Kiewit Eastern Co., Inc.; Kiewit/perini, a Joint Venture, et al. v. L & R Construction Co., Inc.; Cna Insurance Companykiewit Eastern Company, Inc. and Kiewit/perini, a Jointventure, Appellants in No. 94-1434cna Insurance Company, Appellant in No. 94-1439, 44 F.3d 1194 (3d Cir. 1995)

In this diversity case, we are presented with disputes over coverage under two contracts, an indemnification agreement between a contractor and subcontractor and a subsequent insurance contract between the subcontractor and an insurance company. The primary issue is whether the indemnification agreement sufficiently waived the immunity granted employers under the Pennsylvania Workers' Compensation Act. The district court partially granted cross-motions for summary judgment, holding the contractor was entitled to conditional indemnification but its general partner was not. The district court also dismissed the insurer from the case. We will affirm in part and reverse in part.

Kiewit/Perini, a joint venture composed of Kiewit Eastern Company and Perini Corporation, served as general contractor for construction of a portion of Interstate 476, known as the Blue Route, near Philadelphia. In July 1988, Kiewit/Perini subcontracted certain work to L & R Construction which agreed to defend and indemnify Kiewit/Perini and obtain insurance in order to protect the general contractor from liability for personal injuries resulting in whole or in part from the subcontractor's negligence. As a result, L & R Construction purchased an insurance policy from CNA Insurance Company covering liability resulting from L & R Construction's incidental contracts, such as its contract with Kiewit/Perini.

During construction, a crane loaned to L & R Construction by Kiewit Eastern came too close to a power line, injuring Benedict Chen, an employee of L & R Construction. Chen brought two actions in the Philadelphia County Court of Common Pleas against Kiewit/Perini and Kiewit Eastern,¹  but not against L & R Construction, which--as Chen's employer--was immune from suit under the Pennsylvania Workers' Compensation Act.²  After Kiewit/Perini and Kiewit Eastern tendered their defense to CNA Insurance, which refused to accept the tender, they filed a third-party complaint against L & R Construction, alleging it was obligated to defend and indemnify them.

Kiewit/Perini and Kiewit Eastern then filed this declaratory judgment action in federal court, seeking a defense and indemnification from L & R Construction or CNA Insurance, as well as reimbursement for attorneys' fees and costs. All parties filed motions for summary judgment. The district court granted Kiewit/Perini's motion in part, requiring L & R Construction to defend and conditionally indemnify it, but held as a matter of law that L & R Construction owed no duty to defend or indemnify Kiewit Eastern. After deciding those defense and indemnification issues, the court dismissed the claim against CNA Insurance as moot. Kiewit Eastern Co. v. L & R Constr. Co., Civ.A. No. 91-5563, 1993 WL 367051 (E.D. Pa. Sept. 3, 1993) ("Kiewit I "). The district court denied a subsequent motion to amend the judgment, Kiewit Eastern Co. v. L & R Constr. Co., Civ.A. No. 91-5563, 1994 WL 116108 (E.D. Pa. Mar. 15, 1994) ("Kiewit II "), and Kiewit/Perini, Kiewit Eastern, and CNA Insurance appealed.

The district court had jurisdiction of the case under 28 U.S.C. § 1332 (1988).³  We have jurisdiction under 28 U.S.C. § 1291 (1988). Because this is an appeal from a grant of summary judgment, our review is plenary. Oritani Sav. & Loan Ass'n v. Fidelity & Deposit Co., 989 F.2d 635, 637 (3d Cir. 1993). Summary judgment may be granted only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. at 637-38; see also Fed. R. Civ. P. 56(c).

Section 11 of the subcontract between Kiewit/Perini and L & R Construction provided:

INDEMNIFICATION. The Subcontractor further specifically obligates itself to the Contractor, Owner and any other party required to be indemnified under the Prime Contract, jointly and separately, in the following respects, to-wit:

....

