- Pennsylvania Supreme Court Holds "Pass-Through" Clause Ineffective to Impose Indemnity Obligation on Subcontractor
- June 15, 2005
- Law Firm: Pepper Hamilton LLP - Philadelphia Office
Bernotas v. Super Fresh Food Markets, Inc. 863 A.2d 478, 2004 Pa. LEXIS 3238 (Dec. 22, 2004)
Barbara Bernotas sustained serious injuries when she fell into a hole at a construction area inside a Super Fresh store. Bernotas sued Super Fresh for her injuries. Super Fresh filed cross-claims against the general contractor, and its electrical subcontractor, seeking indemnity for any damages under those parties' contracts. Bernotas settled for $200,000, with each defendant contributing 1/3 of the amount. The trial court then held a bench trial in which Super Fresh sought indemnity from the general contractor pursuant to the prime contract, and the general contractor in turn sought indemnity from its electrical subcontractor pursuant to their subcontract. The Supreme Court's opinion addresses only the scope of the subcontractor's indemnity obligations to the general contractor.
In rejecting the general contractor's indemnity claim against the electrical subcontractor, the Pennsylvania Supreme Court held that a pass-through clause that incorporated the prime contract was insufficient to impose indemnity obligations. The contract between the general contractor and Super Fresh required the contractor to "assume entire responsibility and liability for" all damages resulting from injuries "caused by ... the execution of the work provided for in this Contract." The subcontract required the subcontractor to indemnify the general contractor and Super Fresh for injuries "that may result from or arise from the performance ... of the Work." In addition, the subcontract incorporated the prime contract by reference, stating that "the Contract Documents form a part of this Subcontract ... as if herein set forth at length." The general contractor argued that this latter provision "passed through" to the subcontractor the obligation to assume responsibility for all damages, rather than just those arising from the performance of the subcontractor's work.
Reversing the Pennsylvania Superior Court, the Supreme Court held that the "pass-through" clause did not impose the indemnity obligation of the prime contract upon the subcontractor. The Court noted that the trial court never found that Bernotas's injuries resulted from the performance of the subcontractor's work. Thus, the indemnity obligation in the subcontract was never triggered, leaving the "pass-through" clause as the only potentially applicable contract provision.
The Court noted that Pennsylvania had not addressed the general issue of pass-through clauses, but that other courts had found them effective to incorporate "no-damages-for-delay" and dispute resolution provisions. However, the Court also recognized that courts in California, Arizona, and New York had found such clauses ineffective to incorporate indemnity provisions. The Court stated Pennsylvania's requirement that any obligation to indemnify for the negligence of another must be set forth clearly and unequivocally in the contract. The Court noted that the passed-through provision would impose a greater obligation than that in the subcontract, and held that this resulting inconsistency failed the "clear and unequivocal" test. The Court further stated that such pass-through provisions were generally insufficient to incorporate an indemnity obligation, "unless the contract language is clear and specific."