Overreaching In Tough Indemnity Clause Proves Costly
Trying to draft the toughest indemnity clause you can think of might backfire. A recent decision leaves an aggressive general contractor with no indemnity clause at all.
As construction contracts get more and more onerous, there seems to be a contest to see who can devise the toughest and most unfair contract known to man. In at least one area, however, this pursuit may lead to the opposite result.
In a recent case, a plaintiff building owner sued a neighboring developer and the developer’s general contractor for damages caused to its building by the neighbor’s construction. The general contractor in turn sued the Engineer who designed the underpinning system alleged to have allowed the building’s foundation to shift. The contract between the GC and the Engineer provided that the Engineer “assumes entire responsibility and liability for any and all claims and/or damages of any nature or character whatsoever for which [GC] shall be liable…and agrees to indemnify and save [GC] harmless from and against all [such damages].”
In the trial, the GC sought to pass through all liability to the Engineer. The Engineer moved to dismiss the GC’s claim for indemnity, arguing that the NYS General Obligations Law section 5-322.1 prohibits a party in a construction contract from requiring another party to indemnify it from its own negligence. The issue became whether only that portion of the clause requiring the Engineer to indemnify the GC for the GC’s negligence was void, or whether the entire indemnity clause was rendered void.
The court held that because the GC had overreached and made no effort to carve out responsibility for its own liability, the entire clause violated the statute and would be stricken. Thus, the Engineer was found to have no liability under the indemnity clause to the GC--either for the GC’s negligence or for the Engineer’s negligence.
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