(b) to defend and indemnify them against and save them harmless from any and all claims, suits or liability for ... injuries to persons, including death, and from any other claims, suits or liability on account of acts or omissions of Subcontractor, or any of its subcontractors, suppliers, officers, agents, employees or servants, whether or not caused in part by the active or passive negligence or other fault of a party indemnified hereunder; provided, however, Subcontractor's duty hereunder shall not arise if such claims, suits or liability, injuries or death or other claims or suits are caused by the sole negligence of a party indemnified hereunder unless otherwise provided in the Prime Contract. Subcontractor's obligation hereunder shall not be limited by the provisions of any Workers' Compensation act or similar statute [.]⁴ 

(emphasis added).

The district court held the indemnification language required L & R Construction to defend and conditionally indemnify Kiewit/Perini. Kiewit I, supra, at * 8. L & R Construction does not dispute this holding, but its insurance company, CNA Insurance, does.⁵ 

Pennsylvania law permits indemnification, even for the indemnitee's own negligence, as long as the agreement to indemnify is "clear and unequivocal." Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 588 A.2d 1, 4 (1991); Willey v. Minnesota Mining & Mfg. Co., 755 F.2d 315, 323 (3d Cir. 1985). In this case, CNA Insurance claims the language of the subcontract generally is ambiguous and should be interpreted against the indemnitee.⁶  We cannot agree. Under Pennsylvania law, " [w]hen a written contract is clear and unequivocal, its meaning must be determined by its contents alone. It speaks for itself and a meaning cannot be given to it other than that expressed." Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659, 661 (1982) (citation omitted). It is for the court, as a matter of law, to determine whether ambiguity exists in a contract. Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (1986).⁷  In this case, we agree with the district court that the indemnification provisions of the subcontract are unambiguous, requiring L & R Construction to indemnify Kiewit/Perini unless Kiewit/Perini was solely to blame for the injury.⁸ 

CNA Insurance raises two other insubstantial arguments. As we have noted, section 11 of the subcontract provides "Subcontractor's duty hereunder shall not arise if such claims, suits or liability, injuries or death or other claims or suits are caused by the sole negligence of a party indemnified hereunder unless otherwise provided in the Prime Contract." Because the injured employee Chen sued Kiewit/Perini and Kiewit Eastern in negligence but not L & R Construction, CNA Insurance claims there is no duty to defend or indemnify because the "sole negligence" of Kiewit/Perini and Kiewit Eastern is at issue. Of course, L & R Construction was immune from suit because of the Pennsylvania Workers' Compensation Act. Pa.Stat.Ann. tit. 77, Sec. 481 (1992). Just because Chen could not sue L & R Construction does not mean the company was blameless in the accident. As the district court noted, legal immunity from suit between Chen and L & R Construction does not compel a conclusion that L & R Construction was not negligent, nor does it decide the contractual rights and obligations between L & R Construction and Kiewit/Perini. Kiewit I, supra, at * 6. The mere absence of allegations of negligence against L & R Construction in the underlying suit does not negate its obligation to defend and indemnify here.⁹ 

Second, CNA Insurance maintains L & R Construction is immune from liability for injuries to its employees under the Workers' Compensation Act, which provides that the "liability of an employer under this act shall be exclusive and in place of any and all other liability to such employes...." Pa.Stat.Ann. tit. 77, Sec. 481 (1992) (footnote omitted). Although the statute immunizes employers from indemnification suits by third parties who have been sued by injured employees, it exempts from protection any employers that contractually agreed with third parties to waive their immunity under the statute.¹⁰ 

Section 11(b) of the subcontract ends with the proviso that "Subcontractor's obligation [to defend and indemnify] hereunder shall not be limited by the provisions of any Workers' Compensation act or similar statute." Although the district court found this language amounted to an express waiver of immunity provided by the Workers' Compensation Act, Kiewit I, supra, at * 8, CNA Insurance argues on appeal that the subcontract does not "expressly provide" that L & R Construction would waive its immunity--as the statute requires.

