Powell v. ABS

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DMC/SandT/05/09
Tatyana Powell and Others v. American Bureau of Shipping and Others
United States of America: Norfolk Circuit Court, Fourth Judicial Circuit of Virginia: No. CL1623-03: 16 September 2004:unreported
wrongful death: contribution and indemnity: settlement and release
Summary
Plaintiff and Owner settled a wrongful death claim through an agreement that contained an indemnity/hold harmless clause. Plaintiff then sued ABS for the same incident resulting in the wrongful death. ABS commenced an action against Owner for contribution and indemnity for Plaintiff’s claim. The Norfolk Circuit Court enforced the settlement agreement’s indemnity/hold harmless provision in favor of Owner, thus requiring Plaintiff to indemnify Owner in respect of ABS’s claim. As a result, the action against the ABS became circular and effectively ended Plaintiff’s claim.

DMC Category: Confirmed

Case Note contributed by Matthew H. James of Healy & Baillie, LLP in New York. Healy & Baillie are the International Contributors to the website for the United States of America

With acknowledgements to John M Ryan, of the law firm Vandeventer Black of Norfolk, Virginia, Counsel for Owner, for bringing the case to the Editor’s attention

Background
Plaintiff’s husband was killed in a fire aboard Owner’s vessel. Owner commenced a limitation of liability action in federal court and settled with Plaintiff. The settlement agreement contained a clause that required Plaintiff to "defend, indemnify and hold harmless" Owner from, among other things, any "third party claims" or "claims for contribution and/or indemnification" arising out of the death of Plaintiff’s husband.

Plaintiff then brought suit in state court against ABS and two of its surveyors who had inspected the vessel one month before the fire. ABS filed a third party claim for contribution and indemnity against Owner pursuant to its certificate classifying the vessel as seaworthy. Owner moved for judgment against Plaintiff pursuant to the "hold harmless" clause in the settlement agreement, arguing that Plaintiff had a contractual duty to defend Owner against the ABS claim and to indemnify Owner to the extent it was found liable to ABS.

Plaintiff resisted Owner’s motion on three grounds. First, Plaintiff argued that the ABS claim against Owner did not "arise" from the death of Plaintiff’s husband. Second, Plaintiff argued that the ABS claim against Owner was not within "the contemplation of the parties" at the time of execution of the settlement agreement. Third, Plaintiff argued that Owner had not yet suffered any loss for which it could be indemnified.

Judgment
The Court rejected Plaintiff’s first argument as the ABS action against Owner clearly arose from the death of Plaintiff’s husband.

The Court then rejected Plaintiff’s second argument as "third party claims" or "claims for contribution and/or indemnification" were specifically mentioned in the settlement agreement. Moreover, the Court noted that it is common for multiple defendants to seek contribution and indemnity from each other in a death action and criticized Plaintiff’s counsel for not anticipating such a possibility during the drafting of the settlement agreement.

Finally, the Court rejected Plaintiff’s third argument because Virginia abolished the requirement that a party suffer an "actual loss" before seeking indemnification from another potentially liable party. Moreover, the Court noted that Owner had already suffered an "actual loss" in the form of legal fees incurred in defending against the ABS claim.

Comment
The Court enforced the terms of the settlement agreement, thus requiring Plaintiff to defend and indemnify Owner against the ABS claim which effectively ended the litigation. This case highlights the importance of carefully reviewing the terms of a release—whether as the releasor or releasee—upon settlement of a claim. 

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