Defining Sole Negligence: Interpreting Indemnification Clauses

The Sixth Circuit reviewed an indemnification agreement in a shipping contract to determine the definition of “sole negligence.” The indemnification clause read:

[Diamond] does hereby expressly agree to indemnify, defend and hold harmless [Kroger], (***) from and against any and all suits, actions, liabilities, judgments, claims, demands, or costs or expenses of any kind (including attorney’s fees) resulting from (i) damage or injury (including death) to the property or person of anyone (***) or (ii) the negligence, willful misconduct or violation of law by [Diamond], its agents, employees or subcontractors except to the extent that such liability is caused by the sole negligence or willful misconduct of Kroger.

The dispute arose out of a motor vehicle accident by a subcontractor of Diamond in which three persons were killed. Kroger was included in the wrongful death suit with an allegation it negligently hired, retained and/or supervised Diamond (hereinafter referred to as “negligent hiring”). Kroger demanded payment of its attorney fees and indemnification for the claim; however, Diamond responded that since the claim for negligent hiring was solely against Kroger, Diamond was not obligated to indemnify Kroger. The court disagreed and held that “sole negligence” was modified by the reference to “liability” in the agreement. Since a negligent hiring claim requires “two to tango,” in that it requires negligence of both the employee and the employer before liability will attach, the claim did not allege “sole negligence.” The court contrasted the language of the exception clause with the language in the first part of the paragraph which allows indemnification for lawsuits, but also “claims” and “demands” in which “liability” would not be determined.