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Contract – Indemnity Clause – Condo Construction – Window Subcontractor – ‘Clear & Unequivocal’ Standard

The indemnification language in a subcontract did not clearly and unequivocally require the subcontractor to indemnify the general contractor for the general contractor’s own negligence.

We affirm the circuit court’s ruling in favor of the Subcontractor.

Article 12.1 of the parties’ subcontract contained an indemnification clause:

“12.1 SUBCONTRACTOR’S PERFORMANCE. To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, the Architect, the Contractor (including its affiliates, parents and subsidiaries) and other contractors and subcontractors and all of their agents and employees from and against all claims, damages, loss and expenses, including but not limited to attorney’s fees, arising out of or resulting from the performance of the Subcontractor’s Work provided that

“(a) any such claim, damage, loss, or expense is attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of tangible property (other than the Subcontractor’s Work itself) including the loss of use resulting there from, to the extent caused or alleged to be caused in whole or in any part by any negligent act or omission of the Subcontractor or anyone directly or indirectly employed by the Subcontractor or anyone for whose acts the Subcontractor may be liable, regardless of whether it is caused in part by a party indemnified hereunder.

“(b) such obligation shall not be construed to negate, or abridge, or otherwise reduce any other right or obligation of indemnity which would otherwise exist as to any party or person described in this [a]rticle [12.1].”

Sole/Concurrent Negligence

The Contractor argues that, because it was seeking indemnification for its concurrent negligence and not its sole negligence, the indemnification clauses were subject to the general rules of contract construction, rather than strict construction and the heightened standard of clear and unequivocal. We disagree.

A contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from its own negligent acts unless such intention is expressed in clear and unequivocal terms. The deterrence of negligent conduct is the policy basis for the heightened standard of clear and unequivocal.

The clear and unequivocal standard applies any time an indemnitee is seeking indemnification for its negligence, whether sole or concurrent. Applying this heightened standard serves the policy goal of encouraging the Contractor to act with due care in the future because the indemnity clause may not shield it from liability.

Accordingly, the circuit court properly applied the clear and unequivocal standard to the Contractor’s attempt to obtain indemnification for its concurrent negligence.

Indemnification Clause

A contract that purports to indemnify an indemnitee for the indemnitee’s sole negligence is unenforceable. S.C. Code Ann. § 23-2-10.

Under the language of article 12.1, the subcontractor broadly agreed to indemnify for any damages resulting from the scope of work in the subcontract, which was installation of windows and doors. However, we cannot ignore the language in article 12.1(a), which limits the broad language from article 12.1. Specifically, the phrase, “to the extent caused . . . in whole or in any part by any negligent act or omission of the Subcontractor” limits the Subcontractor’s obligation to indemnify to damages and losses only to the extent they were caused by the negligence of the Subcontractor and its own subcontractors.

The Subcontractor’s indemnity obligation extends to losses the Subcontractor only causes in part, but does not clearly and unequivocally require the Subcontractor to indemnify for the negligence of others that contributed to the same loss.

We find the meaning of the limiting phrase in article 12.1(a) is to limit the Subcontractor’s obligation to indemnify to damages and losses caused by the negligence of the Subcontractor and its own subcontractors.

Also, the final phrase of article 12.1(a), which states “regardless of whether it is caused in part by a party indemnified hereunder,” fails to alter the “to the extent” limiting phrase and provide the clear and unequivocal language the Contractor needs. We read this phrase to mean whatever level of indemnification article 12.1 provides is not negated simply because the Contractor’s negligence contributed to the loss.

Reading article 12.1 as a whole, the final phrase of article 12.1(a) shows only the parties’ intent that the Subcontractor’s obligation to indemnify for the Subcontractor’s negligence is not diminished or affected in the event the Contractor is concurrently negligent. Contrary to the Contractor’s claims, this final phrase does not show an intention by the parties to indemnify the Contractor for its concurrent negligence.

Thus, strictly construing the subcontract, the circuit court properly found it fails to indemnify the Contractor for losses resulting from its own concurrent negligence.

Subsequent Agreement

After water began to intrude into the condos built by the parties, they entered into a subsequent agreement, the 2007 Agreement, to address the water intrusion issues.

To the extent the Contractor advocates merging article 12.1 from the subcontract and paragraph eleven from the 2007 Agreement to create one indemnity clause, we disagree. Merging the indemnity clauses into one clause by replacing some language but leaving other language in place would amount to rewriting the indemnity clauses into a contractual term to which the Subcontractor did not agree.

In the absence of clear and express language in the 2007 Agreement instructing what phrases replace specific terms in the subcontract, we decline the Contractor’s invitation to rewrite the indemnity clauses. The circuit court properly interpreted each indemnity clause according to its own terms.

The 2007 Agreement also fails to include any reference to indemnification for the Contractor’s own concurrent negligence. The circuit court correctly found the 2007 Agreement did not clearly and unequivocally require the Subcontractor to indemnify the Contractor for the Contractor’s own concurrent negligence.

Affirmed.

Concord and Cumberland Horizontal Property Regime v. Concord & Cumberland, LLC (Lawyers Weekly No. 011-076-18, 17 pp.) (Paula Thomas, J.) Appealed from the Circuit Court in Charleston County (Clifton Newman, J.) Christopher Alton Majure and Timothy Newton for Appellant; Curtis Lyman Ott, Janice Holmes, and Peter Gunnar Nistad for Respondent. S.C. App.

 

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