Readers of this blog know that the terms and conditions in equipment rental agreements favor the rental company. Those agreements typically have one-sided indemnity clauses, on the basis that the rental company expects the renting contractor to carry appropriate insurance against third-party claims. This is normal insurance risk allocation.
The Minnesota Supreme Court has held, though, that an indemnity clause will not apply to the rental company’s own negligence unless that concept is explicitly stated in the indemnity. Whoa.
But there is logic to the decision. The indemnity clause at issue stated, in part (and the original is FULL OF CAPS just to make the point):
YOU HEREBY . . . AGREE TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE RENTAL COMPANY FROM AND AGAINST, ANY AND ALL LIABILITIES, . . . RESULTING FROM OR ARISING IN CONNECTION WITH SUCH POSSESSION, USE, TRANSPORTATION AND/OR STORAGE, REGARDLESS OF THE CAUSE . . ., EXCEPT TO THE EXTENT DIRECTLY RESULTING FROM OUR INTENTIONAL MISCONDUCT.
Some people would argue that this indemnity includes claims arising from the rental company’s negligence. Obviously, the rental company made that argument. But the Minnesota high court held otherwise. It stated, first, that the test is “not whether the language of an indemnity clause is ‘so broad’ that it necessarily includes the indemnitee's own negligence.” Rather, the test is whether the indemnity clause “includes specific language that expressly shows, in clear and unequivocal language, that the parties intended the clause to obligate the indemnitor to indemnify the indemnitee for the indemnitee's own negligence.” (emphasis in original)
Another fact that affected the outcome was an exculpatory clause immediately following the indemnity, which included a statement that the rental company would not be liable in contract for any claim “INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS ARISING FROM OR IN CONNECTION WITH OUR NEGLIGENCE (OTHER THAN OUR INTENTIONAL MISCONDUCT).” Here, the carve-out for the rental company’s own negligence was specifically stated.
Thus, in Minnesota if not elsewhere, the scope of an otherwise-broadly-stated indemnity clause will not be read to encompass indemnity for the indemnitee’s own negligence, unless there is an explicit statement to that effect.
The case giving rise to this decision arose from the collapse of a folding picnic table rented for the Ma and Pa Kettle Days celebration, causing severe injury to an unsuspecting patron: Dewitt v. London Rd. Rental Ctr., Inc., 2018 Minn. LEXIS 178 (April 18, 2019).
Rental companies who learn of this decision will be looking to have their terms and conditions reviewed and updated.