Itri Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 786 (1997)
Under General Obligations Law § 5-322.1, an indemnification agreement in a construction contract that purports to indemnify a general contractor for its own negligence is void and unenforceable, especially when the agreement contemplates full indemnification regardless of the contractor’s negligence.
Summary
These consolidated appeals address whether a general contractor can enforce an indemnification agreement against a subcontractor when the general contractor is partially negligent. The Court of Appeals held that because the agreements in both cases contemplated full indemnification, rather than partial, they are unenforceable under General Obligations Law § 5-322.1. The statute prohibits agreements that indemnify a promisee (general contractor) against liability for damages arising from their own negligence, even if the negligence is partial. This ruling reinforces the public policy against shifting responsibility for one’s own negligence in construction contracts.
Facts
Itri Brick: Kizmann, an employee of Itri Brick (subcontractor), sued MNT (general contractor) for injuries sustained at a construction project. MNT sought contractual indemnification from Itri. The personal injury action settled, stipulating MNT was 24.26% negligent and Itri was 75.24% negligent.
Stottlar: Stottlar, an employee of Shopovick (subcontractor), sued Ginsburg (general contractor) for injuries sustained at a construction project. Ginsburg sought contractual indemnification from Shopovick. The jury found Ginsburg 35% negligent, Shopovick 50% negligent, and Stottlar 15% negligent.
Procedural History
Itri Brick: Supreme Court initially denied Itri and State Fund’s motion for summary judgment, granting judgment for Aetna, finding the indemnification agreement void under GOL § 5-322.1. After the settlement, the court adhered to its decision. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Stottlar: Supreme Court ruled the indemnification agreement unenforceable under GOL § 5-322.1. The Appellate Division reversed, holding CNA liable to the extent the indemnification required indemnification caused by negligence of a party other than Ginsburg. The Court of Appeals granted CNA leave to appeal.
Issue(s)
1. Whether an indemnification agreement between a general contractor and a subcontractor is enforceable when the general contractor is found partially negligent.
2. Whether General Obligations Law § 5-322.1 bars enforcement of indemnification agreements altogether, or merely bars enforcement to the extent they require indemnification for the general contractor’s negligence.
Holding
1. No, because the agreements contemplated full indemnification, and General Obligations Law § 5-322.1 renders such agreements void and unenforceable when the general contractor is negligent.
2. The statute applies to the indemnification agreements in their entirety because the general contractor/promisee was found to have been negligent, and the agreements did not limit the subcontractor’s obligation to only their own negligence.
Court’s Reasoning
The Court reasoned that the indemnification agreements in both cases contemplated a complete shifting of liability from the general contractor to the subcontractor. This violates the intent of General Obligations Law § 5-322.1, which aims to prevent subcontractors from being coerced into assuming liability for the negligence of others. The Court emphasized that the statute prohibits indemnity agreements where owners or contractors seek to pass along risks for their own negligent actions, even if the accident was only partly caused by their negligence. The Court rejected the argument that only the portion of liability attributable to the general contractor’s negligence is unenforceable. Because the agreements explicitly provided for complete indemnification, and the general contractors were found negligent, the entire agreement is unenforceable. The court clarified, quoting the statute, that the law deems unenforceable any agreement “purporting to indemnify or hold harmless the promisee against liability for damage…caused by or resulting from the negligence of the promisee.” The Court further clarified that the statutory language allowing indemnification for damages caused by a “party other than the promisee” refers to negligence of third parties, not the subcontractor’s own negligence. As the court pointed out, “[w]e conclude that the statute applies to the indemnification agreements in their entirety where, as here, the general contractor /promisee is actually found to have been negligent.”