A Second Level of Protection to Indemnitees

Construction and Procurement Law News, Q2 2019

Firm Alert

Author(s)

It is not uncommon for indemnitees to attempt to add language to indemnification provisions providing additional liability protections from the indemnitor. And courts and legislators are wary of language in indemnity agreements that create obligations on the indemnitor to indemnify the indemnitee for its own acts or omissions and create restrictions on the indemnitee’s rights to do so. A recent Florida court attempted to strike a balance between an indemnitee’s right to indemnification generally and protecting an indemnitor from indemnifying the indemnitee for its own fault.

In CB Contractors, LLC v. Allens Steel Products, Inc., a general contractor of a condominium project brought a contractual and common law indemnification action against its subcontractors arising out of a construction defect action brought against the contractor by the condominium association.

The subcontract’s indemnity clause stated: “Subcontractor’s indemnity obligations hereunder shall apply regardless of whether or not the claims, damages, losses, and expenses or causes of actions are caused in part by a party indemnified hereunder […].” In essence, the subcontract, on its face, allowed the general contractor to seek indemnity for claims, damages, and losses as a result of its own fault.

Florida Statute § 725.06 (2004), which applies to construction of buildings, states that “[a]ny portion of any agreement […] promis[ing] to indemnify or hold harmless the other party to the agreement […] for damages to persons or property caused in whole or in part by an act, omission, or default of the indemnitee […] shall be void and unenforceable unless the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract […].”

Applying this statute, the lower court found that the entire indemnity clause was void and unenforceable. The general contractor appealed the trial court’s decision.

On appeal, the appellate court disagreed and found that the entire indemnity clause was not void and unenforceable, but instead concluded that only the specific portion of the indemnity clause purporting to impose indemnity obligations for the contractor’s own acts or omissions was unenforceable.

This ruling, which reflects the same middle-of-the-road approach followed by many jurisdictions, provides protection to the indemnitor without completely voiding the parties’ indemnification agreement. This decision could have been different under a different state’s stricter law regarding indemnity. Contracting parties should carefully consider the extent of indemnity included in their contracts, especially in light of the relevant jurisdiction’s law regarding those protections.