Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co.

Facts

In 1960 G. W. Thomas Drayage & Rigging Co. contracted with Pacific Gas & Electric Co. to furnish the labor and equipment needed to remove and replace the upper metal cover of Pacific Gas's steam turbine. Thomas Drayage agreed to perform the work at its own risk and expense and to indemnify Pacific Gas against all loss, damage, expense and liability resulting from injury to property, arising out of or in any way connected with performance of the contract. It also agreed to procure not less than $50,000 in insurance covering liability for injury to property; Pacific Gas was to be an additional named insured, but the policy was to contain a cross-liability clause extending coverage to Pacific Gas's property. During the work the cover fell and injured the exposed rotor of the turbine. Pacific Gas sued to recover $25,144.51, the amount it spent on repairs. During trial it dismissed a count based on negligence and won judgment on the theory that the indemnity provision covered injury to all property regardless of ownership. Thomas Drayage had offered to prove, through admissions of Pacific Gas's agents, its own conduct under similar contracts with Pacific Gas, and other proof, that the parties meant the clause to cover injury to third parties' property only.

Issues

1. Is extrinsic evidence offered to prove the parties' intended meaning of a written contract inadmissible whenever the writing appears plain and unambiguous to the court?
2. Was the indemnity clause reasonably susceptible of Thomas Drayage's reading, that it covered injury to third parties' property only?

Holding

The indemnity clause was reasonably susceptible of the meaning Thomas Drayage urged, that it covered injuries to third parties' property only, so the trial court erred in refusing the offered extrinsic evidence and the judgment had to be reversed.