Federal Court Struggles To Find Definition Of “Gross Negligence” While Construing Indemnification Agreement Under Pennsylvania Law
May 8, 2023
By: Carl L. Engel
On May 3, 2023, the U.S. District Court, in the case Johnson v. Keane Group Holdings LLC et al., struggled to find a definition under Pennsylvania law for the term “gross negligence” while construing an indemnification agreement between the owner of a gas well and the company hired to service it. Under their contract, the service provider was obligated to indemnify the owner in lawsuits arising from injuries to the service provider’s employees, unless the owner was “grossly negligent” in causing them. After the owner was sued for “gross negligence” by an employee of the service provider who fell into an unguarded hole at the owner’s gas-well site, it demanded that the service provider indemnify it against the employee’s claims, arguing that he had not accused the owner of acting “recklessly.” The District Court, however, after a long analysis of Pennsylvania law, found that a showing of “recklessness” was not required to establish “gross negligence.” It, therefore, declined to enter summary judgment in favor of the owner, and is allowing a jury to evaluate whether the owner was “grossly negligent” in causing the employee’s injuries. If the owner was “grossly negligent,” then the service provider will not be required by the indemnification agreement to compensate the owner for damages paid to its employee.
Seneca Resources Company, LLC, operates an oil and gas well in the mountains of north-central Pennsylvania. Seneca Resources contracted with Keane Group Holdings LLC and Patrik’s Water Hauling Ltd. to provide services at the wellsite. Seneca Resources’s and Patrik’s Water Hauling’s relationship is governed by a Master Service Agreement. This agreement requires Patrik’s Water Hauling to indemnify Seneca Resources against claims arising from the injury or death of Patrik’s Water Hauling’s employees, “except in the case of Seneca Resource’s gross negligence or willful misconduct.”
On January 7, 2018, an employee of Keane Group fell at the wellsite when she stepped into a gap in a grate that was covering a utility hole in the ground. Seneca Resources learned of the incident, and Keane Group’s on-site safety agent went to the wellsite. He instructed employees there to place caution tape around the well, which they neglected to do. Later that day, an employee of Patrik’s Water Hauling, Danny Johnson, fell into the same hole, injuring himself.
Mr. Johnson sued Keane Group and Seneca Resources for his injuries. Seneca Resources tendered an indemnification demand to Patrik’s Water Hauling, based on the indemnification provision in the Master Services Agreement. Patrik’s Water Hauling refused to indemnify Seneca Resources, however, because it had been accused of “gross negligence” in causing Mr. Johnson’s injuries. Seneca Resources, on the other hand, believed that the allegations had not amounted to “gross negligence,” and moved for summary judgment on this basis.
The court observed at the outset that “the precise definition of ‘gross negligence’ is a source of confusion in Pennsylvania jurisprudence.” It theorized that the confusion arose because “gross negligence” is a relatively new term invented by legislators in statutes, and not a term that evolved organically within the common law. The crux of the case was whether a party alleging “gross negligence” was required to show “recklessness” on the part of the defendant. For its part, Seneca Resources relied on an appellate-court decision from 1973 called Williams v. State Civil Service Commission, which defined “gross negligence” as “a failure to perform a duty in reckless disregard of the consequences or with such want of care and regard for the consequences as to justify a presumption of willfulness or wantonness.”
Patrik’s Water Hauling, however, argued that Pennsylvania courts had retreated from this definition, and that “recklessness” on the part of the defendant was no longer required to establish “gross negligence.” Patrik’s Water Hauling relied on a 1991 appellate-court decision called Bloom v. DuBois Regional Medical Center, in which the court had criticized the Williams definition on the ground that “recklessness” requires a different state of mind than negligence, regardless of whether simple or gross in nature, so “gross negligence clearly does not encompass wanton or reckless behavior.” It instead defined “gross negligence” as “a flagrant deviation from the ordinary standard of care.” Patrik’s Water Hauling noted also that the Pennsylvania Supreme Court in 2019, in the case Feleccia v. Lackawanna College, had found that “gross negligence does not rise to the level of the intentional indifference or ‘conscious disregard’ of risks that defines recklessness.”
The District Court, “in the absence of more precise guidance from the Supreme Court of Pennsylvania or the Third Circuit,” endorsed the Bloom definition and found that “gross negligence does not require evidence of recklessness.” The court then concluded that, based on this definition, it was possible for a jury to conclude that Seneca Resources was “grossly negligent” in failing to secure the hole after Keane Group’s employee had fallen inside. Accordingly, Seneca Resources’s motion for summary judgment was denied.
While the opinion does make clear the distinction between “gross negligence” and “recklessness,” it blurs the line between “ordinary negligence” and “gross negligence.” Indeed, the only guidance provided by the District Court with respect to a difference between the two is that “gross negligence” is “substantially more than ordinary carelessness” or a “flagrant deviation from the ordinary standard of care.” In other words, you know it when you see it. As noted by the District Court, “gross negligence” does not exist under the common law and is an invention of the legislature. Without providing a definition via statute, the legislature’s concept of “gross negligence” remains half-baked. The District Court is simply unwilling to finish the legislature’s work for it by creating one.