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Jones v. Sun Carriers, Inc.

Citation: 19 ELR 20108
No. No. 87-1767, 856 F.2d 1091/(8th Cir., 09/08/1988)

The court holds that the seller of a trucking company is not required by its sales agreement to indemnify the buyer for its potential liability under the Comprehensive Environmental Response, Compensation, and Recovery Act arising out of dioxin contamination of the trucking company's terminal. The indemnity clause of the sales agreement provided that the seller would indemnify the buyer for all liabilities, damages, and claims arising out of any misrepresentation or breach of the agreement. The agreement also stated that the buyer must assert its claims for indemnity within three years of the closing date. The warranty clause provided that the seller had no undisclosed liabilities. While the contamination was discovered within three years after the sale, it was not until the three-year period had elapsed that EPA classified the terminal as a confirmed dioxin site.

The court, interpreting Arkansas law, holds that the agreement does not require the seller to indemnify the buyer for possible expenditures that are still unknown and potential three years after conclusion of the sale. An indemnitor's obligation for "liabilities" accrues only when liability is legally imposed, such as when a judgment is entered or a settlement reached. "Damages" are deemed to have accrued only when the indemnitee has made payment or has otherwise expended money. Although the buyer notified the seller within the three-year period of the potential liability arising out of the dioxin contamination, such notice did not constitute a "claim" covered by the indemnity clause. Generally, no claim arises under an indemnity agreement unless a specific demand is made for something as a legal right or until notice of a lawsuit is given.

Counsel for Appellant
Diane S. Mackey, Herschel H. Friday
Friday, Eldredge & Clark
2200 First Commercial Bldg., Little Rock AR 72201
(501) 376-2011

Counsel for Appellee
Richard A. Williams, Sherry P. Bartley
Mitchell, Williams, Selig & Tecker
1000 Savers Federal Bldg., Little Rock AR 72201
(501) 376-3151

Before McMILLAN, WOLLMAN, and BEAM, Circuit Judges.