In support of its position, CNA Insurance points to the decision in Bester v. Essex Crane Rental Corp., 422 Pa.Super. 178, 619 A.2d 304 (1993), in which the court denied an indemnity claim. The facts in Bester resemble those in the present case: a purported indemnitee claimed protection from liability for injuries to one of the indemnitor's employees that may have been caused by the indemnitee. Yet the comparison between the two cases ends there. Unlike the indemnification contract here, the agreement to indemnify in Bester contained no express waiver of the protections of the Workers' Compensation Act or even a reference thereto.¹¹ 

Here, the subcontract provides the obligation to defend and indemnify "shall not be limited by the provisions of any Workers' Compensation act or similar statute." Bester of course did not require that an indemnity contract use any specific wording,¹²  but merely that "such a clause contain plain language which would avoid the employer's protection from double responsibility which is afforded by the Workmen's Compensation Act."¹³  We can find no Pennsylvania case rejecting an indemnification agreement with language similar to the wording here.¹⁴  We have little difficulty in finding that the language of the subcontract is a sufficient waiver to permit indemnity.¹⁵  Therefore, we hold the subcontract requires L & R Construction to defend and conditionally indemnify Kiewit/Perini.¹⁶ 

Our holding, however, does not necessarily apply to Kiewit Eastern. Kiewit Eastern was not a party to the subcontract with L & R Construction. Instead, the agreement expressly was "by and between" L & R Construction and "Kiewit/Perini, A Joint Venture."

Nevertheless, as the joint venture's "managing party," Kiewit Eastern maintains it may claim any contractual defense available to the joint venture itself. Kiewit Eastern asserts that Pennsylvania partnership law would indemnify a member of a partnership in this situation, so joint venture participants should be indemnified as well. Although generally courts have analogized joint ventures to partnerships,¹⁷  we do not believe that proposition dictates Kiewit Eastern be covered by the subcontract here. Pennsylvania decisions on joint ventures are sparse and it is unclear whether the state's courts would apply partnership law to the joint venture in this situation. Furthermore, application of partnership law would not mandate that L & R Construction defend and indemnify Kiewit Eastern, when Kiewit Eastern was not even named in the subcontract.

To support its contention, Kiewit Eastern cites cases holding partners liable to third parties for debts incurred by other partners on behalf of the partnership. See, e.g., McEvoy v. Grant, 302 Pa. 539, 153 A. 763 (1931). Such a proposition comes as no surprise. Indeed, that doctrine--holding partners individually liable for partnership debts--lies at the heart of partnership law¹⁸  and fundamentally distinguishes partnerships from corporations.¹⁹  Pennsylvania courts have applied this principle of partnership law to joint ventures.²⁰  But here we are confronted not with joint venturers' liabilities under the law, but with their rights--or lack thereof--under a contract. That Kiewit Eastern may be burdened by the liabilities of Kiewit/Perini is the result of statutory and case law; that Kiewit Eastern may not benefit from the indemnity afforded Kiewit/Perini, however, is the result of contract.²¹ 

Thus, the law on joint ventures does not permit venture participants to claim all defenses available to the entity itself. Certainly, Pennsylvania courts have not so held, and we decline to extend the law to permit such a claim in this case. But our decision does not require members of joint ventures to remain unguarded against potential liability. If joint venturers wish indemnity protection to cover themselves as well as the joint venture, they need only so specify in their contracts.²² 

Our holding here is consistent with Pennsylvania law governing indemnity contracts. Pennsylvania courts require that an indemnity agreement be strictly construed against the party asserting it.²³  In addition, if an agreement is ambiguous, it is to be construed "most strongly" against the party who drafted it.²⁴  Both maxims support our interpretation of the subcontract as not requiring the defense and indemnification of Kiewit Eastern.²⁵ 

Section 20 of the subcontract between L & R Construction and Kiewit/Perini provides that " [i]n the event either party institutes suit in court against the other party or against the surety of such party, in connection with any dispute or matter arising under this Subcontract, the prevailing party shall be entitled to recover reasonable attorney fees in addition to any other relief granted by the court."²⁶  In this case, Kiewit/Perini has prevailed on at least some of its claims. Nevertheless, the district court denied its request for attorneys' fees against L & R Construction, holding that the request had not been properly raised.²⁷ 

