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Ohio Farmers Insurance Co. v. JEM Contracting, Inc.

Supreme Court of Montana

December 27, 2016

OHIO FARMERS INSURANCE COMPANY, an Ohio Corporation, Plaintiff and Appellee,
v.
JEM CONTRACTING, INC., JOHN SCHWICHTENBERG and EILEEN SCHWICHTENBERG, Defendants and Appellants.

          Submitted on Briefs: November 2, 2016

         District Court of the Thirteenth Judicial District, In and For the County of Yellowstone, Cause No. DV 14-0336 Honorable Michael G. Moses, Presiding Judge

          For Appellants: Ryan K. Jackson, Jackson Law, P.C., Bozeman, Montana.

          For Appellee: Harlan B. Krogh, Eric Edward Nord, Crist, Krogh & Nord, PLLC, Billings, Montana.

          OPINION

          James Jeremiah Shea Justice.

         ¶1 JEM Contracting, Inc. and John and Eileen Schwichtenberg (collectively, "JEM") appeal an order of the Thirteenth Judicial District Court, Yellowstone County, granting Ohio Farmers Insurance Company's (OFIC) motion for partial summary judgment on the pleadings. We address the following issue:

Whether the District Court erred in granting partial summary judgment on the pleadings to OFIC.

         ¶2 We affirm.

         PROCEDURAL AND FACTUAL BACKGROUND

         ¶3 JEM is a general contractor specializing in construction. OFIC is an insurance company that issues surety bonds. In 2008 and 2009, OFIC and JEM executed two indemnity agreements so that JEM could obtain bonding from OFIC for construction projects. The indemnity agreements both included the following language:

The Indemnitors [JEM] shall exonerate, indemnify, and keep indemnified the Surety [OFIC] from and against any and all liability for losses and/or expenses of whatsoever kind or nature (including, but not limited to, interest, court costs and counsel fees) and from and against any and all such losses and/or expenses which the Surety may sustain and incur: (1) By reason of having executed or procured the execution of the Bonds, (2) By reason of the failure of the Indemnitors to perform or comply with the covenants and conditions of this Agreement or (3) In enforcing any of the covenants and conditions of this Agreement.

         ¶4 On May 6, 2010, JEM contracted with Gallatin and Madison counties on a construction project on Ousel Falls Road and South Fork Road in Big Sky, Montana. On behalf of JEM, OFIC executed and delivered a $2, 113, 797.25 bond for this contract. On July 1, 2010, JEM contracted with the State of Montana on a sanding project in Bozeman, Montana. On behalf of JEM, OFIC executed and delivered a $752, 212.00 bond for this contract. JEM hired a subcontractor, Hollow Contracting, Inc. (Hollow), to furnish labor, materials, and equipment for both projects. After a dispute arose between JEM and Hollow regarding payment for work Hollow performed, Hollow filed a complaint against JEM and OFIC in the Eighteenth Judicial District Court, Gallatin County (Hollow Litigation). Hollow alleged that OFIC was obligated to pay Hollow for labor, materials, and equipment Hollow furnished for the projects because JEM failed to make the payment. This lawsuit was resolved, and on October 16, 2013, the Gallatin County District Court issued an order dismissing the Hollow Litigation.

         ¶5 On February 28, 2014, OFIC filed a complaint in the Yellowstone County District Court in the action that is the basis for this appeal. OFIC sought indemnification from JEM for attorney fees and costs OFIC incurred in the Hollow Litigation. In its answer to OFIC's complaint, JEM alleged that the fees and costs OFIC incurred were wholly related to OFIC defending itself from its own negligence and, therefore, not covered under the indemnity agreements. OFIC moved for partial summary judgment on the pleadings, requesting a judgment requiring JEM to indemnify OFIC. On July 2, 2015, the District Court issued an order granting OFIC's motion and holding that, pursuant to express language in the indemnity agreements, JEM was required to indemnify OFIC for "appropriate expenses." JEM appeals that order.

         STANDARDS ...


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