United States District Court, W.D. Louisiana, Shreveport Division
L. Hornsby, U.S. Magistrate Judge.
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.
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.
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.
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
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.
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.
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
for Summary Judgment
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?