This case note has been submitted by Elizabeth S. McKenna, an attorney with Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States

Facts
Curtis Callais, Sr. ("Curtis") was president and chief executive officer of Curtis Callais Welding, Inc. ("Welding"). In 1995, Welding entered into a Master Service Agreement (the "Agreement") with a company that through acquisition and name change became Stolt Offshore, Inc. ("Stolt Offshore"). As a result of this change, the Agreement was amended to provide that Stolt Offshore, and all of its subsidiaries and affiliates, including Stolt Comex Seaway Holdings, Inc. ("Stolt Holdings"), would be deemed signatories to the original Agreement. The Agreement contained a choice-of-law provision that provided general maritime law would govern any disputes that arose.

Brian Laine ("Laine") was an employee of Big Inch Marine Systems, Inc. ("Big Inch"), another Stolt Offshore subsidiary. Laine was severely injured on the job when a crane capsized; Curtis was supervising the crane operation. Laine filed a negligence claim in a Louisiana state court against Curtis in his individual capacity, and Triple C Fabricators, Inc. ("Triple C"), another company working at the site that was responsible for machinery involved in the accident. (Other parties involved settled with Laine.)

Although Welding was not named as a party to the state court suit, it nevertheless demanded that Stolt Holdings indemnify and defend it in accordance with the terms of the Agreement. Stolt Holdings rejected Welding’s request, contending that the lawsuit was against Curtis in his individual capacity and that the Agreement did not include an obligation to defend and indemnify Welding’s agents or employees. Welding thereafter filed suit in a Louisiana federal district court, alleging that Stolt Holdings, as Stolt Offshore’s affiliate, breached its obligations under the Agreement by failing to defend and indemnify Welding. Welding moved for summary judgment, and Stolt Holdings filed a cross-motion for summary judgment dismissing the claim.

The district court concluded that the Agreement’s choice-of-law provision was enforceable and that the claim was covered by the general maritime law. Pursuant to the plain language of the Agreement, the district court held Stolt Offshore (including, by the terms of the Agreement, Stolt Holdings) was only required to defend and indemnify Welding, and not its employees or affiliates. Accordingly, Stolt Holdings’ cross-motion for summary judgment was granted. Welding appealed from the district court’s decision, alleging that when the accident occurred, Curtis was acting in the "course and scope of his employ" for Welding and thus should have the benefit of the indemnity clause in respect of negligence claims filed against him.

Judgment
The Fifth Circuit concluded that the district court had properly enforced the Agreement’s choice-of-law provision, such that the general maritime law was the proper law to apply in interpreting the Agreement’s terms. The Court noted that the Agreement’s indemnity clause was "unambiguous and unequivocal" regarding the parties’ intent and endorsed the lower court’s reliance on Babcock v. Continental Oil, 792 F.2d 1346 (5th Cir. 1986), in which the Court had held that an indemnification agreement between a company and a contractor did not cover the contractor’s employees with regard to indemnification for personal injury claims because the agreement expressly provided coverage for only the company’s agents and employees, and not for the contractor’s agents or employees. The court reiterated the principle that "under general maritime law, when evaluating a contract, a court cannot look beyond the written language of the document to determine the intent of the parties unless the disputed contract provision is ambiguous . . . . Moreover the contract must be read as a whole and the words must be given their plain meaning."

In applying Babcock to the instant case, the Fifth Circuit concluded the Agreement’s language was unambiguous and must be narrowly construed. While the Agreement expressly included Stolt Offshore’s affiliated or parent or subsidiary companies (including Stolt Holdings), as well as those companies’ agents, officers, directors, and employees, there was no such express provision expanding the definition of Welding to include its affiliated companies or personnel. Further, while the Agreement expressly stated that Welding was to defend and indemnify Stolt Offshore beyond the company itself, the Agreement could not be read to suggest that Stolt Offshore’s obligation to defend and indemnify Welding went beyond the confines of that company.

The Court pointed out that it was an "extraordinary obligation" for one company to indemnify another for its own negligence and that the Agreement clearly did not provide Stolt Offshore with any such express notice that it might have to indemnify Welding’s agents or employees. The Court concluded that the Agreement’s express coverage for Stolt Offshore’s agents, employees, subsidiaries and affiliates in one section, and its omission of this expansive duty of coverage in respect of Welding, was "highly persuasive" evidence that the parties did not intend that Stolt Offshore’s duty of defense and indemnification should expand beyond Welding, the company, to include Curtis in his individual capacity or as Welding’s agent. The Fifth Circuit thus affirmed the district court’s granting of summary judgment in favor of Stolt Holdings, and dismissed Welding’s claims.

Comment
If the parties intend an indemnification obligation to extend beyond the actual parties to the agreement to include affiliates, personnel or sub-contractors, the indemnity agreement in the contract must clearly and unequivocally so provide because such clauses ordinarily will be strictly construed by the courts.