Not An Oscar Winner: A Case About Indemnification

by Brooks Pierce
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[author: Mack Sperling]

It's hard for me to think of a case I'd rather not write about than GR&S Atlantic Beach, LLC v. Hull, 2012 NCBC 52. It's not just that it's deathly boring or that it involves the interpretation of poorly written transaction documents. It's also that it centers on an indemnification agreement, one of the most stultifying areas of the law.

So, with those caveats, here's the Reader's Digest version of the GR&S case. That is, if you haven't stopped reading already.

Indemnification For Unforeseeable Events

The indemnification concerned losses relating to a water treatment facility purchased by one of the Plaintiffs. One of the two tanks at the facility collapsed. The collapse, which was totally unexpected, caused a release of untreated wastewater and substantial damage. Defendants said that the indemnity should not be extended to cover losses which were not intended to be within the scope of the indemnity.

Judge Gale found the language of the indemnity to be clear and unambiguous -- covering future claims arising from the use or operation of the facility -- and he ruled that he would not consider any parol evidence regarding the unforseeability of the collapse.

Statute of Limitations For Indemnification Agreements

The Judge also sided with the Plaintiffs on a statute of limitations issue.  He rejected the argument that each claim under the indemnity was governed by a single limitations period, finding the indemnity agreement to be a severable contract including multiple undertakings.

Doctrine of the Last Antecedent

This opinion gets even more interesting upon the Court's consideration of whether the Indemnification Agreement was assigned to one of the Defendants. By a general assignment one of the Defendants had assigned a variety of contracts, with an exclusionary phrase at the end of several subparagraphs that might have excluded the Indemnification Agreement.

The Court looked to something called the doctrine of the last antecedent in wrestling with this contract interpretation.

Never heard of that doctrine?  Really? It says that

relative and qualifying words, phrases, and clauses ordinarily are to be applied to the word or phrase immediately preceding and, unless the context indicates a  contrary intent, are not to be construed as extending to or including others more remote.

Op. 74 (quoting Novant Health, Inc. v. Aetna U.S. Healthcare, 2001 NCBC 1 at 17-18).

Judge Gale found that even applying the doctrine of last antecedent didn't lead to a clear contract interpretation and that the issue could only be resolved at trial.

Attorneys' Fees Redux

Closing out this opinion, Judge Gale revisited his earlier ruling in the case on whether Plaintiff could recover attorneys' fees incurred in defending "ancillary" litigation brought by the Utilities Commission. He didn't change his ruling, but took note of the intervening Court of Appeals decision in Robinson v. Hope, __ N.C. App. __, 719 S.E.2d 66 (2011) in which the appellate court held that attorneys' fees in ancillary litigation caused by a tortfeasor's wrong could not be recovered as an element of tort damages.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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