New York Law Review

Tag: General Obligations Law § 5-322.1

  • Brooks v. Judlau Contracting, Inc., 11 N.Y.3d 204 (2008): Enforceability of Indemnification Clauses Under GOL § 5-322.1

    Brooks v. Judlau Contracting, Inc., 11 N.Y.3d 204 (2008)

    Under New York General Obligations Law § 5-322.1, a partially negligent general contractor can enforce an indemnification provision against a subcontractor for damages attributable to the subcontractor’s negligence, provided the provision does not indemnify the general contractor for its own negligence.

    Summary

    Stephen Brooks, an ironworker, sued Judlau Contracting, Inc. (general contractor) for injuries sustained at a construction site where he fell due to a faulty safety cable. Judlau then filed a third-party claim against Thunderbird Constructors, Inc. (subcontractor), Brooks’ employer, seeking contractual indemnification. The New York Court of Appeals addressed whether General Obligations Law § 5-322.1 permits a partially negligent general contractor to enforce an indemnification provision against a subcontractor for the portion of damages caused by the subcontractor’s negligence. The Court held that it does, provided the indemnification provision doesn’t cover the general contractor’s own negligence, reversing the lower court’s decision.

    Facts

    Judlau was the general contractor for a highway overpass renovation. Thunderbird was a subcontractor employing Brooks. Brooks was injured when he grabbed a safety cable installed by Judlau, which came loose, causing him to fall. Judlau sought contractual indemnification from Thunderbird based on a clause in their subcontract.

    Procedural History

    Brooks sued Judlau, who then brought a third-party claim against Thunderbird for contractual indemnification. The trial was bifurcated, with the damages trial held before a jury and the indemnification claim decided by the court. The Supreme Court directed a verdict dismissing Judlau’s claim, finding Judlau’s negligence contributed to the accident. The Appellate Division affirmed. The Court of Appeals reversed and reinstated Judlau’s third-party claim.

    Issue(s)

    Whether General Obligations Law § 5-322.1 bars a partially negligent general contractor from enforcing a contractual indemnification provision against its subcontractor for damages attributable to the subcontractor’s negligence, where the indemnification provision does not purport to indemnify the general contractor for its own negligence.

    Holding

    Yes, because General Obligations Law § 5-322.1 does not prevent a partially negligent general contractor from seeking contractual indemnification from its subcontractor, as long as the indemnification provision only applies to the subcontractor’s negligence.

    Court’s Reasoning

    The Court reasoned that the indemnification provision in question did not violate General Obligations Law § 5-322.1 because it only obligated Thunderbird to indemnify Judlau for damages caused by Thunderbird’s own negligence. The Court distinguished this case from Itri Brick, where the indemnification provision sought to indemnify the general contractor for its own negligence. The Court emphasized the legislative intent behind General Obligations Law § 5-322.1, which was to prevent subcontractors from being coerced into assuming liability for the negligence of others over whom they had no control. Allowing a partially negligent general contractor to seek indemnification for the subcontractor’s negligence aligns with the intent that damages be paid according to fault.

    The Court addressed Thunderbird’s argument that the phrase “to the fullest extent permitted by law” broadened the indemnification obligation to include Judlau’s negligence, rendering the provision void. The Court rejected this argument, holding that the phrase limited Thunderbird’s obligation to its own negligence, thus allowing for partial indemnification. The Court noted that other courts have also interpreted similar language as creating only a partial indemnification obligation.

    The Court stated, “[o]ne should not be held to answer for the wrongful acts of another unless he is in the insurance business, assuming risks in return for payment of premiums.” The Court concluded that preventing a partially negligent general contractor from seeking contractual indemnification for a subcontractor’s negligence would unfairly leave the general contractor liable for the subcontractor’s actions, which is contrary to the statute’s purpose.

    The court directly quoted TAG 380, LLC v ComMet 380, Inc., 10 NY3d 507, 512-513 (2008) stating “it is a basic contract principle that ‘when parties set down their agreement in a clear, complete document, their writing should … be enforced according to its terms’”.

