01-0242 Deminsky v. Arlington Plastics Machinery et al.

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“Indemnity provisions merely shift the financial burden of potential liability. Arlington did not attempt to substitute Image as the party responsible for producing a safe product. It could not. Rather, it contracted with Image to take the financial burden if the situation should arise where someone claimed Arlington was negligent or designed an unreasonably dangerous product.

“Contrary to Image’s suggestion, indemnity agreements do not leave Arlington worry-free with respect to its liability. Arlington’s indemnity agreement with Image does it no good if Image is unable to pay. If, for example, Image had no insurance coverage and went bankrupt, Arlington would still have been liable to Deminsky. … The major concern, then, as stated, is whether the injured party can recover. The indemnity agreement here does not decrease or destroy Deminsky’s chance to recover. In fact, because of Arlington’s alleged fragile financial situation, Deminsky’s chances of full recovery are better fulfilled if Image and its insurer are responsible under the indemnification agreement.”

Further, the terms and conditions of the agreement satisfied the conspicuousness requirement.

“While the best policy may be to put indemnity language on the front page of a contract, everything does not always fit on the front page. Here, however, for all practical purposes, we have a one-page contract. The reader merely has to flip over the piece of paper to read the terms. Failure to read a contract, particularly in a commercial contract setting, is not an excuse that relieves a person from the obligations of the contract…. Image has not argued here that Harm was hurried into signing this contract. He had time to carefully review the terms, but he chose not to do so. Additionally, the relevant terms of this contract were conspicuous and the form provided adequate notice to Image of the responsibilities under the contract. There is no argument that the terms of this contract were ambiguous or unclear.”

However, because under the circumstances of this case, Image did not know that settlement negotiations were in progress between plaintiff and Arlington and Image had no opportunity to dispute the validity of the settlement agreement, we remand the action to the circuit court for a limited trial to the court.

“Accordingly, we affirm the holdings of the court of appeals, but modify the judgment to the extent that we remand for a limited trial to the court regarding the reasonableness of the settlement. Because Image rejected the tender of the defense, the burden on remand will fall upon Image to show that the settlement agreement reached was unreasonable, that Arlington faced no potential liability, or that the agreement involved fraud or collusion.”

CONCURRING OPINION: Abrahamson, Ch. J. “I agree with both the legal analysis and remedy of the majority opinion. I write separately because I also agree with the dissent’s concern that the circuit court has not been provided with sufficient guidance for conducting the limited hearing on remand.”

CONCURRING OPINION: Sykes, J., with whom Bradley, J., joins. “I agree with the majority’s analysis of the first issue regarding whether the indemnity agreement is valid and enforceable. I also agree with much of the majority’s discussion of the second issue regarding whether Image as indemnitor is bound by the $1.475 million judgment entered by stipulation between Image’s indemnitee, Arlington, and the plaintiff, Deminsky, without Image’s knowledge or participation. I do not agree, however, with the majority’s ultimate conclusion that the judgment may be enforceable against Image/Federated.

Accordingly, I cannot subscribe to the limitations the majority has placed on the scope and nature of the remand in this case.”

Court of Appeals; Wilcox, J.

Attorneys:

For Appellant: Laura J. Hanson, Katherine A. McBride, Minneapolis, Minnesota

For Respondent: John P. Richie, Eau Claire