American Southern Insurance Company, Inc. was victorious recently when its summary judgment decision regarding a contractual indemnification dispute was upheld on appeal. In American Southern Ins. Co. v. James A. Halbert , et al., PA Superior Court, No. 504 MDA 2018, the Pennsyvlania Superior Court upheld the trial court’s granting of summary judgment in favor of American Southern.
The underlying case involved a performance surety bond for public improvement in North Cornwall Township, PA. Back in 2006, American Southern had entered into an indemnity agreement with the Halbert family (on behalf of the Oaklea Corporation) wherein the Halberts agreed to indemnify American Southern from any claim or liability arising from the issuance of a performance bond. Subsequently, American Southern issued a performance bond in favor of North Cornwall Township to secure completion of improvements for local development by the Oaklea Corporation. In July 2016, the Township informed American Southern that Oaklea refused to respond or perform certain improvements that were demanded by the Township. The Township demanded compensation from American Southern, who in turn, demanded indemnification from the Halberts. The Halberts responded that the improvements demanded by the Township were unnecessary.
In October 2017, American Southern moved for summary judgment asserting that there were no genuine issues of material fact in dispute and that American Southern was entitled to indemnification against the Halberts, as a matter of law. In response, the Halberts cited their Answer and defense that the improvements were unnecessary and also argued that the indemnification agreement was an unconscionable contract of adhesion. The trial court concluded that Halbert failed to show that the improvements were unnecessary and that the agreement was not a contract of adhesion. The Halberts appealed.
On appeal, the Superior Court explained that the Pennsylvania rules governing summary judgment explicitly prohibit a non-moving party from merely relying on the allegations or denials of the pleadings, thus rendering the Halberts’ position deficient. The Halberts conceded that an operative provision of the indemnification agreement granted American Southern the exclusive right to determine whether claims such as the ones brought by the Township should be settled or defended; thereby nullifying Halberts’ repeated defense that the demanded improvements were not necessary. Furthermore, while the court entertained the Halberts affirmative defense that the indemnification agreement was a contract of adhesion, it concluded that the Halberts failed to cite to any evidence detailing the circumstances that would support their assertion that the contract was, in fact, a contract of adhesion.
Ultimately, the Superior Court denied the Halberts appeal and affirmed the granting of summary judgment in favor of American Southern, emphasizing the Halberts’ failure to cite evidence of record that would support their claims. Thanks to Greg Herrold for his contribution to this post. Please email Brian Gibbons with any questions.