New York Law Review

Tag: Indemnification Agreement

  • Rodrigues v. N & S Building Contractors, 5 N.Y.3d 427 (2005): Enforceability of General Indemnity Agreements Under Workers’ Compensation Law

    5 N.Y.3d 427 (2005)

    A general indemnification clause in a contract between a general contractor and a subcontractor can be enforceable under Workers’ Compensation Law § 11, even without explicitly mentioning the specific job site, persons covered, or types of losses, provided the agreement was entered into before the injury.

    Summary

    N & S Building Contractors, a general contractor, sought indemnification from its subcontractor, Caldas Concrete Company, after a Caldas employee was injured at a construction site. The dispute centered on whether a pre-existing general insurance and indemnification agreement between & S and Caldas satisfied the requirements of Workers’ Compensation Law § 11, which restricts third-party claims against employers unless a written contract expressly agrees to indemnification. The Court of Appeals held that the agreement was enforceable, reversing the Appellate Division’s decision, because the agreement applied to all subcontracted work and was entered into before the injury.

    Facts

    N & S hired Caldas as a subcontractor for a construction project. Prior to the project, & S and Caldas had a longstanding working relationship and had entered into a general “Insurance, Indemnification and Safety Agreement” in February 2000. This agreement required Caldas to carry insurance, name & S as an additional insured, and indemnify & S for claims arising out of the performance of subcontracted work. In June 2000, a Caldas employee, Jose Rodrigues, was injured at the construction site. Rodrigues sued & S, who then sought indemnification from Caldas based on their agreement.

    Procedural History

    N & S commenced a third-party action against Caldas seeking indemnification. Supreme Court dismissed the claim, finding the absence of a written contract specifically for the project site barred the indemnification claim. The Appellate Division affirmed, holding the agreement did not unambiguously and expressly provide for indemnification of injuries sustained by Caldas employees in the scope of their employment. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a general indemnification agreement between a general contractor and a subcontractor, entered into before a workplace injury, is enforceable under Workers’ Compensation Law § 11, even if the agreement does not specifically reference the job site where the injury occurred.

    Holding

    Yes, because Workers’ Compensation Law § 11 requires only that the indemnification claim arise from an indemnification provision in a written contract entered into before the injury, and the agreement in question encompassed all subcontracted work between the parties.

    Court’s Reasoning

    The Court of Appeals reversed, holding that the indemnification provision of the agreement applied to the “performance of subcontracted work” and was not limited to a specific job site. The court reasoned that the language of the contract and testimony indicated that the agreement was intended to apply to all jobs for which & S hired Caldas. The court emphasized that Workers’ Compensation Law § 11 only requires a written indemnification provision entered into before the injury. The Court declined to impose specificity requirements not found in the statute, stating, “So long as a written indemnification provision encompasses an agreement to indemnify the person asserting the indemnification claim for the type of loss suffered, it meets the requirements of the statute.” Judge Read dissented, arguing that the indemnification provision was a generic, standard form and did not represent an ‘express’ agreement as required by the statute. The dissent argued for a stricter interpretation, requiring explicit agreement to indemnify for claims otherwise safeguarded by section 11.

  • 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.”

  • 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.

  • Austro v. Niagara Mohawk Power Corp., 66 N.Y.2d 674 (1985): Enforceability of Indemnification Agreements for Gross Negligence

    Austro v. Niagara Mohawk Power Corp., 66 N.Y.2d 674 (1985)

    Indemnification agreements are unenforceable as violative of public policy only to the extent that they purport to indemnify a party for damages flowing from the intentional causation of injury; they are generally enforceable even where the indemnitee is found to be grossly negligent.

    Summary

    Niagara Mohawk Power Co. (NiMo) sought indemnification from Weber Construction Co. based on a contract where Weber agreed to indemnify NiMo for liability arising from NiMo’s negligence related to Weber’s work. The lower courts denied indemnification, citing NiMo’s gross negligence. The Court of Appeals reversed, holding that indemnification agreements are only unenforceable when they cover intentional harm, distinguishing them from exculpatory clauses. Since there was no allegation of intentional harm, NiMo was entitled to indemnification from Weber, regardless of NiMo’s gross negligence.

    Facts

    NiMo contracted with Weber Construction Co. for work. The contract included an indemnification clause where Weber agreed to indemnify NiMo for liabilities arising from NiMo’s negligence that resulted in bodily injury related to Weber’s work.

    An individual, Austro, was injured as a result of the work performed under the contract. Austro sued NiMo.

    NiMo then filed a third-party complaint against Weber and Kenneth Begin, seeking indemnification based on the contractual agreement.

    Procedural History

    The trial court dismissed NiMo’s third-party complaint against Weber insofar as it demanded indemnification for liability arising out of NiMo’s gross negligence.

    The Appellate Division affirmed the dismissal.

    NiMo appealed to the New York Court of Appeals.

    Issue(s)

    Whether an indemnification agreement is unenforceable as against public policy when it seeks to indemnify a party for damages resulting from its own gross negligence, absent any allegation of intentional harm.

    Holding

    No, because indemnification agreements are only unenforceable when they purport to indemnify a party for damages flowing from the intentional causation of injury.

    Court’s Reasoning

    The Court of Appeals distinguished between exculpatory clauses and indemnity contracts. Exculpatory clauses, which prevent a party from recovering damages caused by another’s negligence, are not read to exempt a party from liability for willful or grossly negligent acts, as seen in Gross v. Sweet and Kalisch-Jarcho, Inc. v. City of New York.

    However, indemnity contracts simply shift the source of compensation without restricting the injured party’s ability to recover. The court relied on Public Serv. Mut. Ins. Co. v. Goldfarb, stating that “Indemnification agreements are unenforceable as violative of public policy only to the extent that they purport to indemnify a party for damages flowing from the intentional causation of injury.”

    Since there was no allegation of intentional harm in this case, the court held that NiMo should be granted judgment against Weber and Begin for the full amount of its liability to Austro. The court explicitly stated that it did not need to decide whether the evidence supported the jury’s finding of gross negligence against NiMo because the indemnity agreement was still enforceable absent intentional harm.