United States District Court,

W.D. Tennessee,

Western Division.

NATIONAL BANKERS TRUST CORPORATION, a Tennessee corporation, Plaintiff,

v.

PEAK LOGISTICS LLC, an Indiana limited liability company; Summitt Trucking LLC, an Indiana limited liability company; Pacer Transportation Solutions Inc., an Ohio corporation; Zappos.Com, Inc., a Delaware corporation; and Deckers Outdoor, Inc., Defendants,

v.

Andy Transport, Inc., Third Party Defendant.

 

No. 12–2268–STA–tmp.

April 8, 2013.

 

Kyle A. Young, Adams & Reese, LLP, Nashville, TN, Randall J. Fishman, Richard S. Townley, Ballin Ballin & Fishman, Keith A. Aiken, National Bankers Trust, Memphis, TN, for Plaintiff.

 

Kyle A. Young, Adams & Reese, LLP, Nashville, TN, Lewis Wilkinson Lyons, Todd B. Murrah, Glassman Edwards Wade & Wyatt, PC, Memphis, TN, for Defendants.

 

Matthew Scott Mazza, Law Office of Matthew S. Mazza, Santa Barbara, CA, for Third Party Defendant.

 

ORDER DENYING DEFENDANT DECKERS OUTDOOR, INC.’S MOTION TO DISMISS

S. THOMAS ANDERSON, District Judge.

*1 Before the Court is Defendant Deckers Outdoor, Inc.’s (“Deckers”) Motion to Dismiss for Failure to State a Claim (D.E.# 79), filed December 21, 2012. Plaintiff National Bankers Trust Corporation (“NBT”) filed a Response (D.E. # 82) on December 28, 2012. For the reasons given herein, the Court hereby DENIES Deckers’ Motion to Dismiss.

 

BACKGROUND

For purposes of the instant Motion, the Court accepts the following as true. FN1 NBT is engaged in the business of factoring for motor carriers. (First Am. Compl. ¶ 17, D.E. # 64.) NBT purchases its clients’ accounts receivables (owed by shippers or consigners using the clients’ carrier services) at a discount and takes a security interest in its clients’ assets (including present and after-acquired accounts receivables) securing the purchase price. (Id.) NBT remits a portion of the purchase price, known as the “advance rate,” at the time of purchase, reserving a portion of the purchase price as further security. (Id. ¶¶ 18–19.) NBT releases the reserved funds to its clients once the shipper pays the account. (Id. ¶ 19.)

 

FN1. On a motion to dismiss under Rule 12(b)(6), the Court will take the well-pleaded factual allegations in the complaint as true and construe them in the light most favorable to the plaintiff. Saylor v. Parker Seal Co, 975 F.2d 252, 254 (6th Cir.1992).

 

Defendant Pacer Transportation Solutions Inc. (“Pacer”) brokered loads of shoes Defendant Zappos.com Inc. (“Zappos”) purchased from various suppliers. (Id. ¶ 26.) Pacer contracted with Defendant Summitt Trucking, LLC (“Summitt”) to carry some of these loads. (Id. ¶ 25.) Defendant Peak Logistics, LLC (“Peak”) would then, in turn, broker some of these Summitt loads to other carriers. (Id. ¶ 24.)

 

On August 15, 2011, NBT and Third-party Defendant Andy Transport, Inc. (“Andy Transport”) entered into a factoring agreement. (Id . ¶ 20.) In October 2011, Peak began brokering shipments of Zappos’ shoes to Andy Transport. (Id. ¶ 21.) These loads included shipments of shoes Zappos purchased from Deckers. (Id. ¶ 22.) Pursuant to their factoring agreement, Andy Transport sold the receivables generated by these brokered shipments to NBT. (Id. ¶ 23.) NBT promptly notified Peak of NBT’s purchase of the Andy Transport receivables and of Peak’s obligation to pay NBT. (Id.)

 

On November 23, 2011, and January 5, 2012, Andy Transport hauled two separate loads of Zappos’ shoes shipped from Deckers’ Caramillo, California facility. (Id. ¶¶ 29, 37.) Peak brokered both loads to Andy Transport. (Id.) However, unnamed persons absconded with both loads before they reached their destination. (Id.)

 

On January 17, 2012, after NBT made numerous inquiries to Peak regarding payment on open Andy Transport receivables, Peak informed NBT of the thefts and that it had two insurance claims for lost cargo pending. (Id. ¶ 3 9.) Peak further informed NBT it was holding payment on Andy Transport receivables due to the pending claims. (Id.) Included in these receivables were payments on twenty-four bills of lading naming Deckers as shipper or consignor. (Id. ¶¶ 47–48.) FN2 These bills of lading incorporated the terms of the Uniform Bill of Lading. (See, e.g., Ex. to Compl. at 6, D.E. # 1–9.)

