• Faultless Subcontractor Must Indemnify
  • June 25, 2009 | Author: Jeffrey S. Ammon
  • Law Firm: Miller Johnson - Grand Rapids Office
  • An April 2009 Michigan Court of Appeals decision illustrates the sad case of a subcontractor indemnifying a general contractor even where the subcontractor did nothing wrong. How can this be? Because the sub agreed to an overly broad indemnification clause in its subcontract. Read on to learn how bad it was and how you can avoid the same traps.

    A visitor to a local YMCA slipped and fell on the tile lobby that had been installed by the subcontractor. When the victim sued everyone in sight (the owner, contractor and subcontractor), the owner demanded indemnification from the contractor. The contractor did the same to the subcontractor.

    The subcontractor did nothing wrong: it was not negligent, it did not breach its contract, it was not at fault in any way. The subcontract made the sub responsible for liabilities that were “in any way connected” with any of the subcontractor’s work. The court held that this language made the sub responsible regardless of fault.

    There was no proof that the sub’s work even caused the injury. Perhaps the victim had been carelessly running, or trying to carry too many packages? Maybe the victim would have tripped and fallen on any kind of floor? The sub lost that argument because the indemnification language did not require that the sub’s work be a proximate cause of the injury.

    As a final blow, the sub was required to reimburse the general contractor for its attorney fees in defending the lawsuit. Here we have an indemnification clause that is probably as bad as it could ever be for the indemnifying party. Several lessons about indemnification clauses can be learned by anyone in the construction industry, whether they are a general contractor, architect, engineer, or other participant in a construction project.

    1. Limit your responsibility to actions that are your fault: your negligence, your breach of contract, your failure to meet obligations, etc.
    2. Limit your responsibility to damages proximately caused by those actions that are your fault.
    3. Always consult your insurance advisor to confirm coverage before you sign any contract containing an indemnification clause. Have an experienced advisor tell you whether coverage exists for whatever potential indemnification obligations you may have.