  • Itri Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 N.Y.2d 786 (1997): Enforceability of Indemnification Agreements When General Contractor is Negligent

    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.”

  • Cromwell Towers Construction Co. v. Florence & George Plastering Co., 78 N.Y.2d 1096 (1991): Enforceability of Insurance Procurement Agreements in Construction Contracts

    Cromwell Towers Construction Co. v. Florence & George Plastering Co., 78 N.Y.2d 1096 (1991)

    An agreement to procure insurance in a construction contract is distinct from an agreement to indemnify or hold harmless and does not violate General Obligations Law § 5-322.1, even if the insurance policy covers the promisee’s own negligence.

    Summary

    This case clarifies the distinction between agreements to indemnify and agreements to procure insurance within the context of New York’s General Obligations Law § 5-322.1. Cromwell Construction, a general contractor, sought indemnification from its subcontractor, Hudson Steel, after Hudson’s employee was injured and Cromwell was found partly liable. Cromwell argued that Hudson breached their contract by failing to procure insurance covering Cromwell’s liability. The New York Court of Appeals held that Hudson’s agreement to obtain insurance for Cromwell was enforceable and did not violate General Obligations Law § 5-322.1, even though the insurance would cover Cromwell’s own negligence. The Court emphasized that procuring insurance is different from indemnifying or holding harmless, and such agreements are consistent with public policy.

    Facts

    Cromwell Construction, Inc. (general contractor) hired Hudson Steel Fabricators & Erectors, Inc. (subcontractor) for work on property owned by G. W. Lisk Co., Inc.
    Hudson’s employee was injured on the job and received a settlement against Cromwell and Lisk.
    The jury apportioned negligence: Cromwell (12%) and Hudson (88%).
    The subcontract between Cromwell and Hudson required Hudson to maintain insurance policies to protect both parties from bodily injury claims arising out of the work.

    Procedural History

    The trial court granted summary judgment to Cromwell in its third-party action against Hudson, based on Hudson’s failure to procure the required insurance.
    The Appellate Division affirmed the trial court’s decision, holding that the insurance procurement provision did not violate General Obligations Law § 5-322.1.
    Hudson appealed to the New York Court of Appeals.

    Issue(s)

    Whether a contractual provision requiring a subcontractor to maintain insurance coverage for the general contractor against personal injury claims violates General Obligations Law § 5-322.1 when the injury is caused, in part, by the general contractor’s negligence.

    Holding

    No, because General Obligations Law § 5-322.1 only prohibits agreements to indemnify or hold harmless, and an agreement to procure insurance is distinct from such agreements.

    Court’s Reasoning

    The Court of Appeals reasoned that General Obligations Law § 5-322.1 explicitly addresses agreements to indemnify or hold harmless, not agreements to purchase or maintain insurance. The statute renders void agreements “purporting to indemnify or hold harmless the promisee against liability for damage arising out of bodily injuries to persons * * * contributed to, caused by or resulting from the negligence of the promisee, his agents or employees”.
    The court emphasized a “well recognized” distinction: “Whereas the essence of an indemnification agreement is to relieve the promisee of liability, an agreement to procure insurance specifically anticipates the promisee’s ‘continued responsibility’ for its own negligence for which the promisor is obligated to furnish insurance”.
    The Court cited legislative history indicating that the statute targeted “’broad form hold-harmless’ clauses” that caused contractors to “assume liability for the negligence of others”. The legislature understood that liability protection insurance was less expensive than hold-harmless coverage and expected insurance-procurement agreements to continue in construction contracts.
    The Court referenced prior decisions like Board of Educ. v Valden Assocs., 46 NY2d 653, 657, and Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153, 160 which upheld similar agreements.
    Because Hudson breached its agreement to procure liability insurance covering Cromwell, it was liable for the resulting damages, including Cromwell’s liability to the injured employee. The court explicitly stated that “To the extent that Patenaude v General Elec. Co. (147 AD2d 335) is to the contrary, it should not be followed.”

