Date: Aug 12, 2004
In a case highlighting a well-drafted joint use indemnity provision, the U.S. Court of Appeals for the Eighth Circuit last Friday forced SBC to honor its agreement to indemnify Ameren for as much as $1,950,000 in settlement payments.
The agreement covered jointly-used poles owned by either Ameren or SBC. The indemnity provision allocated to each party the risk for all injuries to that party's employees, contractors and customers. Each party was required to indemnify the other, irrespective of the other's negligence, for claims arising from the exercise of any rights under the agreement.
Tragically, an SBC contractor was fatally electrocuted when he came in contact with Ameren's ground wire. Ameren settled with the children of the deceased for $1,950,000 and sought indemnity from SBC under the terms of the joint use agreement. After SBC refused, a U.S. district court ruled in favor of SBC. The district court reasoned that since SBC owned the pole in question, SBC had an independent right to access the pole so that the injury did not arise from the exercise of any right under the joint use agreement. In Friday's decision, the Eighth Circuit reversed, determining that joint use of the pole, not ownership of the pole, triggered application of the indemnity provision.
The court found the allocation of risk expressed in the indemnity provision to be reasonable, since each party is in a better position to protect and insure against injuries to its own personnel through adequate training. The court determined that it was irrelevant whether Ameren may have been negligent, since the indemnity provision required SBC to reimburse Ameren regardless of negligence. As explained by the court, "Where two sophisticated commercial enterprises allocate their risk of loss by contract as between them, no public policy is violated."
If you have any questions or comments about this case, feel free to contact Tom Magee at 202-434-4128 or firstname.lastname@example.org.
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