Utica Mutual Insurance Company v. Vigo Coal Company, Inc.

393 F.3d 707 (7th Cir. 2004)

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Nature of the Case

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Facts

D purchased Buck Creek Coal, which operated a coal mine and was required by both federal and state law to post reclamation bonds. D, joined by Atlas (D) and by the owners of both and by Buck Creek Coal, signed a 'General Indemnity Agreement.' They agreed to indemnify P for any losses that P might incur from issuing reclamation bonds to the Indiana state government on behalf of Buck Creek. The following year another 'General Indemnity Agreement' was signed, identical to the first, except that the only signers were Schulties (D), who had not signed the previous agreement, and the Piepers (D) (Atlas's owners). The surety bond was 'forfeited' because Buck Creek was unable to fulfill its reclamation obligations. The state required the surety, P, to do the reclamation and P then brought this suit, against all the signers of either agreement, for reimbursement of the expense -- some $400,000 -- of the reclamation. In 1992, D sold the coal mine to Atlas and Schulties, and they agreed to use their best efforts to replace the existing reclamation bonds and obtain a release of D's liability under those bonds. They failed to do so. Atlas and Schulties then got P to accept the indemnity agreement signed by them only. The district court concluded that the second agreement was a 'novation.' Those who signed on the first agreement less Atlas (D) (as it signed both agreements) were released from the agreement. P appealed. P was unable to recover its entire loss from the signers of the 1992 agreement and seeks to enforce the 1991 agreement against D. the court ruled the second agreement a novation and P appealed.