Vey v. Port Authority of New York and New Jersey, 54 N.Y.2d 221 (1981)
A broad indemnification clause in a subcontract, requiring the subcontractor to indemnify the contractor against all claims arising out of the work, is enforceable even when the contractor’s liability to a third party arises from a separate indemnification agreement.
Summary
This case concerns the enforceability of an indemnification clause in a subcontract. An employee of Ermco Erectors, Inc. (Ermco) was injured at a Port Authority construction site. The Port Authority had contracted with Grand Iron Works, Inc. (Grand Iron), who then subcontracted with Ermco. The employee sued the Port Authority, who then sought indemnification from Grand Iron based on their contract. Grand Iron, in turn, sought indemnification from Ermco based on a clause in their subcontract. The Court of Appeals held that the broad language of the indemnification clause in the Grand Iron-Ermco contract required Ermco to indemnify Grand Iron for all damages arising from Ermco’s work, regardless of how the original claim arose. This decision emphasizes the importance of clear and comprehensive language in indemnification agreements.
Facts
Clarence Vey, an employee of Ermco, was injured while working on a construction project at a bus terminal owned by the Port Authority. Vey fell into an open stairway. The Port Authority had contracted with Grand Iron to fabricate and erect structural steel. Grand Iron subcontracted the steel erection to Ermco. Vey and his wife sued the Port Authority, Carlin-Atlas Construction Co., Inc., and Empire City Iron Works. The defendants brought third-party actions against Grand Iron and Ermco.
Procedural History
The parties stipulated to damages of $1,200,000. The trial court determined that the Port Authority and Ermco were each 50% liable. The Port Authority sought indemnification from Grand Iron, who then sought indemnification from Ermco based on both the indemnification clause in their contract and common-law tort principles. The Supreme Court granted Grand Iron’s cross-claim. The Appellate Division modified, disallowing contractual indemnity, holding Ermco liable only for contribution based on its 50% tort liability. The Court of Appeals modified the Appellate Division’s order, reinstating Grand Iron’s judgment against Ermco.
Issue(s)
Whether a contractual provision requiring the subcontractor to indemnify the contractor against all claims arising out of the work covered by the contract requires indemnification when the contractor is held liable to the owner under an indemnification clause in a separate contract.
Holding
Yes, because the broad language of the indemnification provision in Grand Iron’s contract with Ermco demonstrates that the parties intended Grand Iron to be indemnified by Ermco against all liability arising out of Ermco’s work for Grand Iron at the Port Authority’s construction site.
Court’s Reasoning
The Court focused on the specific language of the indemnification clause, which required Ermco to indemnify Grand Iron for all “damages, claims or demands arising out of the work covered by this contract.” The Court reasoned that Vey’s injury occurred while he was performing work for Ermco, Grand Iron’s subcontractor. The fact that the Port Authority could seek indemnification only from Grand Iron did not prevent Grand Iron from seeking indemnification from Ermco, since the original claim arose from Ermco’s execution of its contract with Grand Iron.
The Court also emphasized the broad language of the indemnification provision, stating that it “evidences a clear intent by the parties for Ermco to assume all liability arising out of their work at this construction site.” The provision did not limit the subcontractor’s liability to its own acts or omissions. Quoting Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153, the court implied that the specific mention of employees and the public in the provision indicates an intent to indemnify Grand Iron against all claims arising out of the work Ermco contracted to perform.
The Court further noted that Grand Iron was never present at the construction site, having subcontracted the erection work to Ermco, which made Ermco responsible for ensuring the work was done safely. Therefore, the court found that the indemnification provision was intended to totally indemnify Grand Iron for any liability arising from the Ermco-Grand Iron contract, which was let pursuant to Grand Iron’s contractual responsibilities to the Port Authority. The court concluded, “We believe the clear language of the indemnification provision, strengthened by the surrounding facts and circumstances, demonstrates that the parties intended Grand Iron to be indemnified by Ermco against all liability arising out of Ermco’s work for Grand Iron at the Port Authority’s construction site.”