 

FN2. The Court notes Deckers identifies Paragraphs 47 and 48 of the Amended Complaint as containing “conclusory allegations” the Court should disregard. (Mot. to Dism. at 4, D.E.79–1.) The Court reads this as objecting to the statement “Therefore, Deckers is primarily liable for the freight charges on these twenty-four (24) invoices[,]” and not to the remainder of Paragraphs 47 and 48.

 

*2 NBT commenced this diversity action by filing a Complaint (D.E.# 1) in this Court on April 4, 2012, alleging causes of action against Peak, Summitt, Pacer, and Zappos for failure to pay a sworn account, fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, and replevin. NBT then filed a First Amended Complaint (D.E.# 64) on October 18, 2012, adding a cause of action for failure to pay a sworn account against a new defendant, Deckers. Deckers moves the Court here to dismiss NBT’s sole claim against Deckers for failure to pay a sworn account. Deckers argues the bills of lading NBT submits to the Court indicate Deckers was not liable for shipping charges. (Mot. to Dism. at 3–5.) NBT argues in response a shipper-consignor is primarily and presumptively liable for freight charges on a bill of lading unless they elect the bill of lading’s non-recourse provisions, which Deckers did not do. (Resp. to Mot. to Dism. at 4–5, D.E. # 81.)

 

STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss a claim “for failure to state a claim upon which relief can be granted.” FN3 When considering a Rule 12(b)(6) motion, the Court must treat all of the well-pleaded allegations of the complaint as true and construe all of the allegations in the light most favorable to the non-moving party. FN4 However, the Court will not accept legal conclusions or unwarranted factual inferences as true.FN5 “To avoid dismissal under Rule 12(b)(6), a complaint must contain either direct or inferential allegations with respect to all material elements of the claim.” FN6 Ordinarily, a reviewing court may not consider matters outside the pleadings on a motion to dismiss under Rule 12(b)(6).FN7 However, “a copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” FN8

 

FN3. Fed.R.Civ.P. 12(b)(6).

 

FN4. Saylor, 975 F.2d at 254.

 

FN5. Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987).

 

FN6. Wittsock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir.2003).

 

FN7. Rondingo, LLC v. Twp. of Richmond, 641 F.3d 673, 680–81 (6th Cir.2011).

 

FN8. Fed.R.Civ.P. 10(c).

 

Under Federal Rule of Civil Procedure Rule 8(a)(2), a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” FN9 Although this standard does not require “detailed factual allegations,” it does require more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” FN10 In order to survive a motion to dismiss, the plaintiff must allege facts, if accepted as true, sufficient “to raise a right to relief above the speculative level” and to “state a claim to relief that is plausible on its face.” FN11 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” FN12

 

FN9. Fed.R.Civ.P. 8(a)(2).

 

FN10. Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). See also Reilly v. Vadlamudi, 680 F.3d 617, 622 (6th Cir.2012) (quoting Twombly, 550 U.S. at 555).

 

FN11. Twombly, 550 U.S. at 570.

 

FN12. Iqbal, 556 U.S. at 678.

 

ANALYSIS

In order to decide whether NBT states a claim against Deckers, the Court must determine the meaning of the terms in the bills of lading at issue. “The bill of lading is the basic transportation contract between the shipper-consigner and the carrier; its terms and conditions bind the shipper and all connecting carriers.” FN13

 

FN13. S. Pac. Transp. Co. v. Comm’l Metals Co., 456 U.S. 336, 342 (1982) (citing Tex. & Pac. R. Co. v. Leatherwood, 250 U.S. 478, 481 (1919)).

 

*3 The consignor, being the one with whom the contract of transportation is made, is originally liable for the carrier’s charges and unless he is specifically exempted by the provisions of the bill of lading, or unless the goods are received and transported under such circumstances as to clearly indicate an exemption for him, the carrier is entitled to look to the consignor for his charges.FN14

 

FN14. S. Pac. Transp., 456 U.S. at 343 (quoting C–F–G Grain Co. v. Atchison T. & S.F.R. Co., 351 I.C.C. 710, 712 (1976) (quoting In re Bills of Lading, 52 I.C.C. 671, 721 (1919), modified, 64 I .C.C. 357 (1921), further modified, 66 I.C.C. 63 (1922))).

 

Deckers argues the terms of the bills of lading at issue clearly and unambiguously demonstrate Deckers was not liable for the freight charges. Deckers premises this argument on two notations on the face of each bill of lading: Deckers checked the “3rd Party” box in the “Freight Charge Terms” section, and the section “Third Party Freight Charges Bill To” indicates billing to Zappos care of Pacer. NBT counters the terms contained in the “Freight Charge Terms” and “Third Party Freight Charges Bill To” sections have no effect on Deckers’ presumptive liability for shipping charges under the bills of lading.

