If you negotiate or prepare construction contracts, then you should be familiar with Florida Statute s. 725.06. This statute contains requirements for indemnification provisions in construction contracts and is a must-know and must-read for all construction participants responsible for negotiating and preparing construction contracts, especially those that contain indemnification provisions for bodily injury and property damage (and all such contracts do and should contain such indemnification language!). For more on Florida Statute s. 725.06, please check out these articles:
- Make Sure Indemnification Provisions Clearly Reflect the Required Scope of the Indemnification;
- The Scope of a Release in a Settlement and Contractual Indemnification; and
- Buttoning-Up Contractual Indemnification Language.
Although not a construction case, the opinion in ATC Logistics Corporation v. Southeast Toyota Distributors, LLC, 41 Fla. L. Weekly D816b (Fla. 1st DCA 2016), demonstrates the importance of drafting clear indemnification language. This case contained the following indemnification provision:
(a) ATC [Carrier] shall indemnify and hold harmless SET from and against any and all losses, liabilities, damages, costs, fines, expenses, deficiencies, taxes and reasonable fees and expenses of counsel and agents, including any costs incurred in enforcing this Agreement, that SET may sustain, suffer or incur arising from (i) Carrier’s failure or alleged failure to comply, in whole or in part, with any of its obligations hereunder; (ii) any loss of or damage to a Vehicle while loaded onto, transported on or unloaded from a Car Carrier; (iii) any damage to any property of SET caused by the maintenance or operation of any Car Carrier or the loading or unloading of any Car Carrier; (iv) any claims by any third person with respect to death, injury or property damage caused by the maintenance or operation of any Car Carrier or the loading, transportation or unloading of Vehicles on or from a Car Carrier and (v) any claims resulting from or arising out of injury or death of any employee, agent of contractor of Carrier including claims alleging that SET failed to provide a safe place to work.
The indemnity obligation was broken into five (i – v) sections.
In this case, SET sued ATC (the named Carrier in the indemnification provision) to recover amounts it paid out in a settlement. SET argued that ATC was responsible for indemnifying it for its (SET’s own) negligence based on the language in section (i) that required ATC to indemnify SET for “Carrier’s failure or alleged failure to comply, in whole or in part, with any of its obligations hereunder.”
The issue, however, was that SET was really seeking indemnification relating to section (iv) which did NOT contain any “in whole or in part” language. In other words, section (iv) did not require ATC to indemnify SET for its actions whether caused “in whole or in part” by ATC’s negligence. Had section (iv) contained this “in whole or in part” language, then ATC would have likely been required to fully indemnify SET for its actions even if the damages were partially caused by the negligence of SET. While SET wanted the “in whole or in part” language included in section (i) to be read into the language in section (iv), this was NOT how this clause was written and the court is not there to rewrite parties’ contracts. Accordingly, the First District held that ATC was not required to indemnify SET for SET’s negligence.
Importantly, if the indemnification provision pertained to a construction contract and required the indemnitee (e.g., subcontractor) to indemnify the indemnitor (e.g., contractor), it would need to include certain language for it to be enforceable under s. 725.06. Such indemnification provisions that require the indemnitee to indemnify the indemnitor for “liability for damages to persons or property caused in whole or in part by any act, omission, or default of the indemnitee arising from the contract or its performance, 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.” Fla. Stat. s. 725.06.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.