Authors: Attorney John C. Mitby & Law Sarah Schuchardt

Phone: 608-575-4077

Email: jmitby@hbslawfirm.com

In MillerCoors LLC v. Millis Transfer Inc., Zurich American Ins. Co., 2015AP1894 (WI Ct. App. 2017), the Court of Appeals of Wisconsin affirmed the holding of the circuit court, which found that Millis had breached its duty to defend and indemnify MillerCoors in a negligence lawsuit filed by a Millis employee.¶ 1.

Millis, which is a company that provides transportation services to customers, entered into a transportation agreement with Schneider Logistics, Inc. Through this agreement, Millis was contracted to transport MillerCoors’s product to different locations. ¶ 2. In the course of transporting MillerCoors’s product, a Millis employee sustained injuries in a single-vehicle accident in 2008. ¶ 3. The employee filed a suit alleging negligence against both Millis and MillerCoors in April 2010. ¶ 3. MillerCoors presented the indemnification provision in the contract as its defense soon after the filing, which required Millis to defend and indemnify MillerCoors from any claims made by Millis employees except to the extent that MillerCoors itself was negligent. ¶ 3, 8. The employee voluntarily dismissed Millis from the suit shortly after MillerCoors tendered its defense. ¶ 3. Millis then refused to defend MillerCoors from the negligence claim, even after again being notified of MillerCoors’s assertion of the indemnification provision in defense. ¶ 3.

MillerCoors reached a $200,000 settlement with the injured employee, to which Millis contributed $50,000 towards the amount. ¶ 3. MillerCoors then filed suit against Millis based on the claim that Millis breached the indemnification provision in the transportation agreement by “failing to defend and indemnify MillerCoors with regard to the Millis employee’s lawsuit.” ¶ 4. Millis then filed a counterclaim for $50,000, the amount it contributed towards the settlement. ¶ 4.

The parties agreed on several stipulations: “(1) MillerCoors was not negligent with respect to the accident; (2) the Millis employee’s injuries were not caused by MillerCoors’s conduct; and (3) the reasonable defense and settlement costs incurred by MillerCoors were $825,000.” ¶ 5. Based on the arguments and these stipulations, the circuit court entered summary judgment for MillerCoors. ¶ 5. Millis and Zurich appealed the grant of summary judgment in MillerCoors’s favor. ¶ 1.

Millis and Zurich first argued that the indemnification agreement was not triggered by the Millis employee’s negligence suit against MillerCoors. ¶ 8. Millis and Zurich contend that once Millis was voluntarily dismissed, the employee’s complaint only alleged that MillerCoors’s negligence caused the injuries. ¶ 8. The Court disagreed with this argument because the employee’s complaint showed that it was actually the employee’s own negligence that caused his injuries and that MillerCoors was not negligent at all. ¶ 8-10. The relevant section of the indemnity provision required Millis to defend and indemnify MillerCoors “from all claims, liabilities, and judgments that arose out of or were related to claims or actions filed by Millis’s employees/agents, except that Millis’s duty to defend and indemnify MillerCoors from such claims/actions was limited by MillerCoors’s share of causal negligence.” ¶ 11. Due to the fact that the employee’s complaint showed that his injuries were probably caused by his own negligence, Millis was then required to defend and indemnify MillerCoors. ¶ 11.

Millis and Zurich then argued that the relevant section of the indemnity provision was not meant to apply to actions brought by an employee that alleged that MillerCoors was solely at fault. ¶ 12. The Court rejected this argument. ¶ 12. The indemnity provision only provided that Millis’s duty to defend and indemnify MillerCoors was limited by MillerCoors’s share of the causal negligence. ¶ 14-15. Millis and Zurich also argued that Millis was not obligated to indemnify and defend MillerCoors from claims based on MillerCoors’s alleged negligence, since the contract provision did not refer to “alleged negligence.” ¶ 16. The Court was not convinced by this argument because the contract did not say that Millis did not have to defend and indemnify alleged negligence. ¶ 16.  The Court said that it would not read language into the contract that had been specifically left out. ¶ 16.

Millis and Zurich also argued that the indemnification provision was not “a specific and express” agreement that allowed MillerCoors to seek indemnity from Millis when a Millis employee filed a negligence claim. ¶ 17. The Worker’s Compensation Act:

[P]rohibits an alleged negligent third party . . . from seeking indemnification from an employer . . . for an employee’s negligence claim . . . unless the third party entered into a specific and express agreement with the employer.

¶ 17 (internal citations and quotations omitted) (emphasis added). The Court found, however, that it was a “specific and express” agreement that required Millis to defend and indemnify MillerCoors from all claims filed by Millis’s employees. ¶ 17. Millis’s duty to defend and indemnify was only limited by MillerCoors’s share of causal negligence. ¶ 17.

Why should businesses be aware of this case?

Businesses using indemnification provisions should be aware of the duties and obligations such provisions impose upon the parties and the circumstances under which those obligations are triggered. Courts look at the language of agreement in order to interpret the duties of the parties and will not read in language that was specifically left out. In this case, the Court only looked at the language of the provision, which showed that Millis owed a duty to defend and indemnify MillerCoors. The language in the Indemnification provision stated:

[Millis] agrees to indemnify, defend, and hold [MillerCoors] harmless from and against any and all liabilities, damages . . . of whatever type or nature . . . to any person, arising out of or related to: (i) any act or omission by [Millis], including but not limited to any negligent act or omission, (ii) any claims or actions by [Millis’s] employees, agents, and/or subcontractors, including but not limited to any based upon negligence except to the extent such negligence is that of [MillerCoors] . . .

¶ 8 (emphasis in original). Although Millis argued that this duty was not triggered if MillerCoors was alleged to be solely at fault, the Court found that the employee was at fault, not MillerCoors. Therefore, Millis’s duty to defend and indemnify MillerCoors was triggered.

This case shows that companies should be careful about the broad application of indemnity provisions. Narrow tailoring can limit the instances in which companies would be required to defend and indemnify another party. If there are certain circumstances under which a business does not want to indemnify another party, it should state those circumstances in writing in the agreement.