 

The Court holds the terms contained in the “Freight Charge Terms” and “Third Party Freight Charges Bill To” sections do not explicitly release Deckers from primary liability for shipping charges on the bills of lading. “[A]bsent an express statement on the face of the bill of lading or a separate agreement allocating liability, the shipper-consignor remains presumptively liable for all lawful freight charges.” FN15 The Uniform Bill of Lading provides a method for a consignor to release itself from primary liability for shipping charges:

 

FN15. CSX Transp., Inc. v. Meserole St. Recycling, 618 F.Supp.2d 753, 766 (W.D.Mich.2009) (citing S. Pac. Transp., 456 U.S. at 342–43; Oak Harbor Freight Lines, Inc. v. Sears Roebuck Co., 513 F.3d 949, 954–55 (9th Cir.2008)).

 

[t]he consignor shall be liable for the freight and all other lawful charges, except that if the consignor stipulates, by signature, in the space provided for that purpose on the face of this bill of lading that the carrier shall not make delivery without requiring payment of such charges and the carrier, contrary to such stipulation, shall make delivery without requiring such payment, the consignor (except as hereinafter provided) shall not be liable for such charges.FN16

 

FN16. 49 C.F.R. pt. 1035 app. B, § 7 (emphasis added). A signature in the space provided on the face of the bill of lading stating the carrier shall not make delivery without requiring payment of freight charges from the consignee is known as the “non-recourse” or “Section 7” election.

 

The Sixth Circuit has not discussed the effect of directions to bill third parties on the face of a bill of lading. However, a district court in the Western District of Michigan has confronted such an issue, as have the Fifth and Ninth Circuit Courts of Appeals.

 

In CSX Transportation, Inc. v. Meserole Street Recycling, the Western District of Michigan examined an argument similar to that advanced by Deckers. There, the defendants in an action for shipping charges on bills of lading claimed listing a third party in the section marked “Send Freight Bill To” released the defendants from liability for shipping charges.FN17 The Meserole court reasoned “federal regulation of interstate rail shipments was intended to establish ‘clear, easily enforceable rules for liability .’ “ FN18 The court further noted “[t]he uniform bill of lading in general, and Section 7 in particular, loses its utility if … the carrier cannot rely on unambiguous representations contained on the face of the bill in determining how to allocate liability for freight charges.” FN19 Finding the language merely indicated the carrier expected payment from either the consignee or the shipper, and did not explicitly release the shipper from liability, the court held the “ ‘simple glossation’ of the ‘Send Freight Bill To’ designation … insufficient to relieve [the defendants] of liability.” FN20

 

FN17. Meserole, 618 F.Supp.2d at 768.

 

FN18. Id. (quoting CSX v. Novolog Bucks Co., 502 F.3d 247, 257 (3d Cir.2007)).

 

FN19. Meserole, 618 F.Supp.2d at 768 (citing Mo. Pac. R.R. Co. v. Cent. Plains Indus., Inc., 720 F.2d 818, 819 (5th Cir.1983)).

 

FN20. Id. at 768–69 (quoting Mo. Pac. R.R., 720 F.2d at 819).

 

*4 In Missouri Pacific Railroad Co. v. Center Plains Industries, Inc., the Fifth Circuit considered a case where the consignor had typed “Send Freight Bill To” and the address of a third party on the face of the bill of lading. FN21 The Missouri Pacific panel noted “the transfer of [the shipper’s liability for payment] must be clearly established by the agreement between the parties or the circumstances surrounding the receipt and transportation of the goods.” FN22 As a general matter, a shipper designates such a transfer by “exercising the privilege made available by Section 7 of the Contract Terms and Conditions printed … on the bill of lading by the simple expedient of marking the Section 7 box[.]” FN23 As a result, the Fifth Circuit held the “Send Freight Bill To” language, on its own, insufficient to “transfer the obligation of payment.” FN24

 

FN21. Mo. Pac. R.R., 720 F.2d at 819.

 

FN22. Id. (citing S. Pac. Transp., 456 U.S. at 342).

 

FN23. Id. (citing S. Pac. Transp., 456 U.S. at 342).

 

FN24. Id.

 

In Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., the Ninth Circuit examined the case of shipper liability when the bill of lading stated “Freight Terms: PREPAID” and instructed the carrier to send freight bills to a third party.FN25 The Ninth Circuit found under the default terms of the Uniform Bill of Lading, the shipper is liable for freight charges unless the shipper marks the bill of lading “nonrecourse.” FN26 The Ninth Circuit noted that their holding did not preclude an allocation of responsibility by separate agreement, but in the absence of such an agreement the default terms of the Uniform Bill of Lading controlled.FN27

 

FN25. Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949, 953 (9th Cir.2008).

