The opinion
Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
1-10-1995
Kiewit v L&R Construction Co
Precedential or Non-Precedential:
Docket 94-1434
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
Nos. 94-1434 & 94-1439
________________
KIEWIT EASTERN CO., INC.;
KIEWIT/PERINI, A JOINT VENTURE, ET AL.
v.
L&R CONSTRUCTION CO., INC.;
CNA INSURANCE COMPANY
Kiewit Eastern Company, Inc. and
Kiewit/Perini, A Joint Venture,
Appellants in No. 94-1434
CNA Insurance Company,
Appellant in No. 94-1439
_______________________________________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 91-cv-05563)
___________________
Argued September 26, 1994
Before: SCIRICA, NYGAARD and McKEE, Circuit Judges
(Filed January 10, l995 )
JERROLD P. ANDERS, ESQUIRE (Argued)
White & Williams
One Liberty Place
1650 Market Street, Suite 1800
Philadelphia, Pennsylvania 19103
Attorney for Appellants/Cross-Appellees
Kiewit Eastern Company, Inc. and
Kiewit/Perini, A Joint Venture
ALEXIS L. BARBIERI, ESQUIRE (Argued)
Lewis & Wood
1207 Spruce Street
Philadelphia, Pennsylvania 19107
Attorney for Appellee
L&R Construction Co., Inc.
R. BRUCE MORRISON, ESQUIRE (Argued)
Marshall, Dennehey, Warner, Coleman & Goggin
1845 Walnut Street
Philadelphia, Pennsylvania 19103
Attorney for Appellee/Cross-Appellant
CNA Insurance Company
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
In this diversity case, we are presented with disputes
over coverage under two contracts, an indemnification agreement
between a contractor and subcontractor and a subsequent insurance
contract between the subcontractor and an insurance company. The
primary issue is whether the indemnification agreement
sufficiently waived the immunity granted employers under the
Pennsylvania Workers' Compensation Act. The district court
partially granted cross-motions for summary judgment, holding the
contractor was entitled to conditional indemnification but its
general partner was not. The district court also dismissed the
insurer from the case. We will affirm in part and reverse in
part.
I.
Kiewit/Perini, a joint venture composed of Kiewit
Eastern Company and Perini Corporation, served as general
contractor for construction of a portion of Interstate 476, known
as the Blue Route, near Philadelphia. In July 1988,
Kiewit/Perini subcontracted certain work to L&R Construction
which agreed to defend and indemnify Kiewit/Perini and obtain
insurance in order to protect the general contractor from
liability for personal injuries resulting in whole or in part
from the subcontractor's negligence. As a result, L&R
Construction purchased an insurance policy from CNA Insurance
Company covering liability resulting from L&R Construction's
incidental contracts, such as its contract with Kiewit/Perini.
During construction, a crane loaned to L&R Construction
by Kiewit Eastern came too close to a power line, injuring
Benedict Chen, an employee of L&R Construction. Chen brought two
actions in the Philadelphia County Court of Common Pleas against
Kiewit/Perini and Kiewit Eastern,1 but not against L&R
Construction, which -- as Chen's employer -- was immune from suit
under the Pennsylvania Workers' Compensation Act.2 After
Kiewit/Perini and Kiewit Eastern tendered their defense to CNA
Insurance, which refused to accept the tender, they filed a
1
. Chen v. Philadelphia Elec. Co., No. 91-1339 (Ct. C.P.
Phila. County filed Jan. 11, 1991); Chen v. Philadelphia Elec.
Co., No. 91-1753 (Ct. C.P. Phila. County filed July 10, 1991).
2
. Pa. Stat. Ann. tit. 77, § 481 (1992).
third-party complaint against L&R Construction, alleging it was
obligated to defend and indemnify them.
Kiewit/Perini and Kiewit Eastern then filed this
declaratory judgment action in federal court, seeking a defense
and indemnification from L&R Construction or CNA Insurance, as
well as reimbursement for attorneys' fees and costs. All parties
filed motions for summary judgment. The district court granted
Kiewit/Perini's motion in part, requiring L&R Construction to
defend and conditionally indemnify it, but held as a matter of
law that L&R Construction owed no duty to defend or indemnify
Kiewit Eastern. After deciding those defense and indemnification
issues, the court dismissed the claim against CNA Insurance as
moot. Kiewit Eastern Co. v. L&R Constr. Co., Civ. A. No. 91-
5563, 1993 WL 367051 (E.D. Pa. Sept. 3, 1993) ("Kiewit I"). The
district court denied a subsequent motion to amend the judgment,
Kiewit Eastern Co. v. L&R Constr. Co., Civ. A. No. 91-5563, 1994
WL 116108 (E.D. Pa. Mar. 15, 1994) ("Kiewit II"), and
Kiewit/Perini, Kiewit Eastern, and CNA Insurance appealed.
The district court had jurisdiction of the case under
28 U.S.C. § 1332 (1988).3 We have jurisdiction under 28 U.S.C. §
3
. The parties do not contest jurisdiction. The
Declaratory Judgment Act, 28 U.S.C. § 2201 (1988), permits "the
discretionary exercise of jurisdiction over suits otherwise
falling under federal subject matter jurisdiction," a form of
discretion "significantly greater" than that permitted under
traditional abstention principles. United States v. Commonwealth
of Pa., Dep't of Envtl. Resources, 923 F.2d 1071, 1074 (3d Cir.
1991).
