A.M. Welles, Inc. v. Montana Materials, Inc.

A.M. Welles, Inc. v. Montana Materials, Inc., 2015 MT 38 (Feb. 10, 2015) (Baker, J.) (5-0, rev’d)

Issue: (1) Whether the district court properly denied summary judgment to Welles, and (2) whether the district court abused its discretion in dismissing the state’s action against Liberty Mutual for failure to prosecute.

Short Answer: (1) No. The judgment is reversed with instructions to enter judgment for Welles. (2) Yes.

Reversed and remanded

Facts: The state contracted with Welles to complete a highway paving project near Ennis in 2000. Welles subcontracted with Montana Materials, Inc., RSJ, Inc., and GLJ, Inc. (“Jensen”). The state and Welles insured the job through Liberty Mutual Fire Insurance Co. On Sept. 30, 2000, Jensen applied oil and blotter to the road. That night a storm struck, causing the oil to emulsify, which then splashed onto passing vehicles and caused about $600,000 in damage.

The state paid all claims brought by vehicle owners. Welles reimbursed the state, and the state sued Liberty for indemnification for the costs Welles did not cover. Welles sued Jensen, seeking indemnification under the subcontract for the costs it reimbursed to the state.

Procedural Posture & Holding: Welles and Jensen moved for summary judgment on Welles’ claim against Jensen. The district court denied Welles’ motion in April 2008 and granted Jensen’s motion in January 2010. In 2012, Liberty moved to dismiss the state’s action against it for failure to prosecute. The court granted Liberty’s motion in January 2014, and entered final judgment in February 2014. The state and Welles appeal, and the Supreme Court reverses.                                                                                      

Reasoning: (1) Jensen agreed to indemnify Welles for losses “on account of any act or omission” by Jensen. The contract does not limit the duty to indemnify to negligent or wrongful acts or omissions. With or without the rain, it cannot be disputed that, but for the placement of the primer on the road the preceding day, traffic would have crossed the construction area without incident. This establishes but-for causation, and Welles is entitled to indemnification and summary judgment.

(2) Weighing the four factors from Hobble-Diamond, the Court concludes the district court abused its discretion by dismissing the state’s case against Liberty Mutual. The state’s 17-month delay was “poor practice,” but given the complexities of this case, not per se unreasonable.