On appeal, Kiewit/Perini renews its call for attorneys' fees and costs from L & R Construction.²⁸  Although Kiewit/Perini concedes its summary judgment memorandum did not contain a separate section asking L & R Construction for attorneys' fees, it asserts it generally requested such fees in the memorandum. After reviewing the memorandum, we believe the district court did not err in concluding the issue had been waived. At most, Kiewit/Perini made vague references that could be construed only in hindsight as seeking fees from L & R.²⁹  See, e.g., Brickner v. Voinovich, 977 F.2d 235, 238 (6th Cir. 1992) (noting arguments not "adequately raised" in the district court are waived on appeal), cert. denied, --- U.S. ----, 113 S. Ct. 2965, 125 L. Ed. 2d 665 (1993).

Kiewit/Perini also claims it specifically included a request for attorneys' fees and costs from L & R Construction in its motion for summary judgment. Yet, under local district court rules, " [e]very motion not certified as uncontested shall be accompanied by a brief containing a concise statement of the legal contentions and authorities relied upon in support of the motion." E.D. Pa. R.Civ.P. 20(c). As we have noted, this was not done.³⁰ 

Finally, Kiewit/Perini points out that it briefed the issue of fees and costs against L & R Construction in a motion to amend the judgment under Rule 59(e), which the district court denied. Courts often take a dim view of issues raised for the first time in post-judgment motions. Generally, this is a decision within the sound discretion of the district court. In this case, the issue of attorneys' fees and costs related to the contract dispute at the center of the summary judgment motions, but it was not adequately raised at the time. Thus, we do not believe the district court abused its discretion in denying Kiewit/Perini's Rule 59(e) motion.

Having determined that L & R Construction owes Kiewit/Perini a duty of defense and conditional indemnification, we turn to the question whether the district court properly dismissed CNA Insurance from the case. Once the district court ruled that the subcontract entitled Kiewit/Perini to a defense and indemnification, it dismissed the claims against CNA Insurance as moot. Kiewit I, supra, at * 8. We believe a determination of the responsibilities of CNA Insurance is necessary, however, to resolve not only whether CNA Insurance must defend and indemnify Kiewit/Perini, but also whether it acted in bad faith in denying Kiewit/Perini's tenders of defense, thereby justifying an award of attorneys' fees and costs.³¹ 

Section 10 of the subcontract between Kiewit/Perini and L & R Construction provided:

INSURANCE. Prior to commencement of Work, Subcontractor shall procure and at all times thereafter maintain with insurers acceptable to Contractor the following minimum insurance protecting the Subcontractor, Owner and the Contractor against liability from damages because of injuries including death, suffered by persons, including employees of the Subcontractor ... in connection with the performance of this Subcontract.

After the subcontract was signed, L & R Construction purchased from CNA Insurance a policy covering liability arising out of L & R Construction's incidental contracts. CNA Insurance concedes that this policy requires it to fulfill any duty to defend and indemnify that L & R Construction has under the subcontract.³²  Because we ruled that L & R Construction owes a duty to defend and conditionally indemnify Kiewit/Perini under the subcontract, see supra section II.A, it is evident that CNA Insurance now bears the same duty.³³ B.

Now that we have decided CNA Insurance must defend and conditionally indemnify Kiewit/Perini, the question arises as to whether it must reimburse Kiewit/Perini for its costs. To resolve this issue, we must consider the scope of the insurer's duty to defend:

Under Pennsylvania law, an insurance company is obligated to defend an insured whenever the complaint filed by the injured party may potentially come within the policy's coverage. The obligation to defend is determined solely by the allegations of the complaint in the action. The duty to defend remains with the insurer until the insurer can confine the claim to a recovery that is not within the scope of the policy.

