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International Paper Co. v. Deep South Equipment Co.

United States District Court, W.D. Louisiana, Shreveport Division

August 11, 2017



          Mark L. Hornsby, U.S. Magistrate Judge.

         Relevant Facts

         International Paper Company (“IP”) operates a paper mill near Mansfield, Louisiana. The mill makes paper from both wood pulp and recycled paper. IP leased a warehouse, known as the Murphy Bonded Warehouse, to store bales of paper that were awaiting recycling. IP purchased insurance, on the building and the paper, from Factory Mutual Insurance Company.

         IP hired Tango Transport (“Tango”) to operate the warehouse. Tango also hauled paper from the warehouse to the paper mill, which was located about five miles away.

         Tango used Hyster brand lift trucks to move paper around in the warehouse. Tango purchased or rented the lift trucks from Deep South Equipment Company (“Deep South”), a Hyster dealer located in Shreveport. Tango rented an extra lift truck from Deep South in December 2009 pursuant to a Short Term Equipment Rental Agreement (the “Rental Agreement”). Twenty days later, a Tango employee smelled smoke and discovered that a fire had started in the warehouse in the area near the rented lift truck. The fire destroyed the warehouse and the paper in it.

         IP was paid for some of its losses by Factory Mutual under its insurance policy. IP and Factory Mutual (collectively “Plaintiffs”) sued several defendants, including Deep South, alleging that the fire was caused by defective lighting in the warehouse or loose paper igniting in the engine compartment of the rental lift truck. Deep South filed a third party demand against several related Tango entities seeking indemnity and demanding that Tango provide a defense. Doc. 21. The third party demand was based on the following language in the Rental Agreement:

Lessee (Tango) will save Lessor (Deep South) harmless from and reimburse Lessor for all damage to and loss of the equipment from any cause. Lessee further agrees to indemnify and hold Lessor harmless from all loss, damage, liability, cost or expense of whatsoever nature or cause, arising out of Lessee's use or possession of the equipment. The foregoing includes, without limitation, injury or damage to the person or property of Lessor, Lessee, or any third party, and their respective employees, agents and independent contractors. Equipment shall be operated only by Lessee or Lessee's employees.

Doc. 317-3.

         Tango and Deep South filed cross motions for summary judgment on the third party demand. The court granted Tango's motion in part because the Rental Agreement was insufficient to impose a duty on Tango to indemnify Deep South for any losses sustained as a result of Deep South's own negligence. The court denied Tango's motion to the extent that Deep South had alleged Tango's negligence in operating the lift truck as a cause of the fire. According to the court, if Tango was negligent and that negligence was a cause of the fire, then Tango may be bound to indemnify Deep South under the Rental Agreement. The court also found that Deep South's claim for attorney fees and costs was premature, as the lawsuit was not concluded and liability had not been determined. Doc. 63.

         By the time of trial, the only remaining defendant was Deep South. The key issue at trial was centered on Plaintiffs' allegation that Deep South was responsible for their damages because it rented a lift truck to Tango that was not equipped with a paper application kit which may have prevented the paper from getting in the engine compartment and starting the fire. The jury ruled in favor of Deep South, finding that Plaintiffs failed to prove that the absence of a paper application kit on the lift truck was a cause of the fire. Doc. 278.

         Phoenix Insurance Company (“Phoenix”) insured Deep South and paid almost $1.2 million in defense costs for Deep South over the course of the litigation. Phoenix filed a third party complaint against Hudson Insurance Company (“Hudson”), which provided a contract of indemnity to Tango for “trucking operations.” Phoenix argues that Hudson is liable to Phoenix for the $1.2 million in attorneys fees and expenses (less a $500, 000 retention in Hudson's indemnity contract) pursuant to the indemnity provision in the Rental Agreement. Phoenix is not pursuing Tango on the third party demand because Tango filed for bankruptcy protection (Doc. 297) and the company no longer exists.

         Cross-Motions for Summary Judgment

         Phoenix and Hudson have filed competing motions for summary judgment (Docs. 317 & 320) regarding Phoenix's claim for indemnification. The motions p r e se n t two key i s sue s. First, is the indemnity language in the Rental Agreement broad enough to encompass indemnity for legal fees and costs paid by Phoenix on behalf of Deep South? Second, does Hudson's Indemnity Contract for Tango's “trucking operations” include coverage for Tango's operation of IP's warehouse?

         Law ...

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