  • Brown v. Two Exchange Plaza Partners, 76 N.Y.2d 172 (1990): Enforceability of Indemnification Agreements Under Labor Law § 240(1)

    Brown v. Two Exchange Plaza Partners, 76 N.Y.2d 172 (1990)

    An indemnification agreement in a construction contract is enforceable even when the general contractor is held liable under Labor Law § 240(1), provided there is no finding of negligence on the part of the general contractor.

    Summary

    Plaintiff, an employee of a subcontractor, was injured when a scaffold collapsed at a construction site. The general contractor, Fuller, was held liable under Labor Law § 240(1), which imposes absolute liability for failing to provide adequate safety measures. Fuller sought indemnification from A & M, another subcontractor, based on an indemnification clause in their contract. The New York Court of Appeals held that the indemnification agreement was enforceable because there was no finding of negligence on Fuller’s part, and General Obligations Law § 5-322.1, which voids agreements indemnifying parties for their own negligence, did not apply. This decision clarifies the relationship between Labor Law § 240(1) liability and contractual indemnification rights in construction settings.

    Facts

    Brown, an employee of Central Furring & Dry Wall Company, a subcontractor, was injured at a construction site when the scaffold he was on collapsed. George A. Fuller Company was the general contractor. Fuller subcontracted with Heydt Contracting Corporation for the erection of the scaffold and with A & M Wallboard Company to erect the walls and ceilings. A & M then hired Central Furring. The cause of the scaffold collapse was not determined. The contract between Fuller and A & M contained an indemnification clause.

    Procedural History

    Brown sued Fuller and Two Exchange Plaza Partners. Fuller impleaded Heydt, A & M, and Central Furring. The trial court directed a verdict against Fuller based on Labor Law § 240(1). Fuller sought a directed verdict on its third-party claims for indemnification from Heydt and A & M. The trial court denied Fuller’s motion, stating indemnity was unavailable without subcontractor negligence and the clause was unenforceable under General Obligations Law § 5-322.1. The Appellate Division reversed, awarding Fuller judgment against A & M. The Court of Appeals affirmed the Appellate Division’s decision.

    Issue(s)

    Whether General Obligations Law § 5-322.1 bars enforcement of an indemnification agreement in a construction contract when the general contractor is liable under Labor Law § 240(1) but is not negligent.

    Holding

    No, because General Obligations Law § 5-322.1 prohibits indemnifying a contractor for its own negligence, but liability under Labor Law § 240(1) is imposed irrespective of negligence; therefore, the indemnification agreement is enforceable.

    Court’s Reasoning

    The court reasoned that Labor Law § 240(1) imposes absolute liability on owners and contractors for failing to provide adequate safety devices, regardless of negligence. General Obligations Law § 5-322.1 voids agreements that indemnify contractors for their own negligence. Since Fuller’s liability was based solely on Labor Law § 240(1) and there was no finding of negligence, § 5-322.1 did not apply, and the indemnification agreement was enforceable. The court emphasized that the indemnification clause in the contract between Fuller and A & M applied because the claim arose out of A & M’s work. The court stated, “Without a finding of negligence on the part of Fuller, General Obligations Law § 5-322.1’s prohibition against indemnifying a contractor for its own negligence is inapplicable.” The court also noted the legislative history of § 5-322.1, which aimed to prevent contractors from coercively shifting liability for their own negligence to subcontractors. The court distinguished this case, where the liability was statutory and not based on fault. The court found that the indemnification clause between Central Furring and A&M did require negligence to be found, and since no negligence was proven, that indemnification clause was not applicable. In conclusion, the court emphasized that a contractor found guilty of negligence would still be barred from recovering contractual indemnity.

