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In a decision we previously reported on (see   our article link), a federal district court granted summary judgment to two engineering firms, concluding as a matter of law that the allegations in the complaint did not raise questions of negligence to be determined by a jury, and that no obligations were owed by the engineers to the contractor pursuant to the indemnify obligations of the contracts. This judgment was reversed on appeal, with the court holding that the indemnification clauses of the engineering contracts were at best ambiguous and must be left to the jury to interpret and apply to the facts of the case.  W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP (RK&K) et, al., 934 F. 3d 398 (4th Cir. 2019).

The underlying facts of this case are that the Virginia DOT awarded W.C. English, Inc. a construction contract to build a bridge over an Interstate highway. The contractor retained the services of two engineers – one to provide “quality assurance” (QA) and the other to provide “quality control” (QC) services.” After much of the concrete deck of the bridge had been poured, VDOT required the contractor to tear down and rebuild the bridge due to incorrect depth of concrete over the deck’s rebars that resulted from improper placement of the rebars.

The QC Contract and the QC Engineering Firm

The contractor filed suit against the engineers, asserting breach of contract for failure to adhere to the requirements of reporting “noncompliant work” and submitting a “non-conformance report” as it alleged was required by the three classification levels identified in the QC Plan for the project, and in particular a Level 3 non-conformance, which stated that the QC firm “will immediately notify the [construction manager] if materials or workmanship do no comply with the specifications.” The contractor also claimed it was entitled to indemnification of its damages from both engineering firms.

In granting the summary judgment to the QC firm the lower court held that a reasonable jury would be required to find that it fulfilled its contractual obligations and that the contractor’s damages arose out of its own negligence. In reaching that decision, the court apparently concluded that the height on the rebar slab runners didn’t present a Level 3 non-conformity.

But the question of whether it was a Level 3 non-conformity, and whether a non-conformity report was required to be issued, were factual questions that, according to the appellate court, should have been left to the factfinder. On remand, the court says the factfinder will need to determined whether the firm breached its contractual obligations, and if it did so, “whether and to what extent [the contractor] is entitled to damages.

Comment: It should be noted that a jury could very well conclude that the contractor was solely responsible for its damages and cannot recover from either of the professional consultants.

The QA Contract and the QA Engineering Firm

With regard to the contractor’s suit against the QA firm, the court focused on the indemnification articles of the contract and concluded that they were too ambiguous for the court to enforce on a summary judgment motion, and that the factfinder would have to hear evidence and apply its interpretation of the contract language to the facts at issue.

The indemnity clauses in question that were negotiated during contract formation and at the request of the QA firm have changes made by the QA which are shown in italics in the quoted clauses below.  The court’s analysis of the terms of the indemnity provisions is so educational that we are quoting it in detail.

“11. Indemnity. To the full extent permitted by law, [RK&K] agrees to indemnify and save harmless [English and VDOT], and their servants and employees, from and against any claim, cost, expense, or liability (including attorney’s fees), attributable to bodily injury, sickness, disease or death, or to damages or destruction of property (including loss of use thereof), caused by the negligent performance of the Work by [RK&K], its subcontractors, or their agents, servants, or employees, provided, however, [RK&K’s] duty hereunder shall not arise if such injury, sickness, death, damage, or destruction is caused by the negligence of a party indemnified hereunder, or by their subcontractors or consultants of any tier. [RK&K’s] obligation hereunder shall not be limited by the provision of any workmen’s compensation or similar act.

Should [VDOT] or any other person assert a claim or institute a suit, action or proceeding against [English] involving the manner or sufficiency of the Work, [RK&K] shall indemnify and save harmless [English] and its servants and employees, from and against any liability, loss, damage, or expense arising out of or relat[ing] to such claim, suit, action, or proceeding, to the extent directly caused by the negligence of subcontractor but not to the extent caused by the acts or omissions of [English] or its subcontractors or consultants of any tier.

* * *

  1. Damage. Except if due to [English’s] negligence, [English] shall not be liable or responsible for any loss or damage to the equipment, tools, facilities, or other personal property owned, rented, or used by [RK&K], or anyone employed by [RK&K], in the performance of the Work; and [RK&K] shall maintain such insurance and take such protective action as it deems desirable with respect to such property. Except if due to [English’s] negligence, [English] shall not be liable or responsible for any loss or damage to the Work, and [RK&K] shall be responsible for the correction or restoration of any such loss or damage to the Work, or to the work of [English] or any other subcontractor, resulting from the operations of [RK&K], or its subcontractors, agents, servants or employees hereunder. [RK&K] shall take reasonable precautions to protect the Work from loss or damage prior to acceptance by [VDOT].”

The appellate court explained as follows:

“In granting summary judgment to RK&K, the district court agreed with RK&K’s argument that, even assuming that it had breached its contract, the breach caused no damage because “the terms of the contract absolve[d] RK&K of liability if English was negligent” and that “English has no right to indemnity because … the terms of the contract exempt RK&K from liability if English was negligent.” The district court read Sections 11 and 23 together, reasoning that even though the provisions employed differing language, they could “be reasonably reconciled.” The court’s reconciliation of the provisions led “to a reading that [was] similar to the tort concept of contributory negligence: if English was the cause of its own damages it cannot collect.” Accordingly, the court held that because English was as a factual matter at least partly responsible for the decision to use the 1.75-inch slab runners, it was barred from recovering any damages from RK&K.”

***

“Although the court acknowledged that the second paragraph of Section 11 “could possibly be read to anticipate something akin to the tort concept of comparat[ive] negligence,” it discarded that interpretation by focusing on Section 11’s “use of the word ‘directly,’ ” explaining:

‘The use of this word here is best read as “proximately.” See, e.g., Estate of Moses ex rel. Moses v. Sw. Virginia Transit Mgmt. Co., 273 Va. 672, 679, [643 S.E.2d 156] (2007) (equating “proximate cause,” “direct,” and “efficient contributing cause” in the tort context). When read this way, this sentence states that RK&K is liable for damages “to the extent [proximately] caused by the negligence of [RK&K] but not to the extent caused by the acts or omissions of [English].” This reading demonstrates that RK&K agreed to liability when the dual requirements of contributory negligence were satisfied: RK&K would be liable for damages and would indemnify English when RK&K’s conduct consisted of “negligence and proximate causation.” Rascher v. Friend, 279 Va. 370, 375, [689 S.E.2d 661] (2010). But RK&K would not be liable if damages were caused by English, unless it (RK&K) directly or proximately caused the injury.’

“English contends that the district court’s interpretation was erroneous, arguing that Section 11’s second paragraph unambiguously “invokes a comparative scheme, not a contributory negligence scheme” and pointing to courts that have interpreted similar “to the extent” language as employing such a comparative scheme.”

The appellate court goes on to explain how the wording is potentially ambiguous and subject to different meanings that must be left to the fact finder to decide.

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 22, No. 3 (March 2020).

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