We considered this discretion in a similar situation, a
case in which an insurance company sought a declaratory judgment
on its duty to defend and indemnify an insured in a pending state
1291 (1988). Because this is an appeal from a grant of summary
judgment, our review is plenary. Oritani Sav. & Loan Ass'n v.
Fidelity & Deposit Co., 989 F.2d 635, 637 (3d Cir. 1993).
Summary judgment may be granted only when there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law. Id. at 637-38; see also Fed. R.
Civ. P. 56(c).
II.
(..continued)
action. Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213 (3d
Cir. 1989). In Terra Nova, we reversed the district court's stay
of the federal proceedings on the duty to defend, but affirmed
the stay on the duty to indemnify. Id. at 1228. In affirming
the district court's exercise of discretion to stay the
proceedings on the duty to indemnify, we found persuasive three
factors:
1) the general policy of restraint when the
same issues are pending in a state court; 2)
an "inherent conflict of interest" between an
insurer's duty to defend in a state court and
its attempt to characterize, in the federal
suit, the state court suit as arising under a
policy exclusion; and 3) an avoidance of
duplicative litigation.
Commonwealth of Pa., Dep't of Envtl. Resources, 923 F.2d at 1075-
76 (discussing Terra Nova). Some of those factors may be
implicated in this case. Here, a third-party complaint pleading
the right to indemnification already had been filed by the Kiewit
entities against L&R Construction in at least one of the
underlying state tort cases; thus, the Pennsylvania courts may
well have provided a more suitable and satisfactory forum for
determining the issues before us. See Brillhart v. Excess Ins.
Co. of America, 316 U.S. 491, 495 (1942) ("Ordinarily it would be
uneconomical as well as vexatious for a federal court to proceed
in a declaratory judgment suit where another suit is pending in a
state court presenting the same issues, not governed by federal
law, between the same parties."). Nevertheless, because no party
has raised the matter on appeal, we need not decide this
question.
Section 11 of the subcontract between Kiewit/Perini and
L&R Construction provided:
INDEMNIFICATION. The Subcontractor
further specifically obligates itself to the
Contractor, Owner and any other party
required to be indemnified under the Prime
Contract, jointly and separately, in the
following respects, to-wit:
. . . .
(b) to defend and indemnify them against
and save them harmless from any and all
claims, suits or liability for . . . injuries
to persons, including death, and from any
other claims, suits or liability on account
of acts or omissions of Subcontractor, or any
of its subcontractors, suppliers, officers,
agents, employees or servants, whether or not
caused in part by the active or passive
negligence or other fault of a party
indemnified hereunder; provided, however,
Subcontractor's duty hereunder shall not
arise if such claims, suits or liability,
injuries or death or other claims or suits
are caused by the sole negligence of a party
indemnified hereunder unless otherwise
provided in the Prime Contract.
Subcontractor's obligation hereunder shall
not be limited by the provisions of any
Workers' Compensation act or similar
statute[.]4
4
. A similar indemnification provision in the subcontract
covered equipment the subcontractor borrowed from the contractor:
CONTRACTOR'S EQUIPMENT. In the event
that Subcontractor by rental, loan or
otherwise, makes use of any of Contractor's
equipment, scaffolding, or other appliances,
Subcontractor agrees to accept such "as is"
and that such use shall be at the sole risk
of Subcontractor and Subcontractor agrees to
defend, hold harmless and indemnify
Contractor against all claims of every nature
arising from its use thereof.
(emphasis added).
A.
The district court held the indemnification language
required L&R Construction to defend and conditionally indemnify
Kiewit/Perini. Kiewit I, supra, at *8. L&R Construction does
not dispute this holding, but its insurance company, CNA
Insurance, does.5
Pennsylvania law permits indemnification, even for the
indemnitee's own negligence, as long as the agreement to
indemnify is "clear and unequivocal." Ruzzi v. Butler Petroleum
Co., 588 A.2d 1, 4 (Pa. 1991); Willey v. Minnesota Mining & Mfg.
Co., 755 F.2d 315, 323 (3d Cir. 1985). In this case, CNA
Insurance claims the language of the subcontract generally is
ambiguous and should be interpreted against the indemnitee.6 We
cannot agree. Under Pennsylvania law, "[w]hen a written contract
is clear and unequivocal, its meaning must be determined by its
(..continued)
Subcontract § 22.
5
. Both L&R Construction and CNA Insurance agreed that, if
L&R Construction is found to owe a duty to defend and indemnify,
then CNA Insurance will have the obligation to fulfill that duty,
pursuant to the CNA insurance policy.
6
. CNA Insurance contends the difference in
interpretations offered by the parties to this action
demonstrates the ambiguities inherent in the contract.
Pennsylvania courts repeatedly have rejected such reasoning.
See, e.g., Vogel v. Berkley, 511 A.2d 878, 881 (Pa. Super. Ct.
1986) ("The fact that the parties do not agree upon the proper
interpretation does not necessarily render the contract
ambiguous."); Metzger v. Clifford Realty Corp., 476 A.2d 1, 5
(Pa. Super. Ct. 1984) (citation omitted) ("a contract is not
rendered ambiguous by the mere fact that the parties do not agree
upon the proper construction").
contents alone. It speaks for itself and a meaning cannot be
given to it other than that expressed." Steuart v. McChesney,
444 A.2d 659, 661 (Pa. 1982) (citation omitted). It is for the
court, as a matter of law, to determine whether ambiguity exists
in a contract. Hutchison v. Sunbeam Coal Corp., 519 A.2d 385,
390 (Pa. 1986).7 In this case, we agree with the district court
that the indemnification provisions of the subcontract are
unambiguous, requiring L&R Construction to indemnify
Kiewit/Perini unless Kiewit/Perini was solely to blame for the
injury.8
7
. Under Pennsylvania law, "[t]he fundamental rule in
construing a contract is to ascertain and give effect to the
intention of the parties." Lower Frederick Township v. Clemmer,
543 A.2d 502, 510 (Pa. 1988). Contracts of indemnification often
allocate between parties the "burden of procuring insurance,"
Jamison v. Ellwood Consol. Water Co., 420 F.2d 787, 789 (3d Cir.
