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Searles Valley Minerals Operations Inc v. Ralph M. Parson Service Company et al

January 21, 2011

SEARLES VALLEY MINERALS OPERATIONS INC., PLAINTIFF AND APPELLANT,
v.
RALPH M. PARSON SERVICE COMPANY ET AL., DEFENDANTS AND RESPONDENTS.



Super.Ct.No. CIVBS900052 APPEAL from the Superior Court of San Bernardino County. Kirtland L. Mahlum, Temporary Judge.

The opinion of the court was delivered by: Hollenhorst J.

CERTIFIED FOR PUBLICATION

OPINION

(Pursuant to Cal. Const., art. VI, § 21.) Reversed with directions.

In this contract indemnity action, plaintiff and appellant Searles Valley Minerals Operations Inc. (Searles) appeals the judgment of dismissal entered in favor of defendants and respondents Ralph M. Parsons Service Company and Parsons Infrastructure & Technology Group, Inc. (Parsons), following an order sustaining Parsons's demurrer, without leave to amend, to Searles's cause of action for express indemnity.

Searles contends it adequately alleged a cause of action for express indemnity by alleging that Parsons was required, under an indemnity contract between Parsons and Kerr-McGee Chemical Corporation (KM), to provide KM with a defense and indemnify KM for losses arising from a wrongful death action against KM, Parsons, and Parsons's subcontractor. Searles argues that, as an assignee of KM's indemnity rights, it was entitled to reimbursement for paying KM's defense costs.

While there appears to be no case law directly on point, we conclude that an assignee of contract indemnification rights stands in the shoes of the indemnitee. Therefore, if the indemnitor refuses to pay an indemnitee's defense costs, the indemnitee, and in turn the assignee, can pay the costs and seek reimbursement from the indemnitor. Searles, as KM's assignee, was entitled under the indemnity agreement to recover defense costs it paid on KM's behalf. The trial court thus erred in sustaining, without leave to amend, Parsons's demurrer to Searles's cause of action for express indemnity, and we reverse the judgment of dismissal.*fn1

1. Factual and Procedural Background

Decedent, Michael Todd Moore, was killed while working at Searles's soda ash processing plant in Trona (the Argus plant). In a wrongful death action, Moore's heirs sued KM, Parsons, and Parsons's subcontractor, which manufactured parts for the plant's pneumatic conveyor system. Parsons rejected KM's tender of defense. Searles provided KM with a defense.

Searles's Complaint Against Parsons for Indemnity

After judgment was entered in the underlying wrongful death action (the Moore lawsuit), Searles filed a complaint seeking reimbursement from Parsons for KM's defense costs. Searles's complaint included causes of action for (1) express indemnity, (2) equitable indemnity, (3) subrogation, and (4) declaratory relief.

Searles's complaint contains the following allegations. In 1974, KM entered into a contract with Parsons for the design and construction of the Argus plant, located on property owned by KM. The design and construction included providing a pneumatic conveyor system. The construction contract contained an indemnity provision (paragraph 17) in which Parsons agreed to defend and indemnify KM for personal injury or death arising out of Parsons's or its subcontractors' negligence in connection with work Parsons or its subcontractors performed pursuant to the construction contract. Paragraph 61 of the construction contract permitted KM to assign the agreement.

Searles, formerly known as North American Chemical Company, purchased the Argus plant from KM. In connection with the purchase, Searles agreed to indemnify KM for any accidents or injuries resulting in KM being sued. Under the purchase agreement, KM, in turn, assigned to Searles its rights, including KM's indemnity rights against Parsons under the construction contract.

In 2001, one of Searles's employees, Michael Moore, was killed while working at the Argus plant. At the time, Moore was attempting to remove the door of the pneumatic conveyor system. Moore's heirs filed a wrongful death complaint against KM, Parsons, and Parsons's subcontractor. KM tendered its defense to Searles and to Parsons. Searles accepted KM's defense, whereas Parsons declined it.

In 2004, the Moore plaintiffs, Searles, and Parsons entered into a release and assignment agreement and addendum, wherein it was agreed that all potential claims for indemnity, apportionment, and contribution, other than a pending workers' compensation complaint-in-intervention, would not be extinguished by the judgment entered in the Moore lawsuit.

The jury in the trial on the Moore lawsuit awarded the Moore plaintiffs approximately $6.75 million in damages. The jury assigned no fault to KM or Parsons. The jury found Parsons's subcontractor 25 percent at fault and Searles 75 percent at fault.

Searles incurred over $800,000 in attorney fees, costs, and expenses from providing KM with a defense in the underlying Moore lawsuit.

Searles alleges in the first cause of action for express indemnity that, under paragraph 17 of the construction contract between KM and Parsons, Parsons agreed to indemnify KM from all claims and liability for death arising out of Parsons's negligence. The damages claimed by the Moore plaintiffs were caused in part by Parsons and arose out of the performance of its obligations under the construction contract. Under the agreement, Parsons agreed it would be liable for KM's defense in the event of a dispute with a third party regarding work performed by Parsons. Searles, on behalf of KM, ...


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