 

FN26. Id. at 954–55 (citing C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 478–79 (9th Cir.2000); Toyo Kisen Kaisha v. W.R. Grace & Co., 53 F.2d 740, 742 (9th Cir.1931)).

 

FN27. Id. at 955 (“As a consequence, in the absence of a separate agreement, Sears is liable for the freight charges on the outbound bills of lading.”).

 

In the instant case, the bills of lading explicitly incorporate the default terms of the Uniform Bill of Lading. Although the bills of lading contained a checked-off box indicating third-party billing and directed Andy Transport was to bill Zappos care of Pacer, they also included a box where Deckers could make a Section 7 election by signature. Although Deckers argues it did not make the Section 7 election because doing so would not reflect the agreement between the parties, the Court finds this line of reasoning unpersuasive. Deckers states the agreement between the parties was that Andy Transport would pick up the loads of shoes from Deckers, carry them to Zappos, then bill freight charges to Zappos care of Pacer. Since the Section 7 election language mandates the carrier collect payment at delivery, Deckers maintains making this election would run contrary to the agreement. While a narrow reading of the terms of the Section 7 box would indicate the consignee was to tender cash upon delivery, a more reasonable construction allows for a shipper to receive payment in the form of a promise to pay-exactly the arrangement Deckers seems to assert. FN28 Since the weight of authority directs the Court to the finding that, absent a Section 7 election, language on the face of a bill of lading indicating a third party is to receive billing does not relieve a consignee of primary liability on the bill of lading, the Court cannot find NBT fails to state a claim against Deckers. Therefore, the Court DENIES Deckers’ Motion to Dismiss.

 

FN28. The Court notes the existence of a separate agreement between Andy Transport, Deckers, and Zappos might constitute a defense to liability. See Oak Harbor, 513 F.3d at 949 (“[I]f parties enter into a contract before preparing a bill of lading, and there is ‘an irreconcilable repugnancy between the prior written contract and the bills of lading, that conflict would have to be resolved in favor of the former.’ ”) (quoting Toyo Kisen Kaisha, 53 F.2d at 742). However, that issue is not before the Court on this Motion to Dismiss.

 

CONCLUSION

*5 Because Deckers has not shown the bills of lading expressly relieve Deckers of liability, the Court finds NBT states a claim against Deckers in its Amended Complaint. Therefore, the Court hereby DENIES Deckers’ Motion to Dismiss.

 

IT IS SO ORDERED.

United States Court of Appeals,

Seventh Circuit.

NES RENTALS HOLDINGS, INC., et al., Plaintiffs–Appellants,

v.

STEINE COLD STORAGE, INC., Defendant–Appellee.

 

Appeal from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. 10–CV–00406—Roger B. Cosbey, Magistrate Judge.Calvert Sterling Miller, Milford Mortimer Miller, Rothberg, Logan & Warsco LLP, Fort Wayne, IN, for Plaintiffs–Appellants.

 

Branch R. Lew, Andrew S. Williams, Hunt Suedhoff Kalamoros, Fort Wayne, IN, for Defendant–Appellee.

 

Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.

 

WILLIAMS, Circuit Judge.

*1 Humberto Menendez tragically died from injuries he suffered while operating a forty-foot boom lift. His employer, Steine Cold Storage, Inc., had rented the lift from NES Rentals. Menendez’s family filed suit against NES and others, alleging that their negligence caused the death. NES then sought indemnification from Steine pursuant to an indemnification clause in the rental agreement for the boom lift. Indiana courts allow a party to contract to indemnify for the other party’s own negligence but have said that doing so is a “harsh burden” that a party would not lightly accept absent express language in the agreement evidencing such an intention. We agree with Steine that the indemnification clause in the rental agreement does not expressly state, in clear and unequivocal terms as Indiana law requires, that Steine agreed to indemnify NES for NES’s own negligence. We therefore affirm the district court’s grant of summary judgment in favor of Steine.

 

I. BACKGROUND

Steine Cold Storage, Inc. was a subcontractor for the installation of thermal units at a Wal–Mart store that was under construction in Gas City, Indiana. Steine needed a boom lift, so it rented one from NES Rentals, a company that leases construction equipment. NES delivered the lift to the Wal–Mart work site on August 23, 2006, where Steine foreman Edward Crager signed a one-page, two-sided NES “Rental Agreement.”

 

The Rental Agreement’s signature line is at the bottom of its front side. Above the signature line, the Agreement states:

 

Signer acknowledges that he has read and fully understands this rental agreement including the terms and conditions on the reverse side. Signer agrees that Customer is solely responsible for compliance with Federal and State training and licensing requirements, except where Company provides operator. Signer acknowledges that he is authorized to Sign this agreement and bind the customer to the terms and conditions on the reverse side.