1970), or determine which entity bears "ultimate responsibility
for injuries on the job." Willey v. Minnesota Mining & Mfg. Co.,
755 F.2d 315, 323 (3d Cir. 1985). The indemnification provision
in this case appears to have been intended for a similar purpose,
particularly since it was accompanied by a requirement that the
subcontractor obtain insurance. See Subcontract § 10.
8
. Section 11 of the subcontract states: "Subcontractor's
duty hereunder shall not arise if such claims, suits or
liability, injuries or death or other claims or suits are caused
by the sole negligence of a party indemnified hereunder unless
otherwise provided in the Prime Contract." In Woodburn v.
Consolidation Coal Co., 590 A.2d 1273 (Pa. Super. Ct.), appeal
denied, 600 A.2d 953, 954, 955 (Pa. 1991), the court construed an
indemnification provision that also contained a limitation --
similar to the one here -- exempting from indemnification
coverage those claims arising from the "sole negligence" of the
indemnitee. The court held such a provision means, by "negative
inference," that "any injuries occurring by less than the sole
fault of [the indemnitee] fall within the scope of the
indemnification clause." Id. at 1275. See also Babcock & Wilcox
Co. v. Fischbach & Moore, Inc., 280 A.2d 582, 583-84 (Pa. Super.
Ct. 1971).
CNA Insurance raises two other insubstantial arguments.
As we have noted, section 11 of the subcontract provides
"Subcontractor's duty hereunder shall not arise if such claims,
suits or liability, injuries or death or other claims or suits
are caused by the sole negligence of a party indemnified
hereunder unless otherwise provided in the Prime Contract."
Because the injured employee Chen sued Kiewit/Perini and Kiewit
Eastern in negligence but not L&R Construction, CNA Insurance
claims there is no duty to defend or indemnify because the "sole
negligence" of Kiewit/Perini and Kiewit Eastern is at issue. Of
course, L&R Construction was immune from suit because of the
Pennsylvania Workers' Compensation Act. Pa. Stat. Ann. tit. 77,
§ 481 (1992). Just because Chen could not sue L&R Construction
does not mean the company was blameless in the accident. As the
district court noted, legal immunity from suit between Chen and
L&R Construction does not compel a conclusion that L&R
Construction was not negligent, nor does it decide the
contractual rights and obligations between L&R Construction and
Kiewit/Perini. Kiewit I, supra, at *6. The mere absence of
allegations of negligence against L&R Construction in the
underlying suit does not negate its obligation to defend and
indemnify here.9
9
. This is not a case in which it appears reasonably
certain that the indemnitee was solely negligent for the
underlying injuries. CNA Insurance's own records indicate that
L&R Construction employees were operating the crane when Chen was
injured. Although we express no opinion on the merits of the
underlying tort claims or the negligence of any of the parties,
we note the CNA Insurance records to demonstrate the possibility
that Kiewit/Perini -- if negligent -- may not have been the only
Second, CNA Insurance maintains L&R Construction is
immune from liability for injuries to its employees under the
Workers' Compensation Act, which provides that the "liability of
an employer under this act shall be exclusive and in place of any
and all other liability to such employes . . . ." Pa. Stat. Ann.
tit. 77, § 481 (1992) (footnote omitted). Although the statute
immunizes employers from indemnification suits by third parties
who have been sued by injured employees, it exempts from
protection any employers that contractually agreed with third
parties to waive their immunity under the statute.10
Section 11(b) of the subcontract ends with the proviso
that "Subcontractor's obligation [to defend and indemnify]
hereunder shall not be limited by the provisions of any Workers'
Compensation act or similar statute." Although the district
court found this language amounted to an express waiver of
(..continued)
negligent party. Furthermore, we concur with the district court
that "[t]he assertion by CNA's claim analyst that Kiewit/Perini
had a 'high degree of negligence' is not sole negligence, nor a
proper determination of responsibilities." Kiewit I, supra, at
*6.
10
. See Pa. Stat. Ann. tit. 77, § 481 (1992), which
provides:
[T]he employer, his insurance carrier, their
servants and agents, employes,
representatives acting on their behalf or at
their request shall not be liable to a third
party for damages, contribution, or indemnity
in any action at law, or otherwise, unless
liability for such damages, contributions or
indemnity shall be expressly provided for in
a written contract entered into by the party
alleged to be liable prior to the date of the
occurrence which gave rise to the action.
immunity provided by the Workers' Compensation Act, Kiewit I,
supra, at *8, CNA Insurance argues on appeal that the subcontract
does not "expressly provide" that L&R Construction would waive
its immunity -- as the statute requires.
In support of its position, CNA Insurance points to the
decision in Bester v. Essex Crane Rental Corp., 619 A.2d 304 (Pa.
Super. Ct. 1993), in which the court denied an indemnity claim.
