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Natural Gas Company Cannot Evade Anti-Indemnification Statute's Application in Dispute with Utility Locator after JJ's Restaurant Explosion

October 5, 2021 | Brett Simon

More than eight years after the Country Club Plaza district in Kansas City, Missouri was rocked by a gas line explosion that destroyed JJ’s Restaurant, the United States Court of Appeals for the Eighth Circuit has ruled that utility-locating company USIC has no duty to indemnify natural gas company Spire.

The explosion led to a series of lawsuits against Spire, many of which Spire settled for a collective $75 million. USIC was subsequently asked to indemnify it on the basis that the contract between the two companies placed sole financial responsibility upon USIC—regardless of who was actually at fault. To that end, Spire sought a declaratory judgment that USIC owed Spire for the amount of the prior settlements in addition to any future settlements. USIC moved for summary judgment arguing that R.S.Mo. § 434.100.1, Missouri’s anti-indemnification statute, precluded Spire’s attempt to escape financial liability.

The anti-indemnification statute generally prohibits contractual clauses which force one party to hold another party harmless and indemnify them for their own negligence. In other words, the law prevents a subcontractor from indemnifying a general contractor for any damage caused by the general contractor’s negligence. However, this statute only applies to “any contract or agreement for public or private construction work.”

Spire took the position that USIC’s services could not be considered “construction work” within the statute’s meaning. The Eighth Circuit looked to subsection 3 of the anti-indemnification statute, which defined the terms to include “construction, alteration, maintenance or repair of any . . . pipeline.” The Court easily dispensed with Spire’s argument and held that USIC’s work in locating and marking the gas line meant that USIC was preserving the lines and keeping them in a state of repair. The Court found it irrelevant that USIC did not construct something within the usual meaning of the word since the anti-indemnification statute’s definition of construction controlled the dispute.

In addition to illustrating the scope of the anti-indemnification’s statute in the construction industry, this case also teaches about litigation strategy. Here, Spire opted to pursue an “all-or-nothing approach” and appealed solely on the basis that USIC’s purported obligation to indemnify was absolute. To that end, Spire did not seek any decision on whether it was actually negligent, or whether USIC had an obligation to indemnify it for any amount less than the full cost of the settlements. In that sense, the case suggests that parties may be well-served to pursue other issues in a case, even if those issues may not lead to a full and complete victory.  

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The BSCR Missouri Law Blog examines significant developments, trends and changes in Missouri law on a broad range of topics of interest to Missouri practitioners and attorneys and businesses with disputes subject to Missouri law. Learn more about the editor, David Eisenberg.

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