 

Below the signature line, in all capitals and italics, are the words: “Please note that there are important terms on the reverse side of this contract, including an indemnification provision.”

 

On the reverse side, paragraph 19, the final paragraph, appears in bold, italics, and in text larger than all the other text on the page. It provides:

 

19. Indemnity. Customer [Steine] agrees to indemnify and hold Company [NES] harmless against any and all claims, demands, or suits (including costs of defense, attorney’s fees, expert witness fees, and all other costs of litigation) for any and all bodily injury, property damage, or any other damages or loss, regardless of whether such injury, damage or loss is caused in whole or in part by negligence, which arise out of, result from, or relate to the use, operation, condition or, presence of the equipment except where such injury, damage or loss is caused solely by the Company [NES].

 

NES performed a maintenance check of the boom lift on September 27, 2006. About three weeks later, on November 20, 2006, Humberto Menendez, a Steine employee, was operating the boom lift while working and was fatally injured. Menendez’s family filed a wrongful death lawsuit against various parties, including NES and Wal–Mart, alleging that each of the defendants was negligent and contributed to Menendez’s death. The family’s complaint did not allege that Steine was negligent and did not name Steine, Menendez’s employer, as a defendant (presumably in light of the Indiana Worker’s Compensation Act, see Ind.Code §§ 22–3–2–2, 22–3–2–6).

 

*2 After Menendez’s family filed its lawsuit, NES made a demand upon Steine that it indemnify and hold NES harmless for any amount for which NES was found to be liable in the Menendez family lawsuit, as well as the costs of defense, attorney’s fees, and other litigation costs incurred by NES in defending against the family’s lawsuit. Steine refused and as a result, on November 19, 2010, NES filed this lawsuit against Steine. NES maintained that under the Rental Agreement, Steine had a duty to indemnify NES for the negligence claims against NES asserted by the Menendez family in its lawsuit. NES’s complaint also asserted that it had been incurring losses, including attorney’s fees, as a result of Steine’s failure to indemnify NES. NES and Steine filed cross motions for summary judgment, although NES’s motion was for partial summary judgment since the extent of damages was unknown when the lawsuit was filed. The magistrate judge, sitting by authority of 28 U.S.C. § 636(c) and with the consent of both parties, decided the motions. The judge denied NES’s motion for partial summary judgment and granted summary judgment in favor of Steine. NES appeals.

 

II. ANALYSIS

We review a district court’s grant of summary judgment de novo. Grinnell Mut. Reinsurance Co. v. Haight, 697 F.3d 582, 585 (7th Cir.2012). In doing so, we review the evidence in the record in the light most favorable to the non-moving party and draw all reasonable inferences in its favor. Nat’l Prod. Workers Union Ins. Trust v. Cigna Corp., 665 F.3d 897, 901 (7th Cir.2011). Summary judgment is proper where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Xiong v. Wagner, 700 F.3d 282, 288 (7th Cir.2012). The parties agree that Indiana law governs this suit. As a court sitting in diversity and applying Indiana law, we are required to make our best prediction of how the Supreme Court of Indiana would decide the case. BMD Contractors, Inc. v. Fid. and Deposit Co. of Md., 679 F.3d 643, 648 (7th Cir.2012). Where as here the state supreme court has not spoken on a particular issue, then “ ‘decisions of the state appellate courts control, unless there are persuasive indications that the state supreme court would decide the issue differently.’ “ Research Sys. Corp. v. IPSOS Publicite, 276 F.3d 914, 925 (7th Cir.2002) (quoting Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir.1999)).

 

An indemnity agreement involves “a promise by one party (the indemnitor) to reimburse another party (the indemnitee) for the indemnitee’s loss, damage, or liability.” Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d 751, 756 (Ind.Ct.App.2002). We have recognized that “[a]s a general matter, parties are free under Indiana law to enter into an indemnification clause and may obligate one party to insure against and/or to indemnify certain acts or omissions of the other party.” Gaffney v. Riverboat Servs. of Ind. ., Inc., 451 F.3d 424, 469 (7th Cir.2006); see also, e.g., GKN Co. v. Starnes Trucking, Inc., 798 N.E.2d 548, 552 (Ind.Ct.App.2003). In particular, when it comes to negligent conduct, Indiana allows a party to contract to indemnify another for the other’s own negligence. GKN, 798 N.E.2d at 552. But see, e.g., J.S. Alberici Const. Co. v. Mid–West Conveyor Co., 750 A.2d 518, 521 (Del.2000) (under Delaware law, contractual provision requiring one party to indemnify another for other party’s own negligence, whether sole or partial, is unenforceable).

