Federal court’s decision in breach of contract claim highlights the danger to transportation company in failing to timely respond to request to defend and indemnify pursuant to clear provisions within a standard transportation or logistics agreement.

This action arose following a fatal trucking accident in Missouri involving a Diamond Transportation Logistics trailer moving freight for Kroger. Despite what the federal court ultimately ruled were clear defense and indemnification provisions that required Diamond to defend and hold harmless Kroger for the accident, Diamond failed to timely respond. Kroger proceeded to defend itself, withhold payments to Diamond pursuant to the contract, and ultimately settled the third-party suit from the estates of the decedents with the money it withheld from Diamond. Diamond filed an action to recover the withheld payments, arguing it was not responsible for Kroger’s “voluntary” settlement. The court held, relying on clear precedent and the unambiguous terms of the contract, that among other provisions, plainly stated an intention to abandon common law principles as to voluntary payments, found in Kroger’s favor. It ruled Kroger was clearly entitled to defense and indemnification, that Diamond was on sufficient notice of the request, and Kroger did not act wrongly in rejecting Diamond’s eventual, but late, offer to defend and indemnify, and withhold the payments in question and use those payments to resolve the third-party suit. This case clearly highlights the risk transportation companies can create or exacerbate if tenders for defense and indemnification are not addressed expediently and efficiently.

_{Case Law Alerts, 2nd Quarter, April 2023 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2023 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}