American States Ins. Co. v. Maryland Casualty Co., 427 Pa.Super. 170, 628 A.2d 880, 887 (1993) (quoting Pacific Indemnity Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985)) (citations omitted). Because CNA Insurance has failed to satisfy its duty to defend, Kiewit/Perini asserts it should be reimbursed for its costs incurred in defending the underlying tort suits and in bringing this declaratory judgment action.

First, we consider those costs that Kiewit/Perini already has incurred in defending itself from the personal injury claims made by Chen, the injured worker. As previously noted, CNA Insurance has conceded, if L & R Construction had a duty to defend and indemnify Kiewit/Perini, then CNA Insurance must fulfill that duty on behalf of L & R.³⁴  When an insurer erroneously denies its duty to defend, fulfillment of the duty requires the insurer to pay for any defense costs already incurred.³⁵  Such fees only can be awarded for services rendered from the time "the duty to defend arose." Heffernan & Co. v. Hartford Ins. Co. of Am., 418 Pa.Super. 326, 614 A.2d 295, 299 (1992). Thus, because CNA Insurance had a duty to defend but denied that duty, the insurer must reimburse Kiewit/Perini for the costs it has incurred so far in defending the underlying tort claims.

Second, we must determine whether Kiewit/Perini is entitled to its costs in pursuing the present declaratory judgment action. For more than a decade, Pennsylvania courts have permitted attorneys' fees in this situation, but only when the insurer has acted in bad faith.³⁶  Carpenter v. Federal Ins. Co., 432 Pa.Super. 111, 637 A.2d 1008, 1013 (1994) (citing First Pa. Bank v. National Union Fire Ins. Co., 397 Pa.Super. 612, 580 A.2d 799, 803 (1990)) ("an insured who is compelled to bring a declaratory judgment action to establish his insurer's duty to defend an action brought by a third party may recover attorneys' fees if the insurer has, in bad faith, refused to defend the action brought by the third party"). See also Kelmo Enters., Inc. v. Commercial Union Ins. Co., 285 Pa.Super. 13, 426 A.2d 680, 685 (1981); Pacific Indem. Co. v. Linn, 766 F.2d 754, 769 (3d Cir. 1985). As the court stated in Carpenter, 637 A.2d at 1013, " [t]o compel appellees to expend thousands of dollars to enforce their contractual right to a defense and indemnification would fly in the face of equity."

The language of some of these decisions, however, seems to limit this award of costs to an "insured" against its insurer. In this case, Kiewit/Perini may not be an "insured" of CNA Insurance.³⁷  But we believe such a distinction does not matter here because an award of fees does not rest on a contract between the parties. As this court stated in Trustees of University of Pennsylvania v. Lexington Insurance Co., 815 F.2d 890, 910-11 (3d Cir. 1987):

Although the Kelmo court purported to connect its holding to a contract analysis, the holding truly rested on a quasi-tort view that attorneys' fees represent compensation for an insurer's violation of its obligation to act in good faith. The mere contractual obligation of the insurer to pay for the costs of defending its insured does not include the obligation to pay for the insured's suit against its insurer.³⁸ 

In this case, as we have already found, CNA Insurance owed Kiewit/Perini the duty to defend, and CNA Insurance breached that duty. As a result of the breach, Kiewit/Perini was forced to defend itself in the underlying tort suits and incur the expense of bringing this declaratory judgment action. We are satisfied the necessary "quasi-tort" elements exist here to permit the possibility of an award of costs and attorneys' fees to Kiewit/Perini. Therefore, we remand this case to the district court to determine whether CNA Insurance acted in "bad faith" so as to justify an award of costs and attorneys' fees arising out of this declaratory judgment action. The district court should also determine the fees and costs to which Kiewit/Perini is entitled for defending itself in the underlying tort suits.³⁹ 

Overall, we believe that L & R Construction and CNA Insurance have a duty to defend and conditionally indemnify Kiewit/Perini, but not Kiewit Eastern. We remand to the district court to determine whether the insurance company's actions rise to the level of "bad faith." In any event, CNA Insurance must reimburse Kiewit/Perini for the costs and fees it has incurred in defending itself against the underlying tort claims. In all other respects, we will affirm the district court.