 

*3 Indiana courts have construed contracts to indemnify another for the other’s own negligence strictly, explaining that “[c]ourts disfavor such indemnification clauses because to obligate one party for the negligence of another is a harsh burden which a party would not lightly accept.” Moore Heating & Plumbing, Inc. v. Huber, Hunt & Nichols, 583 N.E.2d 142, 145 (Ind.Ct.App.1991). Therefore, Indiana appellate courts have ruled that a party may be obligated by contract to indemnify another for the other’s own negligence only if the party “knowingly and willingly” agrees to this indemnification, and a contract will only be held to provide indemnification for the other’s own negligence if “it is so stated in clear and unequivocal terms.” GKN, 798 N.E.2d at 552.

 

[1] Indiana courts have followed a two-part test to assess whether a party “knowingly and willingly” accepted the burden of indemnifying the other for the other party’s negligence. Id.; see also Exide Corp. v. Millwright Riggers, Inc., 727 N.E.2d 473, 479–80 (Ind.Ct.App.2000). First, the court reviews the indemnification clause to see whether it states in clear and unequivocal terms that negligence is an area of application where the indemnitor (here, Steine) has agreed to indemnify the indemnitee (here, NES).   GKN, 798 N.E.2d at 552. The parties agree that the first step is satisfied. Paragraph 19 in the Rental Agreement, the indemnification provision, expressly mentions “negligence.” It states in particular that indemnification applies “… for any and all bodily injury, damage, or any other damages or loss, regardless of whether such injury, damage or loss is caused in whole or in part by negligence….”

 

Second, the court determines to whom the indemnification clause applies; “in clear and unequivocal terms, the clause must state that it applies to indemnification of the indemnitee by the indemnitor for the indemnitee’s own negligence.” Id. We first note that the parties agree that Steine has no obligation to indemnify NES if the sole cause of the injury or damages is NES, as the indemnification clause specifically excludes that from coverage. See Par. 19 of Rental Agreement (“… except where such injury, damage or loss is caused solely by [NES]”); Raytheon Eng’rs & Constructors, Inc. v. Sargent Elec. Co., 932 N.E.2d 691, 698 (Ind.Ct.App.2010).

 

The question at hand is whether, if NES is assessed some portion of fault in the Menendez family suit and others are also assessed some portion of fault, the indemnity clause in the Rental Agreement means that Steine must indemnify NES for NES’s own negligence. In light of the “harsh burden” imposed by obligating a party for another’s negligence, the indemnification for NES’s own negligence must be “explicit,” not “implicit,” for Steine to have knowingly and willingly accepted the burden. See Moore Heating, 583 N.E.2d at 146. The Indiana appellate court explained in Moore Heating:

 

*4 For example, if a clause simply states that a subcontractor shall indemnify a general contractor for any negligence which arises from the job, it is sufficient to show that the clause applies to negligence but is insufficient to inform the subcontractor that it must indemnify the general contractor for acts of the general contractor’s own negligence. The claim of negligence which arises from the job could have been caused by the negligence of the general contractor, the subcontractor, third persons, or a combination of them. This is the very reason the indemnity for the indemnitee’s own negligence must be specifically, not generally, prescribed…. Therefore, in order to reflect a knowing and willing acceptance of such a harsh burden, the indemnification clause must expressly state, in clear and unequivocal terms, that the indemnitee agrees to indemnify the indemnitor against the indemnitor’s own negligence.

 

Id. at 145–46.

 

Here, the indemnification clause provides that Steine will indemnify NES for any injury, “regardless of whether such injury … is caused in whole or in part by negligence….” Under the explanation in Moore Heating that we just quoted, that statement is sufficient to make clear to Steine that the indemnification clause applies to negligence, but it is not sufficient to inform Steine “in clear and unequivocal terms” that Steine must indemnify NES for acts of NES’s own negligence. See id.; see also, e.g., Vernon Fire and Cas. Ins. Co. v. Graham, 166 Ind.App. 509, 336 N.E.2d 829, 831 (Ind.Ct.App.1975) (finding clause insufficient to obligate indemnification for indemnitee’s own negligence where clause stated: “The Lessee agrees to be responsible for any damage to the property … which may result from any use of the demised premises, or any act done thereon by Lessee … and will also save the Lessor harmless from any liability to any other person, for damage to person or property resulting from any such causes.”).

 

The language we quoted from Moore Heating reflects the court’s rationale but not the exact language of the provision at issue there, and NES maintains that the provision at issue in Moore Heating demonstrates why it should prevail. We disagree. The indemnity provision in Moore Heating, which the court found obligated Moore to indemnify for Huber’s own negligence, states in relevant part:

 

[Moore] agrees to indemnify [Huber] against and hold [Huber] harmless from any and all liability … from any claim or cause of action of any nature arising while on or near the Job Site … and whether or not it is alleged that [Huber] in any way contributed to the alleged wrongdoing or is liable due to a nondelegable duty. It is the intent of the parties that [Moore] shall indemnify [Huber] under [this clause] to the fullest extent permitted by law, however, [Moore] may not be obligated to indemnify [Huber] for the sole negligence or willfull misconduct where such indemnification is contrary to law, but otherwise it is the intent of the parties that [Moore] shall indemnify [Huber] to the fullest extent permitted by law for such liability.

