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Where a general contractor performing a build-out for a store tenant (not the project owner) retained the services of a subcontractor for certain work and an employee of the subcontractor was injured by falling from a ladder, the project owner sued the contractor for common law indemnification and contractual indemnification for damages for which the Owner had been found vicariously liable under the state’s statutory law.  Although the general contractor had not itself been found to be directly liable or vicariously liable for the subcontractor employee injuries, the property owners argued they were entitled to common law indemnification.   They asserted the general contractor contractually assumed sole responsibility and control of the entire project, and had the contractual authority to (1) direct, supervise and control the means and methods of plaintiff’s work, and (2) institute safety precautions to protect the workers.    The Owner asked the Court to adopt a general rule that a party may be liable for common-law indemnification upon a showing that the party (i.e., the proposed indemnitor) either was actually negligent or had the authority to direct, control or supervise the injury-producing work, even if it did not exercise that authority.   What the Owner asked to court to do was equate a party that merely has authority to direct, control or supervise the work with a party who is actively at fault in bringing about the injury suffered by the plaintiff.   The appellate court held that in the absence of proof of any negligence or actual supervision of a general contractor, the mere authority the general contractor has to supervise the work and implement safety procedures is not a sufficient basis to require common law indemnification of the project owner. McCarthy v. Turner Construction, Inc., 953 N.E. 2d 794, (New York, 2011).

In rejecting the project owner’s argument the court held:

 A party cannot obtain common-law indemnification unless it has been held to be vicariously liable without proof of any negligence or actual supervision on its own part. But a party’s (e.g., a general contractor’s) authority to supervise the work and implement safety procedures is not alone a sufficient basis for requiring common-law indemnification. Liability for indemnification may only be imposed against those parties (i.e., indemnitors) who exercise actual supervision (Citation omitted). Thus, if a party with contractual authority to direct and supervise the work at a job site never exercises that authority because it subcontracted its contractual duties to an entity that actually directed and supervised the work, a common-law indemnification claim will not lie against that party on the basis of its contractual authority alone.

 Here, Gallin and nonparty Ann Taylor, Inc., not the property owners, entered an agreement under which Gallin was Ann Taylor, Inc.’s general contractor/construction manager. Further, Gallin engaged a subcontractor (Linear), which, in turn, engaged its own subcontractor (Samuels), the entity which employed plaintiff. Although the agreement, inter alia, required Gallin to supervise and direct the work at the premises owned by the property owners, this fact alone was insufficient to establish that Gallin actually supervised or directed the injured plaintiff’s work, especially in light of the fact that Gallin contracted the work [out to a subcontractor,] that resulted in plaintiff’s injury, and Supreme Court’s findings that Gallin (1) had no supervisory authority over Samuels’s (plaintiff’s employer’s) work, (2) would not have directed plaintiff as to how to perform his work, and (3) did not provide any tools or ladders to the subcontractors who worked at the site.

 Although the GC interacted with the subcontractor and the sub-subcontractor firm whose employee was injured, the GC had no supervisory authority over the sub-subcontractor’s work and it provided no tools or ladders to subcontractors that worked at the site.

No Contractual Indemnification

Citing case law that stands for the proposition that through a contractual indemnification clause, an owner who is only vicariously liable by statute may seek full indemnification from the party that is wholly responsible for the accident, the court found in this case that there was no direct contractual relationship between the project owner the general contractor.  The contract was in fact between the contractor and a store tenant of the project owner.  In addition, the owner had no third party beneficiary rights under the contract between the contractor and the store tenant. For these reasons, the contractual indemnification was dismissed on summary judgment by the trial court and that dismissal was affirmed on appeal.

Common law Indemnification

Even in the absence of contractual indemnification, a contractor could have an indemnification obligation that is created by common law which “imposes obligations upon those actively at fault in bringing about the injury.”   Reviewing decisions by various New York appellate division courts, the Court of Appeals observed that some courts had found a common law duty to indemnify based solely on the fact that a party had contractual authority to supervise the work at a site, whereas other courts limited the duty to those who had “actually supervised and controlled the injury-producing work.”  After reviewing these cases, the court concluded that a preponderance of case law reveals the courts “have usually, consistent with the equitable principles of common-law indemnification and this Court’s teachings, imposed the obligation to indemnify on parties who were actively at fault in bringing about the injury.”

For these reasons, the court held that because the general contractor in this case “did not actually supervise and/or direct the injured plaintiff’s work, [Contractor] is not required to indemnify the property owners under the common law.”

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 14, No. 5 (May 2012).

Copyright 2012, ConstructionRisk.com, LLC