Contract – Indemnification Language – Subcontractors’ Negligence

Listen to this article

Indemnity provisions of a later version of a master agreement are neither clear nor unequivocal.

We affirmed all eight orders.

Builders FirstSource-Southeast Group, LLC (BFS) appealed eight orders granting summary judgment or partial summary judgment to various subcontractors. BFS argued the circuit court erred in (1) applying the clear and unequivocal standard of Concord & Cumberland Horizontal Property Regime v. Concord & Cumberland, LLC, 424 S.C. 639, 819 S.E.2d 166 (Ct. App. 2018); (2) finding the indemnity provisions of BFS’s subcontracts violate South Carolina law and public policy; (3) finding BFS’s indemnity claims are collaterally estopped; (4) failing to address severability or finding the court lacked authority to sever; and (5) deeming the subcontracts unconscionable and unenforceable.

Plaintiffs sought damages for deficiencies in the original construction of a multi-family development consisting of 32 buildings containing 129 townhome units (the Project). Plaintiffs contended BFS “provided materials and/or labor, including but not limited to the framing, the windows and doors and all related components at all or a portion of the Project.” Plaintiffs claimed, among other things, that BFS’s framing and window installation services were deficient and that these deficiencies resulted in water intrusion and corresponding damages. BFS contracted with several subcontractors for work on the Project. After litigation began, BFS filed crossclaims or third-party claims against many of its subcontractors, asserting causes of action for negligence, breach of express and implied warranty, breach of contract, and contractual or equitable indemnity. Respondents filed motions for summary judgment and supporting memoranda throughout 2019 and 2020. In 2021, the circuit court issued Form 4 orders granting, or granting in part, summary judgment to Palmetto Trim and Renovation, Hurley Services, LLC, ECC Contracting, LLC, East Coast Carpentry, AC Construction, Inc. (ACC), WS Contractors, LLC (WSC), and Pohlman Quality Exteriors, Inc. BFS filed eight separate notices of appeal. This court consolidated these eight appeals.

Among the orders before us, two different versions of BFS’s master subcontract were at issue. Two orders address the 2005 version of BFS’s master subcontract (2005 Contracts); the other six involve a later version of this master agreement (Later Contracts). The 2005 Contracts govern BFS’s relationships with Palmetto and East Coast (collectively, the 2005 Subcontractors). The Later Contracts govern BFS’s relationships with Hurley, ECC, ACC, WSC, Pohlman, and L&G (the Later Subcontractors). These contain similar language.

Among other things, BFS argued the circuit court erroneously applied the clear and unequivocal standard articulated in Concord & Cumberland to the relevant contractual language because BFS was not seeking indemnity for its own negligence. We disagreed, as BFS’s position is inconsistent with the language of its own claims as well as the convoluted language within the challenged indemnity provisions. We affirmed the circuit court’s rulings that the indemnity provisions of the 2005 Contracts are neither clear nor unequivocal, and that BFS’s contractual indemnity claims against Palmetto and East Coast fail as a matter of law.

BFS contended it is not seeking indemnity for loss or damage arising from its own negligence, but rather indemnity only against liability for loss or damage arising from the sole or concurrent negligent acts or omissions of its subcontractors in the performance of their work. Thus, BFS asserted the clear and unequivocal standard of Concord & Cumberland should not apply. However, our review of the indemnification and defense provisions in Sections 3 and 5 of the Later Contracts—as well as the language of BFS’s crossclaims—reveals this not to be so. We affirmed the circuit court’s rulings that the indemnity provisions of the Later Contracts are neither clear nor unequivocal and that BFS’s claims must fail as a matter of law.

BFS argued the circuit court erred in finding the contractual language permitting BFS to recover for its subcontractors’ negligence violates section 32-2-10 of the South Carolina Code (2007) and public policy. We disagreed. Although § 32-2-10 allowed BFS and the 2005 Subcontractors to agree the 2005 Subcontractors will indemnify BFS for damages caused by the 2005 Subcontractors or their subs, the 2005 Contracts also contain multiple provisions requiring the 2005 Subcontractors to indemnify (or defend) BFS for damages incurred as a result of BFS’s sole negligence. Therefore, we affirmed the circuit court’s findings as to the public policy and statutory questions. Moreover, because the Later Contracts’ indemnity provisions require the Later Subcontractors to indemnify BFS against liability for damages from bodily injury or property damage proximately caused by or resulting from the sole negligence of BFS, these provisions are unenforceable under § 32-2-10.

Finally, BFS argued the circuit court erred in finding the warranty, contractual indemnity, and duty to defend provisions of the Later Contracts are unconscionable and unenforceable as a matter of law. We disagreed and affirmed the circuit court’s findings that the pertinent provisions of the Later Contracts are unconscionable and unenforceable.

Affirmed.

The Retreat at Charleston National Country Club Home Owners Association Inc. v. Winston Carlyle Charleston National LLC (Lawyers’ Weekly No. 011-006-25, 30 pp.) (Stephanie P. McDonald, J.) Appealed from Charleston County Circuit Court (Jennifer B. McCoy, J.) Stephen P. Hughes and William Hewitt Cox, III, both of Howell Gibson & Hughes, PA, of Beaufort, for Appellant; Thomas Frank Dougall, of Dougall & Collins, of Elgin, and Michal Kalwajtys, of Baker Ravenel & Bender, LLP, of Columbia, both for Respondent L&G Construction Group, LLC.; Edward Glenn Elliott, of Aiken Bridges Elliott Tyler & Saleeby, P.A., of Florence, for Respondent Pohlman Quality Exteriors, Inc.; W. McElhaney White and Todd Russell Flippin, of Holcombe Bomar, PA, of Spartanburg, for Respondent Hurley Services, LLC; Kevin W. Mims, John Barnwell Fishburne, Jr., and William Chase McNair, all of Luzuriaga Mims, LLP, of Charleston, for Respondent AC Construction Inc.; Payton Dwight Hoover and James H. Elliott, Jr., both of Richardson Plowden & Robinson, PA, of Mount Pleasant, for Respondent Palmetto Trim and Renovation; Francis Heyward Grimball and James H. Elliott, Jr., both of Richardson Plowden & Robinson, PA; Mark Shanter Chaparro, of Hall Booth Smith, PC; and L. Dean Best, of Best Law, P.A., all of Mt. Pleasant, for Respondent ECC Contracting, LLC; Francis Heyward Grimball and James H. Elliott, Jr., both of Richardson Plowden & Robinson, PA, of Mt. Pleasant, for Respondent East Coast Carpentry; John Phillips Linton, Jr. and Jennifer Sue Ivey, both of Walker Gressette & Linton, LLC, of Charleston, for Respondent WS Contractors, LLC. South Carolina Court of Appeals