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An indemnification clause in a contract between a school board and a general contractor contained an indemnification clause requiring the contractor to defend and indemnify the owner against all claims and damages even if caused by the owner. This violated the state’s anti-indemnity statute that prohibits recovery under a contractual indemnity provision when damages sustained by third parties are caused the public owner’s own negligence.

The Board was sued by an individual who was injured by debris that was expelled as a result of a tire blowout on a dump truck being operated by a general contractor on a construction site. When the Board sought to be indemnified, the trial court found the indemnity clause to be void and unenforceable. This was reversed on appeal with the court finding that although the clause was void to the extent it required the contractor to indemnity the Board for the Board’s own negligence, it was nevertheless enforceable in this case where the underlying claim alleged that damages were caused by the contractor’s negligence. Johnson v. Hamp’s Construction, LLC, 221 So.3d 222, (2017).

Comment: This is why it is wise to begin an indemnity clause with the introductory wording, “To the fullest extent permitted by law, the Contractor shall….” That language was included in the clause at issue. It permitted the court to strike out the offending language and enforce the balance of the clause to the maximum extent legally enforceable to accomplish the intent of the parties.

The indemnity provision of the public works contract executed by the OPSB and WWCC states:

3.18.1 To the fullest extent permitted by law the Contractor [WWCC] shall indemnify and hold harmless the Owner [the OPSB], Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. [Emphasis added by Court].

           The Court focused on the language that stated the contractor must indemnify and hold harmless the owner “but only” to the extent that the claims were “caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable.” The court noted that thefinal phrase of the clause allows the OPSB to recover even if a party to be indemnified thereunder, including the OPSB [the Owner], partially caused the third party’s claim, damage, loss or expense.”

The contractor also was found to owe a duty to defend the owner even if there had been an allegation that damages were caused in part by the Owner’s negligence. As explained by the court:

Considering that an indemnification claim is not ripe until the conclusion of the lawsuit, by which point a determination will have been made as to whether the public body was negligent, it is consistent with [citation omitted] that if a public body is not found to be negligent that it is entitled to seek indemnification for defense costs. A plaintiffs’ litigation strategy will most likely include suing the public body that retained the contractor and who may own the premises where an accident occurred and/or where their damages were sustained.

Should a contractor be relieved of his or her contractual obligation to indemnify a non-negligent public body because a plaintiff alleges the public body was negligent? We think not. Similarly worded indemnification provisions would be rendered virtually useless for public bodies that have entered into public works agreements with contractors thereby limiting their recovery of defense costs to the lawsuits where they have not been sued for negligence. If this were the case, taxpayers ultimately would have to bear this cost. A plaintiff’s allegation of negligence should not be the determining factor in applying the contractual provision. It is a finding of negligence that should be dispositive.

Comment: When drafting indemnity clauses it common to find a provision stating that the duty to defend and indemnify applies even if the damages were caused in part by the Indemnitees. So long as the clause states that the contractor’s duty is limited to indemnifying for damages to the extent caused by its negligence, the logical way to read the clause is just as was done by the court in this case, i.e., (1) the contractor indemnifies for those damages caused by its negligence; (2) the owner remains responsible for the damages caused by its negligence and the contractor does not indemnify for those; and (3) the defense duty is triggered if there are allegations of negligence by the contractor even if there are also allegations of negligence against the Indemnitees (e.g. Owner).

 

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. 19, No. 11 (Dec 2017).

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