  • Quain v. Buzzetta Construction Corp., 69 N.Y.2d 379 (1987): Scope of Review Limited by Leave Application

    Quain v. Buzzetta Construction Corp., 69 N.Y.2d 379 (1987)

    When a party seeking leave to appeal specifically limits the issues it seeks to have reviewed in its application, it is bound by that limitation and cannot raise additional issues on appeal.

    Summary

    In this case concerning injuries sustained at a construction site, the New York Court of Appeals addressed whether an appellant could raise issues beyond those specified in its application for leave to appeal. The Court held that Buzzetta Construction Corp. was bound by the limited issue presented in its leave application, which concerned the validity of an indemnification clause under General Obligations Law § 5-322.1. Because Buzzetta’s leave application focused solely on indemnification, it could not subsequently challenge its liability to the plaintiffs. The Court reversed the Appellate Division’s order regarding indemnification and reinstated the original apportionment of damages between the defendants.

    Facts

    Plaintiff Rose Quain was injured after falling into a hole at an unfinished New York City sewer project managed by Buzzetta Construction Corp. as the general contractor. Quain and her spouse sued both Buzzetta and the City. The jury found Buzzetta 75% responsible and the City 25% responsible for the injuries. The contract between the City and Buzzetta contained an indemnification clause.

    Procedural History

    The trial court awarded damages to the plaintiffs and granted the City’s motion for summary judgment on its cross-claim against Buzzetta, requiring Buzzetta to fully indemnify the City. The Appellate Division affirmed the liability and claim over but directed a new trial on damages unless plaintiffs stipulated to a reduced award, which they did. Buzzetta then sought leave to appeal to the New York Court of Appeals, specifically limiting its appeal to the issue of the indemnification clause’s validity under General Obligations Law § 5-322.1. Buzzetta then attempted to raise the issue of its liability to the plaintiffs in its jurisdictional statement and brief. The plaintiffs moved to strike the portions of Buzzetta’s filings that went beyond the scope of the leave application. The Court of Appeals initially denied the motion without prejudice, and then considered it on appeal.

    Issue(s)

    1. Whether Buzzetta could raise the issue of its liability to the plaintiffs on appeal, given that its application for leave to appeal was expressly limited to the issue of indemnification under General Obligations Law § 5-322.1.
    2. Whether the indemnification clause in the contract between Buzzetta and the City was enforceable under General Obligations Law § 5-322.1.

    Holding

    1. No, because Buzzetta specifically limited the issues in its application for leave to appeal, it was bound by that limitation and could not raise additional issues on appeal.
    2. No, because General Obligations Law § 5-322.1 prohibits enforcement of the indemnification clause under the facts of this case.

    Court’s Reasoning

    The Court reasoned that granting leave to appeal generally allows parties to address all reviewable issues. However, when a party expressly limits the issues in its leave application, it is bound by that limitation. To allow otherwise would prejudice the opposing party, who might have sought to join issue or cross-move for leave to appeal on additional issues had they been properly notified. The Court stated, “Ordinarily when the court grants a motion for leave to appeal all issues of which the court may take cognizance may be addressed by the parties. Where, however, the party seeking leave specifically limits the issues to be raised, it is bound thereby and may not thereafter raise other questions.”

    Regarding the indemnification clause, the Court agreed with Buzzetta’s argument (conceded by the City) that General Obligations Law § 5-322.1 prohibited the enforcement of the clause because it would require Buzzetta to indemnify the City for the City’s own negligence. The Court noted that the City’s alternative argument based on breach of contract was not properly raised in the pleadings or motions before the trial court.

    Therefore, the Court granted the plaintiffs’ motions to strike the portions of Buzzetta’s filings addressing liability to the plaintiffs, reversed the Appellate Division’s order insofar as it pertained to indemnification, and reinstated the original apportionment of damages between the defendants.

  • Quevedo v. City of New York, 56 N.Y.2d 150 (1982): Enforceability of Indemnification Clauses Under GOL § 5-322.1

    Quevedo v. City of New York, 56 N.Y.2d 150 (1982)

    Under former General Obligations Law § 5-322.1, an indemnification clause in a building maintenance contract is unenforceable only to the extent it indemnifies the promisee against liability caused by the promisee’s sole negligence, but remains enforceable for instances of joint fault.

