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In re Estate of Koch

Court of Appeals of Michigan

December 19, 2017

A. Z. SHMINA, INC, Defendant/Cross-Defendant-Appellee/Cross-Appellant, Estate of Michael Koch, by SUSAN KOCH, Personal Representative, Plaintiff and ORCHARD, HILTZ, & MCCLIMENT, INC. Defendant/Cross-Plaintiff/Third-Party Plaintiff-Appellant/Cross-Appellee, and REGAL RIGGING & DEMOLITION, LLC Defendant, and PLATINUM MECHANICAL, INC. Third-Party Defendant-Appellee.

         Washtenaw Circuit Court LC No. 13-001066-NO

          Before: Markey, P.J., and Ronayne Krause and Boonstra, JJ.

          Boonstra, J.

          Defendant/Cross-Plaintiff/Third-Party Plaintiff, Orchard Hiltz & McCliment, Inc. (OHM), appeals by right the trial court's order dismissing this case, which plaintiff, the Estate of Michael Koch, filed after its decedent was killed in an explosion at the Village of Dexter's (Dexter) Wastewater Treatment Plant. OHM was Dexter's engineer. OHM filed a cross-complaint seeking indemnity from contractor A. Z. Shmina, Inc. (Shmina) and subcontractor Platinum Mechanical, Inc. (Platinum). The parties stipulated to dismiss the case after the trial court denied OHM's motion for summary disposition under MCR 2.116(C)(10) (no genuine issue of material fact) and granted summary disposition in favor of Shmina and Platinum under MCR 2.116(C)(10) on OHM's claims. We affirm with respect to the trial court's denial of summary disposition in favor of OHM. We vacate the trial court's grant of summary disposition in favor of Shmina and Platinum and remand for further proceedings consistent with this opinion.


         OHM initially contracted with Dexter in August 2011 to design upgrades to the sludge handling process at Dexter's wastewater treatment plant. The services included replacing digester tank lids that had exceeded their design life. On June 4, 2012, OHM again contracted with Dexter for services including "contract administration, construction engineering, construction observation, and construction staking." OHM's contract incorporated a provision to the effect that it had no responsibility for job-site safety.

         Dexter hired Shmina as a contractor to improve the digester and sludge storage tanks. Dexter's contract with Shmina included general and supplementary terms, both of which contained indemnification provisions. Shmina subcontracted with Platinum, which agreed to provide labor and materials for digester lid demolition and installation. Platinum's contract incorporated the general, special, and supplementary terms of Shmina's contract with Dexter. Platinum in turn subcontracted with Regal Rigging & Demolition (Regal), awarding Regal a contract to demolish, remove, and haul away two digester tank lids.

         According to Jeremy Cook, Platinum's job foreman, there were weekly progress meetings in OHM's job trailer. Cook stated that Chris Nastally of OHM discussed "anything that had to do with that job" at the meetings, including job safety. Meeting minutes indicate that a progress meeting was held on April 11, 2013, and that Nastally and Sherry Wright of OHM, Cook and Kenneth Coon of Platinum, John Franklin of Shmina, and Jeff LaFave of Regal were in attendance. The minutes indicated that Regal planned to start demolishing the digester lids on April 12 and that the primary lid would be removed first. The minutes also indicated that the only "hot" work would be to cut holes in the lids and pull them out. Coon testified that at the meeting, Regal was instructed that it could only cut holes in the primary digester for rigging purposes and "[t]here was to be no other cutting on that job site whatsoever." Coon stated that anyone on the job site should have known that there should be no cutting torches on the secondary digester.

         On April 22, 2013, the secondary digester exploded, resulting in Koch's death. Wright, an environmental engineer, testified that she was on the site the week before the explosion because Nastally was on vacation. Wright testified that on the morning of the explosion, she walked the site with Nastally, talked about the areas that had been worked on, and told Nastally that the secondary digester still contained sludge.

         Franklin, Shmina's project supervisor and site safety officer, testified that the primary digester had been cleaned and purged. Franklin also testified that OHM, Platinum, and Nastally would have known that only one digester could be worked on at a time. According to Franklin, David McBride of Regal began cutting the side beams on the secondary digester tank at around 10:00 or 10:30 a.m., and Franklin was concerned about the methane in the digester.

