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Stifle v. Marathon Petroleum Co.

decided: May 24, 1989.


Appeal from the United States District Court for the Southern District of Illinois, Benton Division. No. 86 C 4152--James L. Foreman, Chief Judge.

Cummings, Cudahy and Manion, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge

In this diversity action defendant and third-party plaintiff Marathon Petroleum Company appeals the district court's dismissal of its third-party complaint against Insulating & Materials Corporation. Chief Judge Foreman determined that an indemnity agreement between Insulating & Materials and Marathon was not applicable in a suit claiming that Marathon negligently caused job-related injuries to plaintiff Danny Stifle, an Insulating & Materials employee, and also alleging Marathon's violation of the Illinois Structural Work Act. The court later refused to allow Marathon to set off Stifle's subsequent $170,000 judgment against Marathon by the value of the workers' compensation lien which had been surrendered by Insulating & Materials as part of its settlement with Stifle. Marathon appeals both adverse decisions.

I. Facts and Procedural History

Danny Stifle was employed by Insulating & Materials ("Insulating"), which had contracted to perform services at Marathon's refinery in Robinson, Illinois. While working at the Marathon site, Stifle suffered a back injury as the result of a fall while attempting to ascend a coal hopper by ladder. Insulating paid workers' compensation benefits to Stifle and consequently obtained a statutory lien equal to the amount of workers' compensation benefits received by Stifle as against any judgment or settlement Stifle might later obtain against Marathon. See Ill.Rev.Stat. ch. 48, para. 138.5, ยง 5(b).

Stifle later filed a two-count complaint against Marathon, alleging a violation of the Illinois Structural Work Act, Ill.Rev.Stat. ch. 48, paras. 60-69, and common law negligence.*fn1 Marathon promptly filed a third-party complaint against Insulating, claiming, among other things, that Insulating was jointly negligent and that the two firms had an express agreement whereby Insulating had agreed to indemnify Marathon for such claims. Prior to trial, Stifle and Insulating announced that they had reached a settlement agreement in which Stifle agreed to forebear suing Insulating and in return Insulating agreed to pay $10,000 to Stifle and surrender its statutory lien equivalent to all benefits he received through workers' compensation.*fn2 The third-party complaint of Marathon against Insulating was then dismissed by Judge Foreman following his determination that the indemnification agreement had no application in a suit alleging negligence because of the adoption of comparative negligence and the right of contribution in Illinois, nor did the indemnification agreement apply to situations involving alleged violations of the Illinois Structural Work Act.

The Stifle-Insulating settlement also sparked a controversy over the proper amount to set off from whatever judgment Stifle might receive against Marathon. Prior to Stifle's Structural Work Act trial against it, Marathon argued the final judgment should be set off not only by the $10,000 paid by Insulating, but also by the value of the lien surrendered by Insulating. In response Stifle argued that Marathon should be responsible for his total amount of damages less only the $10,000. Before the commencement of the Stifle trial against Marathon, Judge Foreman ruled that he would allow only the $10,000 set-off, refusing to incorporate in the set-off the value of the statutory lien. The question of Marathon's liability under the Structural Work Act was decided by a jury, which returned a verdict for Stifle. Damages were stipulated at $180,000. Judge Foreman set off $10,000, and judgment was entered against Marathon for $170,000 in lieu of the $750,000 damages sought in Stifle's amended complaint.

Marathon appeals Judge Foreman's decisions dismissing its third-party claim premised on contractual indemnity against Insulating, and disallowing the value of the workers' compensation lien as part of the set-off against the final judgment against Marathon under the Structural Work Act.*fn3

II. Analysis

A. Indemnification Agreement

As part of their contract for the work to be performed by Insulating at the Marathon plant, the two companies included an indemnity clause which reads:

XI. Indemnity:

CONTRACTOR [Insulating] agrees to and shall protect, defend, indemnify and hold MARATHON harmless from and against any and all claims, demands, causes of action, damages, suits, costs, losses or expenses (including, but not limited to, attorney fees) arising out of or in any way connected with, directly or indirectly, the performance of work hereunder by CONTRACTOR, including both acts and omissions ...

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