The facts in Bester resemble those in the present case: a
purported indemnitee claimed protection from liability for
injuries to one of the indemnitor's employees that may have been
caused by the indemnitee. Yet the comparison between the two
cases ends there. Unlike the indemnification contract here, the
agreement to indemnify in Bester contained no express waiver of
the protections of the Workers' Compensation Act or even a
reference thereto.11
11
. In Bester, the indemnification clause stated:
The Lessee [Russell] shall defend,
indemnify and hold forever harmless Lessor
[Essex] against all loss, negligence, damage,
expense, penalty, legal fees and costs,
arising from any action on account of
personal injury or damage to property
occasioned by the operation, maintenance,
handling, storage, erection, dismantling or
transportation of any Equipment while in your
possession. Lessor shall not be liable in
any event for any loss, delay or damage of
any kind of character resulting from defects
in or inefficiency of the Equipment hereby
leased or accidental breakage thereof. . . .
The Lessee will include the interest of
ESSEX CRANE RENTAL CORP. as an additional
named insured under their General Liability,
Excess Liability, and Automobile Insurance
Here, the subcontract provides the obligation to defend
and indemnify "shall not be limited by the provisions of any
Workers' Compensation act or similar statute." Bester of course
did not require that an indemnity contract use any specific
wording,12 but merely that "such a clause contain plain language
which would avoid the employer's protection from double
responsibility which is afforded by the Workmen's Compensation
Act."13 We can find no Pennsylvania case rejecting an
indemnification agreement with language similar to the wording
here.14 We have little difficulty in finding that the language
of the subcontract is a sufficient waiver to permit indemnity.15
(..continued)
Policies as respect to this equipment during
the term of the rental with minimum liability
limits of $1,000,000 per occurrence and
provide a certificate of insurance to Lessor.
619 A.2d at 306.
12
. The Bester court noted that "if the indemnification
agreement is clear and includes indemnification in the event of
either the indemnitee's or the employer's own negligence, its
enforceability does not require that the employer, in addition,
expressly and in haec verba waive the immunity provided by §
481(b) of the Workmen's Compensation Act." Id. at 307.
13
. Id. at 308.
14
. See, e.g., Szymanski-Gallagher v. Chestnut Realty Co.,
597 A.2d 1225, 1229 (Pa. Super. Ct. 1991), overruled by Bester,
619 A.2d at 308; Remas v. Duquesne Light Co., 537 A.2d 881, 882
(Pa. Super. Ct.), appeal denied, 552 A.2d 251, 252 (Pa. 1988);
Gerard v. Penn Valley Constructors, Inc., 495 A.2d 210, 212 (Pa.
Super. Ct. 1985).
15
. Bester also held the contract insufficient to provide
indemnity protection for the indemnitee's own negligence. 619
A.2d at 309 n.2. In the present case, however, the subcontract
withheld indemnity only in cases of the indemnitee's "sole
negligence." See supra note 8 and accompanying text.
Therefore, we hold the subcontract requires L&R Construction to
defend and conditionally indemnify Kiewit/Perini.16
B.
Our holding, however, does not necessarily apply to
Kiewit Eastern. Kiewit Eastern was not a party to the
subcontract with L&R Construction. Instead, the agreement
expressly was "by and between" L&R Construction and
"Kiewit/Perini, A Joint Venture."
Nevertheless, as the joint venture's "managing party,"
Kiewit Eastern maintains it may claim any contractual defense
available to the joint venture itself. Kiewit Eastern asserts
that Pennsylvania partnership law would indemnify a member of a
partnership in this situation, so joint venture participants
should be indemnified as well. Although generally courts have
analogized joint ventures to partnerships,17 we do not believe
16
. As a diversity case, we must predict how the
Pennsylvania Supreme Court would decide these matters. See Hon
v. Stroh Brewery Co., 835 F.2d 510, 512 (3d Cir. 1987). Because
the Pennsylvania Supreme Court has not definitively spoken on
many of these issues, we have looked to decisions of the
intermediate Pennsylvania courts. See Wisniewski v. Johns-
Manville Corp., 759 F.2d 271, 273-74 (3d Cir. 1985) ("Although
lower state court decisions are not controlling on an issue on
which the highest court of the state has not spoken, federal
courts must attribute significant weight to these decisions in
the absence of any indication that the highest state court would
rule otherwise.").
17
. See West v. Peoples First Nat'l Bank & Trust Co., 106
A.2d 427, 431 (Pa. 1954) ("while a joint adventure is not the
same as a partnership . . . a joint adventure does partake in
many ways of the nature of a partnership, the principal
difference being that it usually, though not necessarily, applies
to a single transaction instead of being formed for the conduct
of a continuing business"); Snellbaker v. Herrmann, 462 A.2d 713,
716 (Pa. Super. Ct. 1983) ("A joint venture partakes in many ways
that proposition dictates Kiewit Eastern be covered by the
subcontract here. Pennsylvania decisions on joint ventures are
sparse and it is unclear whether the state's courts would apply
partnership law to the joint venture in this situation.
Furthermore, application of partnership law would not mandate
that L&R Construction defend and indemnify Kiewit Eastern, when
Kiewit Eastern was not even named in the subcontract.
