Continental Motors, Inc. v. Jewell Aircraft, Inc., 2012 WL 5950374 (S.D. Ala. November 28, 2012). Free copy available here.
Who is affected? Any party pleading common law indemnity under Kentucky law.
“On November 21, 2006, a Piper Lance Cherokee aircraft (the ‘Aircraft’) went down near Bardstown, Kentucky, resulting in serious injuries to its occupants, Larry Dale Crouch and Teddy Lee Hudson. Defendant, Jewell Aircraft, Inc., and others had overhauled the Aircraft’s engine in spring 2005. During that overhaul process, Jewell Aircraft installed a magneto manufactured by plaintiff, Continental Motors, Inc. (‘Continental’), in the Aircraft’s engine. Jewell Aircraft performed this task incorrectly in several respects, by (i) using ‘an older, outdated, generation of AVCO clamps’ that had ‘been superseded by a newer generation AVCO clamp;’ (ii) using at least one AVCO clamp that had been ‘impermissibly modified prior to or during the Overhaul;’ and (iii) using an ‘improper Superior Air Parts, Inc. gasket that was manufactured outside of the FAA approved specifications relating to this gasket.’
“At the time of the overhaul, Jewell Aircraft was a distributor of Continental or was an agent or representative of a Continental distributor, having entered into a Product Support Agreement with Continental in January 2005. That agreement provided, in pertinent part, that Jewell Aircraft ‘agrees to indemnify and hold [Continental] harmless from and against all claims, demands, obligations and liabilities … to the extent that [they] have resulted from or arisen out of any act or omission of [Jewell Aircraft], its officers, agents, representatives, servants, or employees.’
“Crouch and Hudson filed suit against Continental, alleging inter alia that the crash was caused by separation of the magneto from the engine’s accessory case, resulting in a sudden loss of engine power. Those claims were initially filed in Kentucky, then transferred to this District Court to remedy a personal jurisdiction defect. When the action ripened into a three-week trial before Judge DuBose in 2011, Crouch and Hudson presented both claims alleging wrongdoing by Continental itself ( i.e., claims that Continental had assembled a defective magneto or had failed to warn others of its defects), and claims alleging that Continental was liable because its agent (Jewell Aircraft) had negligently installed the magneto onto the Aircraft. At trial, for reasons that are not germane to the instant Motion, Crouch and Hudson withdrew their negligent installation claim. The jury returned a verdict in Continental’s favor on the remaining claims (negligent failure to warn, breach of warranty, strict liability). That verdict and the accompanying judgment for Continental are presently on appeal to the Eleventh Circuit.”
“Kentucky authorities are quite clear that ‘a claim for common law indemnity … arises only when the tortfeasors are not in pari delicto and when one party has been exposed to liability because of the wrongful act of another.’ Degener v. Hall Contracting Corp., 27 S.W.3d 775, 782 (Ky.2000); see also Greenwell v. Lowe’s Home Centers, Inc., 2012 WL 3046417, *2 (Ky.App. July 27, 2012) (‘Indemnity is a firmly entrenched principle in our common law and is available to one exposed to liability because of the wrongful act of another with whom he/she is not in pari delicto [in equal fault].’) (citation and internal quotation marks omitted); T–Netix, Inc. v. Combined Public Communications, Inc., 2012 WL 1078826, *3 (W.D.Ky. Mar. 30, 2012) (‘The threshold issue when a common law indemnity claim is made is whether the indemnitee is exposed to liability because of the wrongful act of the indemnitor….’).The obvious question, and the one about which the parties spar, is whether the term ‘exposed to liability’ contemplates actual liability by the indemnitee in order to trigger common-law indemnity rights. A more precise way to frame the issue is whether one can be ‘exposed to liability’ for indemnity purposes when a jury verdict has expressly determined that one is not liable at all.
“There is abundant precedent applying Kentucky law which either states or suggests that the “exposed to liability” prerequisite for common-law indemnity requires an underlying liability in damages (in terms of a judgment, a settlement, or at least an ongoing proceeding for damages) by the would-be indemnitee (in this case, Continental) to a third party (in this case, Crouch and Hudson).”