A contractual indemnification provision is one of the most important provisions in construction contracts. Owners want to be indemnified from the general contractor to the extent a person or entity performing a scope of the general contractor’s work asserts a claim against the owner or a person is injured on the owner’s property. Likewise, general contractors want their subcontractors to indemnify them to the extent the owner asserts a claim against them arising out of the general contractor’s work or a person or entity performing a scope of the subcontractor’s work asserts a claim against the general contractor.
Indemnification (hold harmless) provisions need to be carefully drafted because Florida Statute §725.06 includes a limitation on indemnification for construction contracts. In short, this statute provides in material part that if a contract requires an indemnitor (such as a subcontractor required to indemnify a general contractor) to indemnify and hold harmless the indemnitee (such as the general contractor receiving the indemnification) “for liability for damages to persons or property caused in whole or in part by any act, omission, or default of the indemnitee…[the indemnification provision] shall be void and unenforceable unless the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.” Stated simply, if the indemnification provision does not comply with Florida law, it may be unenforceable – a very bad thing for a party expecting to be indemnified!
Recently, the First District Court of Appeal in Griswold Ready Mix Concrete, Inc. v. Reddick, 2012 WL 1216268 (Fla. 1st DCA 2012), dealt with the enforceability of an indemnification provision. In this case, a concrete supplier leased a pump truck (to facilitate pouring concrete). The lease agreement provided that the concrete supplier was to:
“(g) To assume all risks and liabilities for and to indemnify Lessor [of the pump truck]…and Lessor’s agents against all claims, actions, suits, penalties, expenses and liabilities, including attorneys fees, whether or not covered by insurance, for (i) loss or damage to the Equipment; (ii) injuries or deaths of any persons; and (ii)[sic] damage to any property, howsoever arising or incurred from or incident to the use, operation or possession of the Equipment, unless such claims, actions, suits, penalties, expenses or liabilities are caused solely by the intentional conduct of the Lessor or its agents.”
When concrete was being poured, a construction worker was injured and asserted a claim against the concrete supplier and the lessor of the pump truck. The lessor settled the claim and asserted a claim for contractual indemnification against the concrete supplier based on the contractual language above. Among other arguments, the concrete supplier argued that the indemnification provision was unenforceable under Florida Statute §725.06 because it contained no monetary limitation.
Although the trial court found the indemnification provision to be enforceable, the First District disagreed, maintaining, “The indemnity provision at issue in this case does not contain a dollar limit to Griswold’s [concrete supplier] potential liability. For that reason, it is void and unenforceable as provided in section 725.06, and the trial court erred in ruling otherwise.”
While this case does not contain a lengthy discussion with respect to the language of the indemnification provision between the concrete supplier and the lessor of the pump truck, it appears clear that the provision required the concrete supplier to indemnify the lessor for the lessor’s potential negligence (i.e., damage or injury caused in whole or in part by any act, omission, or default of the lessor). For this reason, the indemnification provision needed to include a monetary limitation and should have under the law also expressed that it was part of the bid documents or project specifications.
This case illustrates the importance of making sure an indemnification provision is properly worded and drafted in accordance with Florida law, especially if you are a contractor or an owner where the indemnification provision is a material portion of the contract. As you can see, not doing so can have the harsh effect of having the indemnification provision declared unenforceable.
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