To support its contention, Kiewit Eastern cites cases
holding partners liable to third parties for debts incurred by
other partners on behalf of the partnership. See, e.g., McEvoy
v. Grant, 153 A. 763 (Pa. 1931). Such a proposition comes as no
surprise. Indeed, that doctrine -- holding partners individually
liable for partnership debts -- lies at the heart of partnership
law18 and fundamentally distinguishes partnerships from
corporations.19 Pennsylvania courts have applied this principle
(..continued)
of a partnership . . . ."); see also 48A C.J.S. Joint Ventures §
5 (1981) (footnotes omitted) ("The relation of the parties to a
joint venture is so similar to that in a partnership that their
rights, duties, and liabilities are usually tested by partnership
rules, and in numerous decisions it has been broadly held that
both joint venture and partnership are governed by the same rules
of law.").
18
. See, e.g., 15 Pa. Cons. Stat. Ann. § 8327 (Supp. 1994)
(holding partners liable for debts of the partnership, including
debts incurred by individual partners); LaFountain v. Webb Indus.
Corp., 759 F. Supp. 236, 242 n.3 (E.D. Pa.) ("Under Pennsylvania
. . . law, a partner is individually liable for wrongs committed
by the partnership."), aff'd, 951 F.2d 544 (3d Cir. 1991).
19
. See, e.g., Board of Trustees of W. Conference of
Teamsters Pension Trust Fund v. H.F. Johnson, Inc., 830 F.2d
1009, 1015 (9th Cir. 1987) (noting the "fundamental difference
between corporations and partnerships" is "shareholders and
officers enjoy limited liability; partners do not").
of partnership law to joint ventures.20 But here we are
confronted not with joint venturers' liabilities under the law,
but with their rights -- or lack thereof -- under a contract.
That Kiewit Eastern may be burdened by the liabilities of
Kiewit/Perini is the result of statutory and case law; that
Kiewit Eastern may not benefit from the indemnity afforded
Kiewit/Perini, however, is the result of contract.21
Thus, the law on joint ventures does not permit venture
participants to claim all defenses available to the entity
20
. See, e.g., Snellbaker, 462 A.2d at 716 ("Absent a
limitation in the [joint venture] agreement, a joint venturer
will be held responsible with his or her associates for the
losses sustained by the enterprise."); Newlin Corp. v.
Commonwealth of Pa., Dep't of Envtl. Resources, 579 A.2d 996 (Pa.
Commw. Ct. 1990) (holding joint venturers liable for pollution
emanating from a landfill owned by the joint venture), appeal
denied, 588 A.2d 915 (Pa. 1991).
21
. Other states' courts concur with this reasoning. For
example, in Azer v. Myers, 793 P.2d 1189, 1209 (Haw. Ct. App.),
rev'd in part on other grounds, 795 P.2d 853 (Haw. 1990), the
court held an indemnification clause inapplicable to a partner
because it "applies to acts or omissions of the partnership, not
to [defendant] Gromet's individual negligence while acting for
the partnership." Contrary to Kiewit Eastern's assertions,
O'Brien & Gere Engineers, Inc. v. Taleghani, 504 F. Supp. 399
(E.D. Pa. 1980), does not require a different result. In
O'Brien, the plaintiff sought to hold defendants liable as
"partners by estoppel," rather than under the written contracts
between the parties. The court held an individual could not be
found liable for the business's debts, under the terms of the
Pennsylvania "partner by estoppel" statute, without benefit of
any defenses the company would have under the contract. Id. at
401. Thus, the courts in Azer and O'Brien agreed the terms of
the relevant contracts should control an individual partner's
rights, which is precisely what we have decided here.
Furthermore, the O'Brien plaintiff was attempting to hold the
defendant "liable for the business entity's debts," id.; in the
present case, Kiewit Eastern is being sued for its own alleged
negligence, not that of Kiewit/Perini.
itself. Certainly, Pennsylvania courts have not so held, and we
decline to extend the law to permit such a claim in this case.
But our decision does not require members of joint ventures to
remain unguarded against potential liability. If joint venturers
wish indemnity protection to cover themselves as well as the
joint venture, they need only so specify in their contracts.22
Our holding here is consistent with Pennsylvania law
governing indemnity contracts. Pennsylvania courts require that
an indemnity agreement be strictly construed against the party
asserting it.23 In addition, if an agreement is ambiguous, it is
to be construed "most strongly" against the party who drafted
it.24 Both maxims support our interpretation of the subcontract
22
. Joint venturers, such as Kiewit Eastern, could ensure
that any indemnity agreements for the joint venture specifically
cover the venturers. The venturers also could limit their
potential liability in the original agreement forming the
venture. See Snellbaker, 462 A.2d at 716 ("The liability of a
joint venturer for a proportionate part of the losses or
expenditures of the enterprise may be fixed by the terms of the
[joint venture] agreement."). Depending upon the terms of the
relevant formation agreement here, Kiewit Eastern may have a
claim for reimbursement against Kiewit/Perini for any damages it
pays in the underlying tort suits. See 15 Pa. Cons. Stat. Ann. §
8331(2) (Supp. 1994) (subject to any agreement between the
parties, "[t]he partnership must indemnify every partner in
respect of payments made and personal liabilities reasonably
incurred by him in the ordinary and proper conduct of its
business").
23
. See Phillippe v. Jerome H. Rhoads, Inc., 336 A.2d 374,
376 (Pa. Super. Ct. 1975); Lackie v. Niagara Mach. & Tool Works,
559 F. Supp. 377, 378 (E.D. Pa. 1983); cf. Topp Copy Prods., Inc.
v. Singletary, 626 A.2d 98, 99 (Pa. 1993).
