First Mercury Insurance Co. v. Westchester Surplus Lines Ins. ( 2018 )

FILED
NOT FOR PUBLICATION
JUL 20 2018
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FIRST MERCURY INSURANCE ) No. 16-35888
COMPANY, an Illinois company, )
) D.C. No. 3:15-cv-00192-MO
Plaintiff-Appellee, )
) MEMORANDUM*
)
AIG SPECIALTY INSURANCE )
COMPANY, )
)
Intervenor-Plaintiff-Appellee, )
)
v. )
)
WESTCHESTER SURPLUS )
LINES INSURANCE COMPANY, )
a Georgia company, )
)
Defendant-Appellee, )
)
MULTNOMAH COUNTY, an )
Oregon municipality, )
)
Defendant-Appellant. )
)
Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, Chief District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Submitted July 10, 2018**
Seattle, Washington
Before: FERNANDEZ and NGUYEN, Circuit Judges, and RAKOFF,*** District
Judge.
Multnomah County (“the County”), which is the assignee of the claims of
ZellComp, Inc., against First Mercury Insurance Company, Westchester Surplus
Lines Insurance Company, and AIG Specialty Insurance Company (collectively
“the Insurers”), appeals the district court’s grant of judgment in favor of the
Insurers. We affirm.
The County entered into a contract with Conway Construction Company
(“Conway”) under which Conway was to furnish goods and services1 for the
rehabilitation of the Morrison Bridge (“the Bridge”), a structure owned and
operated by the County. Conway entered into a subcontract with ZellComp under
which the latter was to furnish materials, including reinforced polymer bridge
decking (“the decking”). ZellComp, in turn, entered into a sub-subcontract (“the
**
The panel unanimously finds this case suitable for decision without oral
argument. Fed. R. App. P. 34(a)(2).
***
The Honorable Jed S. Rakoff, Senior United States District Judge for the
Southern District of New York, sitting by designation.
1
Those included “design, construction, construction administration, and
related services.”
2
Agreement”) with Strongwell Corporation under which the latter was to custom
make and sell the decking to the former, for use in the Bridge rehabilitation project.
The Agreement provided that Strongwell was required to maintain insurance that
would indemnify ZellComp for the latter’s own negligence that caused damages to
the County. Strongwell did so, and the Insurers are the ones it contracted with for
that purpose. After the Bridge rehabilitation project was completed, numerous
problems developed, including cracks in and other deterioration of the decking.
Therefore, the County brought an action against Conway and others, which
ultimately resulted in a jury verdict determining that the County was damaged due
to the negligence of a number of parties and that forty percent of that damage was
caused by the negligence of ZellComp. ZellComp claimed the right to indemnity
from the Insurers and, in due course, assigned its claims to the County. In the
action at hand, the district court declared that the Agreement was void insofar as it
provided that the Insurers were required to indemnify ZellComp for its negligence.
Thus, the court entered judgment against the County. The County asserts that the
district court erred. We disagree with that assertion.
We apply Oregon law to this action,2 which includes Oregon statutes
2
See Zamani v. Carnes, 491 F.3d 990, 995 (9th Cir. 2007).
3
construed as the Oregon Supreme Court has, or would, construe them.3 Here, the
plain language of the Oregon anti-indemnity statute provides that “any provision in
a construction agreement that requires a person or that person’s surety or insurer to
indemnify another against liability for damage arising out of . . . damage to
property caused in whole or in part by the negligence of the indemnitee is void.”
Or. Rev. Stat. § 30.140(1); see also id. at (3) (defining construction agreement).
And the history of the legislation makes it clear that the very purpose of the
legislature was to preclude contractors or owners from “forcing subcontractors to
accept” liability for the contractor’s own negligence “as part of the
[subcontractor’s] cost of doing business.” Sunset Presbyterian Church v. Andersen
Constr. Co., 341 P.3d 192, 200 (Or. Ct. App. 2014); see also Montara Owners
Ass’n v. La Noue Dev., LLC, 353 P.3d 563, 569 (Or. 2015). But that is precisely
what the Agreement required. Thus, the text of the statute4 and its legislative
history5 indicate that the indemnity portion of the Agreement is void.
The County’s suggestion that the Agreement was for the sale of goods points
3
See Goldman v. Salisbury (In re Goldman), 70 F.3d 1028, 1029 (9th Cir.
1995) (per curiam).
4
See State v. Gaines, 206 P.3d 1042, 1050 (Or. 2009) (en banc).
5
See id. at 1050–51; see also State v. Thompson, 306 P.3d 731, 734 (Or. Ct.
App. 2013).
4
to an irrelevancy as far as this custom-made product for incorporation in the Bridge
is concerned. The statute makes no such distinction between goods and services.
Nor does the statute provide different provisions for a subcontractor who happens
to be more financially stable or successful than the contractor itself. The statute
speaks to which entity has the authority over awarding the construction work in
question. Here, ZellComp, not Strongwell, was that entity. Thus, the district court
did not err.6
AFFIRMED.
6
As a result of this determination, we need not and do not consider whether
the terms of the Insurers’ policies would also preclude recovery by the County in
whole or in part.
5