 

*5 Id. at 144.

 

The Moore Heating provision contains a significant clause that NES’s Rental Agreement did not: “whether or not it is alleged that [Huber] in any way contributed to the alleged wrongdoing or is liable due to a nondelegable duty.” That provision contains explicit language making clear the obligation to indemnify for Huber’s own conduct. See Moore Heating, 583 N.E.2d at 147. And it makes all the difference. No comparable provision exists here.

 

Similarly, the clause in GKN Co. v. Starnes Trucking, Inc., 798 N.E.2d 548, 554 (Ind.Ct.App.2003), contains clear and unequivocal language making clear the obligation to indemnify for the indemnitee’s negligence. The clause there stated:

 

[Starnes] shall indemnify and hold harmless [GKN] … from and against all claims … arising out of or resulting from the performance of the work, provided that such claim … is caused in whole or in part by any negligent act or omission of [Starnes] … regardless of whether it is caused in part by a party indemnified hereunder.

 

Id. at 550 (emphasis added). The GKN court ruled that the last part of the clause (“regardless of whether it is caused in part by a party indemnified hereunder”) “clearly and unequivocally operated to alert Starnes to the burden it undertook.” Id. at 553–55. There, again, a clause explicitly made clear that indemnification applied even if the damages were caused in part by the indemnified party.

 

That direct reference to conduct by the indemnitee present in Moore Heating (“whether or not it is alleged that [Huber] in any way contributed to the alleged wrongdoing or is liable due to a nondelegable duty”) and GKN (“regardless of whether it is caused in part by a party indemnified hereunder”) is missing in the NES Rental Agreement. Instead, the language is largely general: “any and all claims”; “for any and all bodily injury, property damage, or any other damages or loss”; “regardless of whether such injury, damage or loss is caused in whole or in part by negligence”. The provision states that it covers “negligence” in a general sense, but it does not contain language making it explicit that it covers NES’s own negligence.

 

The only reference to NES in the indemnification provision comes in its final words: “except where such injury, damage or loss is caused solely by the Company [NES].” NES argues that this phrase is an explicit statement set within a broad indemnity clause requiring Steine to indemnify NES “for any and all claims” arising out of the use of the equipment, and that this “except” clause is explicit in establishing that Steine must indemnify NES whenever the triggering event involved concurrent or contributing acts of others. Cf. Moore Heating, 583 N.E.2d at 146 (stating words of a contract are not alone and that entire contract must be read together). The problem with this argument, however, is that the “except” clause does not make the obligation to indemnify for NES’s own negligence explicit. Any obligation based on the “except” clause is only, at best, an implicit one. NES’s argument is essentially that there is an implication from the provision’s coverage of “any and all claims … caused in whole or in part by negligence” “except” those caused by NES’s sole negligence that the provision covers NES’s own negligence in instances when it was not the sole cause. Whatever appeal that argument may have, it is not enough under Indiana law, as the obligation to indemnify for the other party’s own negligence must be “explicit.” See Moore Heating, 583 N.E.2d at 146.

 

*6 NES maintains, however, that case law demonstrates that the “except” clause is enough. It emphasizes in its brief a 1966 Indiana appellate court decision, New York Central Railroad Co. v. Northern Indiana Public Service Company, 140 Ind.App. 79, 221 N.E.2d 442 (Ind.Ct.App.1966). The clause there stated:

 

Sixth. Second Party (NIPSCO) shall and will at all times hereafter indemnify and save harmless First Party (N.Y.C) from and against any and all detriment, damages, losses, claims, demands, suits, costs, or expenses which First Party (N.Y.C) may suffer, sustain, or be subject to, directly or indirectly, caused either wholly or in part by reason of the location, construction, maintenance, use or presence of said Work as permitted by this license or resulting from the removal thereof, except such as may be caused by the sole negligence of First Party (N.Y.C), its agents or employees.

 

Id. at 444.

 

In that case, the trial court found that the operator of the crane involved in the fatal accident was NYC’s agent. Id. at 445. It also found that the death was caused by the sole negligence of NYC, acting through its agents and employees. Id. The question on appeal was whether the trial court erred in finding that the crane operator was NYC’s servant, id. at 446, and the appellate court spent the bulk of its opinion addressing that question.