24
. Pittsburgh Steel Co. v. Patterson-Emerson-Comstock,
Inc., 171 A.2d 185, 189 (Pa. 1961) (if the meaning of an
indemnity clause "is ambiguous or reasonably susceptible of two
interpretations, it must be construed most strongly against the
party who drew it"); cf. Hutchison v. Sunbeam Coal Corp., 519
as not requiring the defense and indemnification of Kiewit
Eastern.25
C.
Section 20 of the subcontract between L&R Construction
and Kiewit/Perini provides that "[i]n the event either party
institutes suit in court against the other party or against the
surety of such party, in connection with any dispute or matter
arising under this Subcontract, the prevailing party shall be
(..continued)
A.2d 385, 390 n.5 (Pa. 1986); Raiken v. Mellon, 582 A.2d 11, 13
(Pa. Super. Ct. 1990).
25
. Kiewit Eastern notes that joint venturers are
considered agents and principals of the joint venture. See Gold
& Co. v. Northeast Theater Corp., 421 A.2d 1151, 1153 n.1 (Pa.
Super. Ct. 1980) (citing 46 Am. Jur. 2d Joint Ventures § 1
(1969); McRoberts v. Phelps, 138 A.2d 439, 443 (Pa. 1958)). As
an agent, Kiewit Eastern claims it is entitled to the benefits of
the joint venture's contracts with third parties, but it cites no
authority for that proposition. We believe Kiewit Eastern
misinterprets the implication of the statements referring to
joint venturers as agents and principals. Such statements merely
reiterate that each joint venturer has the right to participate
in both the creation and implementation of the joint venture's
policies. See 46 Am. Jur. 2d Joint Ventures § 1 (1969) ("each
joint venturer shall stand in the relation of principal, as well
as agent, as to each of the other coventures, with an equal right
of control of the means employed to carry out the common purpose
of the venture"). Even if Kiewit Eastern were technically
considered Kiewit/Perini's "agent," we still would not be
permitted to "read in" Kiewit Eastern as a party to the
subcontract and thereby ignore the plain language of the
agreement. See Restatement (Second) of Agency § 323 (1957) ("If
it appears unambiguously in an integrated contract that the agent
is a party or is not a party, extrinsic evidence is not
admissible to show a contrary intent . . . ."). As noted, the
subcontract in this case was unambiguous in stating it was "by
and between" L&R Construction and "Kiewit/Perini, A Joint
Venture," with only their representatives signing it. See id. §
323 cmt. a ("The statement as to parties may appear either in the
body of the instrument or in the signature . . . .").
entitled to recover reasonable attorney fees in addition to any
other relief granted by the court."26 In this case,
Kiewit/Perini has prevailed on at least some of its claims.
Nevertheless, the district court denied its request for
attorneys' fees against L&R Construction, holding that the
request had not been properly raised.27
On appeal, Kiewit/Perini renews its call for attorneys'
fees and costs from L&R Construction.28 Although Kiewit/Perini
concedes its summary judgment memorandum did not contain a
separate section asking L&R Construction for attorneys' fees, it
asserts it generally requested such fees in the memorandum.
After reviewing the memorandum, we believe the district court did
not err in concluding the issue had been waived. At most,
Kiewit/Perini made vague references that could be construed only
26
. Section 11 of the subcontract contains a similar
provision: "The Subcontractor shall defend and indemnify the
Contractor . . . from, any and all loss, damage, costs, expenses
and attorneys' fees suffered or incurred on account of any breach
of the aforesaid obligations . . . ."
27
. The district court, in its initial ruling on the
motions for summary judgment, stated that Kiewit/Perini had not
sought attorneys' fees against L&R Construction, but only against
CNA Insurance. Kiewit I, supra, at *9 n.5. In a motion to amend
the judgment under Rule 59(e), Kiewit/Perini argued it had
requested fees against L&R Construction in the summary judgment
papers, and it renewed its claim for fees. The district court
again rejected the request, explaining "[t]he issue of attorneys
fees against L&R, whether or not sought in the pleadings, was not
briefed and argued in the motion for summary judgment, which
motion sought complete judgment." Kiewit II, supra, at *6.
28
. Kiewit Eastern also claims a right to attorneys' fees
and costs, but it clearly is not a "prevailing party," within the
meaning of the subcontract.
in hindsight as seeking fees from L&R.29 See, e.g., Brickner v.
Voinovich, 977 F.2d 235, 238 (6th Cir. 1992) (noting arguments
not "adequately raised" in the district court are waived on
appeal), cert. denied, 113 S. Ct. 2965 (1993).
Kiewit/Perini also claims it specifically included a
request for attorneys' fees and costs from L&R Construction in
its motion for summary judgment. Yet, under local district court
rules, "[e]very motion not certified as uncontested shall be
accompanied by a brief containing a concise statement of the
legal contentions and authorities relied upon in support of the
motion." E.D. Pa. R. Civ. P. 20(c). As we have noted, this was
not done.30
Finally, Kiewit/Perini points out that it briefed the
issue of fees and costs against L&R Construction in a motion to
amend the judgment under Rule 59(e), which the district court
denied. Courts often take a dim view of issues raised for the
first time in post-judgment motions. Generally, this is a
decision within the sound discretion of the district court. In
29
. In that same memorandum of law, however, Kiewit/Perini
devoted an entire subsection to the reasons it should receive
attorneys' fees from CNA Insurance.
30
. We have noted the importance of similar rules at the
appellate level requiring that issues raised on appeal must be
accompanied by supporting arguments. See, e.g., Travitz v.
