By: Lane F. Kelman, Jonathan A. Cass, and Jackson S. Nichols
Indemnity provisions are common features in construction contracts. They typically require one party, the indemnitor, to provide protection to another party (e.g., “to indemnify”) from liability for losses caused by the indemnitor.
Typically, a general contractor or owner will require a contractor to indemnify them from responsibility for claims for personal injury or property damage that arise from the project. Many jurisdictions are reluctant to enforce such provisions, however. In D.C., the courts will generally enforce indemnity provisions in construction contracts. Maryland and Virginia, on the other hand, are more reluctant to enforce such provisions in all scenarios.
Say you are a drywall subcontractor on a job for the construction of a building, and you sign a subcontract where you agree to the following:
The subcontractor shall promptly indemnify and save and hold harmless the General Contractor and the Owner from any and all claims, liabilities, and expenses for property damage or personal injury; including death, arising out of or resulting from or in connection with the execution of the work provided for in this Agreement.
While working, one of your workers falls through an unmarked hole in the building, sustains serious injuries, and sues the GC and owner. Who is responsible to pay for his injuries? Normally, a GC is responsible for complying with all health and safety regulations and ensuring the safety of a job site. But according to the indemnity provision, you, the subcontractor, have agreed to pay for any liability to the GC or the owner arising from that worker’s injuries, including their attorneys’ fees.
In fact, the same indemnification clause and fact pattern described above were the subjects of a case called WM Schlosser Co., Inc. v. Maryland Drywall Co., Inc., where the D.C. Court of Appeals held the subcontractor responsible because of the above indemnity provision. Maryland and Virginia, however, would likely have reached a different outcome because they have laws restricting the ability of a party to a construction contract from receiving the benefit of an indemnification provision (e.g., be protected) for their own negligence.
Because indemnity provisions can carry serious financial consequences for a company, it is vital to understand the risks involved before agreeing to them. Insurance requirements, subrogation clauses, and workers compensation laws all interrelate with indemnity provisions. These rights can differ from state to state, and it is recommended to have legal counsel review any such provisions to understand your risk.