The opinion of the court was delivered by: Hoffman, District Judge.
The main issue presented by the instant case is whether the
language used by the parties in their contract requires the
defendant to indemnify the plaintiff for losses resulting from
the plaintiff's negligence. The plaintiff does not here dispute
that the loss was occasioned by its negligence. That issue was
decided against the plaintiff in a suit in the United States
District Court for the Northern District of Indiana, Hammond
Division, and the judgment was affirmed by our Court of Appeals.
Cole v. American Bridge Co., 7 Cir., 152 F.2d 157.
There are two subsidiary issues which will require decision
only if the indemnity clause is construed as protecting the
plaintiff from its own negligence: (1) whether the plaintiff
acted as a "volunteer" so as to disqualify itself from recovering
in whole or in part indemnity for the sum expended by the
plaintiff in paying, pursuant to its own agreement with a joint
tortfeasor, one-half of the amount of a joint and several
judgment against the plaintiff and the joint tortfeasor; and (2)
whether the plaintiff may recover the amounts which it paid for
interest on the judgment, attorneys' fees and court costs
resulting from an unsuccessful appeal.
The contractual obligation of the defendant to indemnify the
plaintiff was part of a contract by which the defendant agreed to
dismantle all electrical equipment and wires in a group of
buildings at Gary, Indiana, which plaintiff had purchased. The
seller of the buildings retained title to all electrical
equipment and wires, plaintiff agreed to dismantle and remove
such material at its expense, and contracted to have the
defendant do the dismantling.
Cole, an electrician employed by the defendant, was severely
burned while engaged in dismantling the wires. The injury
resulted from the negligent turning on, without warning to Cole,
of electric current in wires with which Cole was working. Cole
filed a suit for damages for negligence naming as joint
defendants the party who is the plaintiff here and the seller of
the buildings. Cole recovered a joint and several judgment
against them for $12,000, in the United States District Court for
the Northern District of Indiana. Cole's
own employer, the defendant here, was not a party to that suit.
Cole did not name the instant defendant as a party because
obviously Cole's recourse against the defendant would have been
solely under the Indiana Workmen's Compensation Act, Burns'
Ann.St. § 40-1201 et seq. Although the defendant as indemnitor
was given notice and requested to defend, the defendant declined
to do so, apparently on the ground that defendant believed that
the injury was occasioned by the indemnitee's own negligence and
as such was not covered by indemnity agreement.
In the negligence suit our Court of Appeals found that at the
time he was injured Cole was working under the supervision of
three different companies, his own employer who is the indemnitor
and defendant here, the buyer of the buildings who is the
indemnitee and the plaintiff here, and the seller of the
buildings who retained title to the electrical wires and
equipment involved. Cole v. American Bridge Co., 7 Cir.,
152 F.2d 157, 160. Nothing in the decision of that case undertakes to fix
the responsibility for the injury as between these three
companies. The decision merely holds that Cole was entitled to go
to the jury on the issue of whether the two who were defendants
in that suit were negligent "either in turning on the electric
current without first ascertaining where plaintiff [Cole] was
working or in failing to warn plaintiff [Cole] that the current
was to be sent through the wires upon which he was working." Id,
152 F.2d at page 160.
In this suit the plaintiff here has accepted as conclusive of
its negligence the jury's verdict of joint and several liability
of both the plaintiff and the seller of the buildings and
affirmance thereof by the Court of Appeals. In the instant suit
the plaintiff bases its case solely on the proposition that the
language of the indemnity clause obligates the defendant to
indemnify it for all losses incident to performance of the
contract, including those caused by the plaintiff's own
negligence. Since, as hereafter appears, the court agrees with
this construction of the contract, the court has no occasion to,
and does not, examine the facts respecting the negligence to
determine whether primary responsibility therefor may have rested
on the defendant itself or on the seller of the buildings rather
than on the plaintiff.
The indemnity clause which is determinative of the case imposes
on the defendant the obligation
"To provide all proper safeguards in performing the
work, to save harmless and defend [plaintiff]
American Bridge Company from and against all suits,
actions, legal proceedings, claims, demands, damages,
costs, expenses and attorney's fees, in any manner
caused by, arising from, incident to, connected with
or growing out of the performance of this
This contract was accepted in Illinois, contemplated
performance in Indiana and was performed in Indiana. This being
a diversity suit it is governed by state law. Since both Illinois
and Indiana follow the overwhelming weight of modern authority
with respect to the law applicable to a suit by an indemnitee for
losses occasioned by the indemnitee's own negligence, there are
no conflict of law problems for decision.
While there are early cases in some states expressing a public
policy against indemnifying a tortfeasor for his own negligence
it is today well established that the parties may so contract.
Modern legal theory does not ignore the desirable objective of
accident prevention which motivated the earlier decisions. But it
finds nothing in the financial arrangements by which the business
community through insurance and indemnity agreements allocates
losses, inconsistent with that objective. The one on whom the
contract imposes the liability has the same incentive to prevent
the losses. Increased premiums and increased cost of services or
materials act to deter the insured or indemnitees in the long
run. At the same time society benefits through the spreading of
the burdens of these
unfortunate events and business does not have to risk the
uncertainties of uninsured or unindemnified losses.
The Restatement of the Law of Contracts states the modern rule
"§ 574. Legal Bargains for Exemption From Liability
"A bargain for exemption from liability for the
consequences of negligence not falling greatly below
the standard established by law for the protection of
others against unreasonable risk of ...