Northeast Dep't ILGWU Health & Welfare Fund, 13 F.3d 704, 711 (3d
Cir.) (citations omitted) ("Under Fed.R.App.P. 28(a)(5), an
appellant is required to list the issues raised on appeal and
present an argument in support of them. When an issue is not
pursued in the argument section of the brief, the appellant has
abandoned and waived that issue on appeal."), cert. denied, 114
S. Ct. 2165 (1994).
this case, the issue of attorneys' fees and costs related to the
contract dispute at the center of the summary judgment motions,
but it was not adequately raised at the time. Thus, we do not
believe the district court abused its discretion in denying
Kiewit/Perini's Rule 59(e) motion.
III.
Having determined that L&R Construction owes
Kiewit/Perini a duty of defense and conditional indemnification,
we turn to the question whether the district court properly
dismissed CNA Insurance from the case. Once the district court
ruled that the subcontract entitled Kiewit/Perini to a defense
and indemnification, it dismissed the claims against CNA
Insurance as moot. Kiewit I, supra, at *8. We believe a
determination of the responsibilities of CNA Insurance is
necessary, however, to resolve not only whether CNA Insurance
must defend and indemnify Kiewit/Perini, but also whether it
acted in bad faith in denying Kiewit/Perini's tenders of defense,
thereby justifying an award of attorneys' fees and costs.31
A.
Section 10 of the subcontract between Kiewit/Perini and
L&R Construction provided:
INSURANCE. Prior to commencement of
Work, Subcontractor shall procure and at all
times thereafter maintain with insurers
acceptable to Contractor the following
minimum insurance protecting the
31
. That CNA Insurance appealed from the district court's
judgment, which dismissed the complaint against it as moot,
demonstrates it continues to have a vital stake in the outcome of
this proceeding.
Subcontractor, Owner and the Contractor
against liability from damages because of
injuries including death, suffered by
persons, including employees of the
Subcontractor . . . in connection with the
performance of this Subcontract.
After the subcontract was signed, L&R Construction purchased from
CNA Insurance a policy covering liability arising out of L&R
Construction's incidental contracts. CNA Insurance concedes that
this policy requires it to fulfill any duty to defend and
indemnify that L&R Construction has under the subcontract.32
Because we ruled that L&R Construction owes a duty to defend and
conditionally indemnify Kiewit/Perini under the subcontract, see
supra section II.A, it is evident that CNA Insurance now bears
the same duty.33
B.
Now that we have decided CNA Insurance must defend and
conditionally indemnify Kiewit/Perini, the question arises as to
whether it must reimburse Kiewit/Perini for its costs. To
resolve this issue, we must consider the scope of the insurer's
duty to defend:
32
. Brief of Appellees/Cross Appellant CNA Insurance
Company, at 43 ("CNA agrees, that if, an indemnification
obligation arose from the language of the L&R-Kiewit/Perini
subcontract, the coverage obligations of the L&R-CNA contractual
liability coverage would trigger, i.e., CNA would have to fulfill
the defense and indemnification obligations to which its insured
had contractually agreed.").
33
. Our resolution of this issue makes it unnecessary for
us to determine whether Kiewit/Perini was an additional insured
or a third-party beneficiary of the insurance policy between L&R
Construction and CNA Insurance.
Under Pennsylvania law, an insurance company
is obligated to defend an insured whenever
the complaint filed by the injured party may
potentially come within the policy's
coverage. The obligation to defend is
determined solely by the allegations of the
complaint in the action. The duty to defend
remains with the insurer until the insurer
can confine the claim to a recovery that is
not within the scope of the policy.
American States Ins. Co. v. Maryland Casualty Co., 628 A.2d 880,
887 (Pa. Super. Ct. 1993) (quoting Pacific Indemnity Co. v. Linn,
766 F.2d 754, 760 (3d Cir. 1985)) (citations omitted). Because
CNA Insurance has failed to satisfy its duty to defend,
Kiewit/Perini asserts it should be reimbursed for its costs
incurred in defending the underlying tort suits and in bringing
this declaratory judgment action.
First, we consider those costs that Kiewit/Perini
already has incurred in defending itself from the personal injury
claims made by Chen, the injured worker. As previously noted,
CNA Insurance has conceded, if L&R Construction had a duty to
defend and indemnify Kiewit/Perini, then CNA Insurance must
fulfill that duty on behalf of L&R.34 When an insurer
erroneously denies its duty to defend, fulfillment of the duty
requires the insurer to pay for any defense costs already
incurred.35 Such fees only can be awarded for services rendered
34
. See supra note 32.
35
. See, e.g., Carpenter v. Federal Ins. Co., 637 A.2d
1008, 1013 (Pa. Super. Ct. 1994) ("If a duty to defend is found
on the part of an insurer, it is also the insurer's
responsibility to pay for attorneys' fees and costs incurred by
the insured in the underlying action."); Imperial Casualty &
Indem. Co. v. High Concrete Structures, Inc., 858 F.2d 128, 131
from the time "the duty to defend arose." Heffernan & Co. v.
Hartford Ins. Co. of Am., 614 A.2d 295, 299 (Pa. Super. Ct.
1992). Thus, because CNA Insurance had a duty to defend but
denied that duty, the insurer must reimburse Kiewit/Perini for
the costs it has incurred so far in defending the underlying tort
claims.
Second, we must determine whether Kiewit/Perini is
entitled to its costs in pursuing the present declaratory
judgment action. For more than a decade, Pennsylvania courts
have permitted attorneys' fees in this situation, but only when
the insurer has acted in bad faith.36 Carpenter v. Federal Ins.