         Cook testified that Franklin approached him at around 10:00 a.m. and told him that "the guys from Regal [were] doing some hot work and he was worried that they were blowing sparks on the roof . . . ." Cook stated that he approached McBride, told him that he was not supposed to be working on the secondary digester, and specifically mentioned that there could be methane gas. Cook testified that McBride was given plywood to lean against the tank to finish cutting the rail he was working on, which otherwise would have created a falling hazard.

         Cook testified that he did not see McBride cutting again that day. However, Franklin testified that he saw McBride again cutting at around 1:00 or 1:30 p.m. on the roof line. According to Franklin, he went onto the roof and told McBride to stop working and that it was dangerous to work there. Franklin stated that McBride shut off his cutting torch and walked over to the primary digester, at which point Franklin left to have a conversation with Cook. McBride testified that Cook told him to use a torch to remove the bolts and that if someone had told him to stop cutting or to cut in a different location, he would have moved.

         Nastally testified that he was on the roof for about four minutes before the explosion. Nastally stated that if he was looking at someone who was cutting, he would have known they were cutting, but he was not paying attention to whether there were sparks. When asked whether he knew that the tanks contained methane gas when they had sludge in them, Nastally testified, "I guess I never thought about that." Nastally also testified that it was not his responsibility to know whether there was methane gas or to make sure the digesters did not explode. Nastally testified that he took a couple of pictures and then responded to an e-mail on his phone, which he was looking down at when the explosion occurred.

         McBride testified that in one of the photographs Nastally had taken, he can be seen cutting the center bolts of the digester, that he had cut about thirty bolts, and that it took him about five minutes to cut each bolt. McBride testified that when he is cutting, he creates sparks, smoke, a loud noise, and a burnt metal smell. Wright testified that if she had taken the photograph, she would have been concerned for the safety of everyone in the area, and that anyone onsite should have informed Franklin about McBride's activities.

         The Estate sued Shmina and OHM, [1] alleging in pertinent part that Dexter had warned Shmina and OHM not to work on any digester until it was emptied and cleaned to reduce methane hazards, the secondary digester had not been emptied, Shmina and OHM knew the secondary digester still contained sludge, and that McBride was photographed cutting bolts on the secondary digester within minutes of the explosion. The Estate alleged that McBride's cutting torch ignited methane in the secondary digester, which launched the lid into the air and caused Koch's death.

         OHM filed a cross-claim against Shmina, alleging in pertinent part that Shmina had breached its contract with OHM by refusing to indemnify and defend OHM against the Estate's complaint and by failing to purchase project insurance that would have protected OHM from claims against it. OHM also filed a third-party complaint against Platinum, in which OHM made the same allegations.

         OHM moved for summary disposition under MCR 2.116(C)(10) against Platinum and Shmina, alleging that OHM was an intended third-party beneficiary of Platinum's and Shmina's contracts with Dexter and that Platinum and Shmina were required to indemnify, defend, and hold harmless OHM. Platinum responded in part that the contract's general and supplemental provisions conflicted, creating an ambiguous agreement that the trial court should construe against OHM. Shmina responded that OHM could not reasonably observe practices that its engineers knew to be dangerous and do nothing. OHM replied that the parties' contracts required them to defend and indemnify OHM regardless of the cause of the accident and that the contracts' general and supplemental provisions did not conflict.

         At an April 22, 2015 motion hearing, the trial court asked counsel if they were familiar with MCL 691.991, also known as the indemnity invalidating act (the act), which no party had cited. The trial court then read the statute. OHM argued that it was not a public entity under the statute. The trial court ultimately denied OHM's motion for summary disposition, ruling that MCL 691.991 was clear and prohibited OHM from seeking indemnification for its own negligence. The trial court subsequently denied OHM's motion for reconsideration, and reaffirmed its determination that MCL 691.991 applied retroactively. The court also stated, as an alternate basis for its denial of summary disposition to OHM, that the internally ...

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