 

The final argument the appellate court addressed was NYC’s argument that NIPSCO failed to maintain power lines at a sufficient height, and that this failure contributed to the accident. Id. at 451. The court rejected this argument and ruled that the evidence in the record demonstrated that the accident was caused by the sole negligence of NYC, its agents, or employees. Id. So the exception in the indemnity clause applied (“except such as may be caused by the sole negligence of First Party (N.Y.C), its agents or employees”), and NIPSCO had no obligation to indemnify NYC. Id. As a result, New York Central Railroad did not address the question here. Whether the indemnification clause required indemnification for NYC’s own negligence in instances when it was not the sole cause was simply not at issue.

 

NES’s reliance on Penn Central Co. v. Youngstown Sheet & Tube Co., 146 Ind.App. 216, 253 N.E.2d 704 (Ind.Ct.App.1969) similarly does not help it. As NES acknowledges, the indemnitor there made no effort to argue that the indemnity clause did not obligate it to indemnify the plaintiff in instances where the plaintiff’s negligence was not the sole cause of an accident. The only question was whether the indemnification clause violated public policy, and the issue of indemnification for the indemnitee’s own negligence was not litigated. Id. at 220–23, 253 N.E.2d 704.

 

NES also points to Center Township of Porter County v. City of Valparaiso, 420 N.E.2d 1272 (Ind.Ct.App.1981). The clause there stated:

 

That the City of Valparaiso, Indiana, its agents, departments, officials, and governing boards shall be held harmless from any and all negligence, misconduct, malfeasance or misfeasance resulting under its performance of this contract, whether or not caused by or resulting from the activity of the Fire Department or any other participating agency or department or official of the City of Valparaiso, Indiana. The City is not a guarantor nor an insurer of the lives and property of the said Center Township and is responsible and bound only to the good faith performance of the terms and obligations of this contract.

 

*7 Id. at 1274. The court held that the provision “put the parties on notice that the indemnitor (Center Township) is liable for loss arising from the negligence of the indemnitee (City).” Id. at 1275. This result makes sense, as the clause explicitly stated it applied for all negligence whether or not caused by any City agency or official. The NES Rental Agreement lacks a comparable clause.

 

We noted many years ago that it is not unconscionable or illicit to contract for protection against one’s own negligence, whether through insurance or indemnity. Indent. Ins. Co. of N. Am. v. Koontz–Wagner Elec. Co., 233 F.3d 380, 383 (7th Cir.1956) (applying Indiana law). Indeed, the Indiana courts do “not invalidate such clauses simply because they might provide broad protection for the indemnitee.” Ft. Wayne Cablevision v. Ind. & Mich. Elec. Co., 443 N.E.2d 863 (Ind.Ct.App.1983). Rather, “[t]he policy of disfavor is directed at indemnification duties which the indemnitor did not knowingly assume.” Id. The Indiana appellate court has explained:

 

Our “judicial policy of disfavor” toward such clauses is grounded in the recognition that the obligation to insure another party against the costs of the other’s own negligence is “so extraordinary and harsh …” with the “potential liabilities assumed … awesome” that a promisor would not lightly accept such a burden knowingly and willingly….

 

Ind. State Highway Comm’n v. Thomas, 169 Ind.App. 13, 346 N.E.2d 252, 263 (Ind.Ct.App.1976) (internal citations and quotations omitted). And unlike in many insurance settings, where one has an incentive to act carefully at the risk of increased premiums, the indemnitee who will be indemnified for prospective acts of negligence generally lacks the same incentive.

 

In light of the way the Indiana appellate court decisions have construed indemnification provisions, our best prediction is that the Supreme Court of Indiana would conclude that the indemnification provision in the NES Rental Agreement does not evidence that Steine knowingly and willingly accepted the burden of indemnifying NES for NES’s own negligence. See Treat v. Tom Kelley Buick Pontiac GMC, Inc., 646 F.3d 487, 492 (7th Cir.2011) (looking especially to more recent Indiana Court of Appeals decisions in deciding diversity case). That is, we think the Supreme Court of Indiana would agree with the district court that the Rental Agreement does not explicitly provide, “in clear and unequivocal terms,” that Steine must indemnify NES for NES’s own negligence, and so Steine has no obligation to do so.

 

[2] Finally, NES contends on appeal that even if the district court viewed the language of the indemnity clause as insufficient to indemnify NES for its own negligence, the district court should have entered partial summary judgment in favor of NES on the basis that NES had alleged it incurred costs in its defense of the Menendez lawsuit. It maintains that Steine should indemnify it for any defense costs associated with defending itself, other than for its own negligence, in the Menendez lawsuit. The principal problem with this contention is that NES never made this argument to the district court. “It is a well-established rule that arguments not raised to the district court are waived on appeal.” Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir.2012). NES filed memoranda both in support of its motion for partial summary judgment and in opposition to Steine’s motion for summary judgment before the district court, but it never made the “costs of defense” argument it makes now. We do not consider it here.

 

III. CONCLUSION

*8 The judgment of the district court is AFFIRMED.