    Summary

    Raphael Quevedo, an employee of Berley Industries, was injured in an explosion in a City of New York-owned building. He sued the City, who then sought contractual indemnification from Berley based on their maintenance contract. The contract included an indemnification clause where Berley agreed to indemnify the City against liability arising from the contract. The New York Court of Appeals held that under the former General Obligations Law § 5-322.1, the indemnification clause was only unenforceable to the extent it covered the City’s *sole* negligence. Because there was no determination that the City was solely negligent, the clause was enforceable.

    Facts

    Raphael Quevedo, an employee of Berley Industries, Inc., suffered injuries from a boiler explosion in a building owned by the City of New York.

    Berley Industries had a contract with the City to provide janitorial and maintenance services for certain City-owned buildings.

    The maintenance contract contained a clause requiring Berley to indemnify the City against liability arising out of or connected with the performance of the contract.

    The contract also required Berley to obtain an insurance policy that included coverage for the contractual indemnification.

    Procedural History

    Quevedo and his wife sued the City and V and A Oil Burner Services, Inc. The City asserted a cross-claim against V and A and commenced a third-party action against Berley for common-law and contractual indemnification.

    Following jury selection, the parties settled, with the City, Berley, and V and A each contributing $36,000.

    The City continued its claim for contractual indemnification against Berley, moving for enforcement of the indemnification clause.

    Supreme Court granted the City’s motion.

    The Appellate Division affirmed the Supreme Court’s order.

    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether, under former General Obligations Law § 5-322.1, the indemnification clause in the building maintenance contract is wholly unenforceable because it requires Berley to indemnify the City against its own negligence.

    Whether the City’s alleged failure to provide timely notice to the insurer bars enforcement of the indemnification clause.

    Holding

    1. No, because former section 5-322.1 renders an indemnification clause unenforceable only to the extent it purports to indemnify the City against liability caused by the *sole* negligence of the City. Since there was no determination of sole negligence, the clause is enforceable.

    2. No, because the contract explicitly stated that notice to the insurance company by *either* party (City or Berley) would be sufficient, and there was no claim Berley failed to provide timely notice.

    Court’s Reasoning

    The Court of Appeals clarified the scope of former General Obligations Law § 5-322.1, emphasizing that it only proscribes indemnification clauses that seek to protect a promisee from *sole* negligence. The court noted, “The Legislature, however, unambiguously proscribed only those clauses that purport to indemnify the promisee against ‘the sole negligence of the promisee’.” The statute aimed to prevent contractors from assuming liability for others’ negligence, but it didn’t invalidate agreements covering joint fault.

    The court found that the clause in question required Berley to indemnify the City even for injuries caused by the City’s negligence, but also covered instances of joint fault. Therefore, the entire clause was not void; only the portion pertaining to the City’s sole negligence was unenforceable. Citing Central N. Y. Tel. & Tel. Co. v Averill, 199 NY 128, 140, the court stated that the statutory bar need not invalidate the agreement *in toto.*

    Because the main action settled prior to trial and there was no determination or admission of fault by any party, the record did not establish that the plaintiff’s injuries resulted from the City’s *sole* negligence. Thus, there was no basis to deny enforcement of the indemnification clause.

    Addressing the notice issue, the court highlighted the contract’s explicit provision that notice to the insurer by either party would be sufficient. There was no allegation that Berley failed to provide timely notice, negating this argument against enforcement. The court pointed out that “[n]otice to the company by either party shall be deemed sufficient notice under the policy.”

    The court also clarified that the existence of insurance does not automatically save an otherwise unenforceable indemnification clause under section 5-322.1, noting that the statutory proviso regarding insurance contracts merely ensures that contractors do not lose insurance coverage simply because it extends to liability under an unenforceable agreement.