(..continued)
n.2 (3d Cir. 1988) ("[i]f an insurer has a duty to defend a suit
and is requested to provide a defense, then that insurer is
clearly obligated to pay fees and costs incurred by the insured
in defending the suit," including reimbursing the insured for
fees and costs already paid).
36
. Awards for the "bad faith" conduct of insurers appear
possible under at least two theories. First, a 1990 Pennsylvania
statute permits an insured to bring an action for interest,
attorneys' fees, court costs, and punitive damages against an
insurer for its bad faith acts under an insurance policy. 42 Pa.
Cons. Stat. Ann. § 8371 (Supp. 1994). Second, Pennsylvania
courts have long held that "an insured who is compelled to bring
a declaratory judgment action to establish his insurer's duty to
defend an action brought by a third party may recover his
attorneys' fees incurred in the declaratory judgment action if
the insurer has, in bad faith, refused to defend the action
brought by the third party." Kelmo Enters., Inc. v. Commercial
Union Ins. Co., 426 A.2d 680, 685 (Pa. Super. Ct. 1981). We do
not believe the statutory remedy is implicated here because
Kiewit/Perini has not brought a separate cause of action for
damages, but has merely claimed the fees incidental to this
declaratory judgment suit. See, e.g., Asplundh Tree Expert Co.
v. Pacific Employers Ins. Co., Civ. A. No. 90-6976, 1991 WL
147461, at *5-10 (E.D. Pa. July 25, 1991) (distinguishing between
claims brought under the Pennsylvania statute and those sought
under the Kelmo rationale); Liberty Fish Co. v. Home Indem. Co.,
Civ. A. No. 89-5201, 1990 WL 161139, at *1 (E.D. Pa. Oct. 18,
Co., 637 A.2d 1008, 1013 (Pa. Super. Ct. 1994) (citing First Pa.
Bank v. National Union Fire Ins. Co., 580 A.2d 799, 803 (Pa.
Super. Ct. 1990)) ("an insured who is compelled to bring a
declaratory judgment action to establish his insurer's duty to
defend an action brought by a third party may recover attorneys'
fees if the insurer has, in bad faith, refused to defend the
action brought by the third party"). See also Kelmo Enters.,
Inc. v. Commercial Union Ins. Co., 426 A.2d 680, 685 (Pa. Super.
Ct. 1981); Pacific Indem. Co. v. Linn, 766 F.2d 754, 769 (3d Cir.
1985). As the court stated in Carpenter, 637 A.2d at 1013, "[t]o
compel appellees to expend thousands of dollars to enforce their
contractual right to a defense and indemnification would fly in
the face of equity."
The language of some of these decisions, however, seems
to limit this award of costs to an "insured" against its insurer.
In this case, Kiewit/Perini may not be an "insured" of CNA
Insurance.37 But we believe such a distinction does not matter
here because an award of fees does not rest on a contract between
the parties. As this court stated in Trustees of University of
Pennsylvania v. Lexington Insurance Co., 815 F.2d 890, 910-11
(3d. Cir. 1987):
(..continued)
1990) ("The allegations of bad faith are not put forth as a
separate claim for damages, but seek the incidental award of
attorneys' fees.").
37
. As we have noted, we decline to decide whether
Kiewit/Perini is an additional insured or a third-party
beneficiary of the insurance contract between CNA Insurance and
L&R Construction. See supra note 33.
Although the Kelmo court purported to connect
its holding to a contract analysis, the
holding truly rested on a quasi-tort view
that attorneys' fees represent compensation
for an insurer's violation of its obligation
to act in good faith. The mere contractual
obligation of the insurer to pay for the
costs of defending its insured does not
include the obligation to pay for the
insured's suit against its insurer.38
In this case, as we have already found, CNA Insurance
owed Kiewit/Perini the duty to defend, and CNA Insurance breached
that duty. As a result of the breach, Kiewit/Perini was forced
to defend itself in the underlying tort suits and incur the
expense of bringing this declaratory judgment action. We are
satisfied the necessary "quasi-tort" elements exist here to
permit the possibility of an award of costs and attorneys' fees
to Kiewit/Perini. Therefore, we remand this case to the district
court to determine whether CNA Insurance acted in "bad faith" so
as to justify an award of costs and attorneys' fees arising out
of this declaratory judgment action. The district court should
also determine the fees and costs to which Kiewit/Perini is
entitled for defending itself in the underlying tort suits.39
38
. See also Liberty Fish Co. v. Home Indem. Co., Civ. A.
No. 89-5201, 1990 WL 161139, at *1 (E.D. Pa. Oct. 18, 1990) (in
Lexington Insurance, "the Third Circuit emphasized that its
holding was not based on the particular contractual obligations
involved, but rested instead on the general principle of tort
that reimbursement is due where expenses are incurred as the
result of the fault of another").
39
. The district court should award only those fees and
costs related to Kiewit/Perini's claims. Since neither L&R
Construction nor CNA Insurance has a duty to defend or indemnify
Kiewit Eastern, the fee award should not include any costs
attributable to Kiewit Eastern.
IV.
Overall, we believe that L&R Construction and CNA
Insurance have a duty to defend and conditionally indemnify
Kiewit/Perini, but not Kiewit Eastern. We remand to the district
court to determine whether the insurance company's actions rise
to the level of "bad faith." In any event, CNA Insurance must
reimburse Kiewit/Perini for the costs and fees it has incurred in
defending itself against the underlying tort claims. In all
other respects, we will affirm the district court.