indemnity is void and unenforceable by operation of a Wyoming anti-indemnity statute, Wyo.Stat. Sec. 30-1-131 (1977). The United States District Court for the District of Wyoming resolved the matter on a motion for summary judgment holding that Sec. 30-1-131 did not prohibit indemnification when the indemnitee did not seek indemnification for his own negligence, 602 F.Supp. 75 (D.C.Wyo.1985). After entry of the district court's judgment, the Wyoming Supreme Court decided Cities Service Co. v. Northern Production Co., 705 P.2d 321 (Wyo.1985), which addressed this issue with no departure from the precedent relied on by the district court. Neither the briefs nor oral argument offers any analysis to persuade us that the district court incorrectly applied the law or that Cities Service does not control this case. We therefore affirm the decision of the trial court, adopt its reasoning, and add the following comments based on the clarification afforded by Cities Service.

This is one of two actions arising from an April 1981 accident and injury to an oil field worker, John C. Hull, an employee of appellant Chase Drilling Company (Chase).1 At the time of the accident, Chase was under a contract to drill an oil well for Chevron U.S.A., Inc. (Chevron) on a federal lease partly owned by Chevron. Mr. Hull and two co-employees were moving drill collars when one of the drill collars rolled off a forklift, struck Mr. Hull, and seriously injured his leg.

In the underlying action, Chevron asserted a third-party claim against Chase based on an indemnity provision in their contract. Finding Chevron liable under a theory of respondeat superior, the jury apportioned the negligence among the parties. Hull was judged 30% negligent while Chevron and Chase were each found to be 35% negligent. The court entered judgment against Chevron for $420,000. After Chevron's motion for judgment notwithstanding the verdict or new trial was denied, Chevron moved for judgment against Chase based on the indemnity provision in their contract.2 The district court granted Chevron's motion for summary judgment and held in a well-reasoned opinion that neither the law nor public policy in Wyoming was offended by enforcement of the contractual indemnity clause.

The district court relied on Tenth Circuit and Wyoming precedent, Heckart v. Viking Exploration, Inc., 673 F.2d 309 (10th Cir.1982), and Mountain Fuel Supply Co. v. Emerson, 578 P.2d 1351 (Wyo.1978), respectively, to conclude that Chevron's claim for partial indemnification was valid. Central to the court's resolution was the fact that Chevron sought indemnity only for that portion of the judgment reflecting its vicarious liability, that is, for Chase's negligence and not its own. In concluding that the contractual provision satisfied the requirements of Sec. 30-1-131 and fulfilled the essential statutory goal of promoting public safety, the district court noted that Wyoming had no policy against indemnity contracts as argued by Chase. A contrary resolution, the court stated, would be unfair to the parties and undermine the incentive to maintain a safe workplace.

While Cities Service addressed several other important issues involving the interaction between principles of indemnity and worker's compensation, we are concerned primarily with its treatment of an indemnity agreement concerning a well for oil and gas.3 The Wyoming Supreme Court distinguished that while a rule of strict construction generally applies when an indemnitee seeks to be indemnified for its own acts of negligence, that rule is not applicable when indemnity is claimed only for the negligent acts of the indemnitor. Citing Algrem v. Nowlan, 37 Wis.2d 70, 154 N.W.2d 217, 220 (1967), the Wyoming court quoted: "Where the indemnitor merely contracts to indemnify another against his own acts there is no reason in law, logic or policy to apply strict construction. Rather, public policy would seem to call for a rule of broad construction in such instances." Cities Service, 705 P.2d at 328. The Cities Service court considered the contract as a whole and placed a broad construction on the indemnity provision to give effect to the intention of the parties.

This emphasis entirely undercuts appellant's contention that Cities Service applies only to provisions for full indemnity.4 Appellant argues that unless an indemnity clause specifically states that partial indemnity is available, Sec. 30-1-131 would permit only full indemnification. Appellant urges that to permit partial indemnity in the light of the statute and Cities Service would "create a right of private indemnity outside of the contract."

Appellant's distinction is unfounded in the law and logic. We fail to understand how Cities Service permits full indemnification under nearly identical circumstances but would deny "partial indemnity" in an instance when Chevron seeks "full indemnity" only for the indemnitor's share of the adjudged negligence. The contractual provisions in Cities Service and this case are similar although the Cities Service contract included an additional paragraph specifically stating that its indemnity provision "shall not apply to injuries to or deaths of any and all persons ... caused by or result [sic] from the sole negligence of Cities Service." (Emphasis added.) The result in both cases is funded by the principle that each party should be "responsible for its own activities and liable for loss and damage caused by its own failure to exercise reasonable care in its operations and furthers this beneficial public policy." Cities Service, 705 P.2d at 330.

Cities Service and its precedent circumscribe the substantive inquiry which guides our review of whether summary judgment was properly granted. Anderson v. Liberty Lobby, Inc., --- U.S. ----, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Windon Third Oil and Gas Drilling Partnership v. FDIC, 805 F.2d 342 (10th Cir.1986). Neither public policy nor principles of contract permit a different result.

AFFIRMED.