Indemnification is an important legal concept which impacts nearly all construction contracts. It has several forms and types, but generally amounts to a contract requirement where one party party agrees to restore the other party from any losses. Where an anticipated loss should occur, the damaged party can expect reimbursement for the loss.

The use of indemnification clauses in construction contracts, when properly tailored, can often provide protection to owners or general contractors from certain claims of subcontractors.

In a recent case, Guzman v. 170 West End Avenue Associates,[1]the Appellate Division of the Supreme Court, First Department, ruled that an indemnification clause in a construction contract was not void merely because it was written in a way that could have potentially required a construction contractor to indemnify an owner for the owner’s own negligence.

As a matter of background, General Obligations Law § 5-321 makes any indemnification provision in a construction contract void if it requires a party to be indemnified for its own negligence. In Guzman, a construction worker was injured when 100 pounds of electrical cable fell on him from a height of 27 stories, and the worker brought suit against the property owner, who sought indemnification from its contractor. The contract provided that the contractor would indemnify “the Owner Parties” for “liability or claims for damages [or] injuries … arising … as the result of any event or occurrence which arises in connection with the Work.” The contract provided that this indemnification would be available “to the fullest extent permitted by law”.

The First Department observed that, while the contract language might appear to indemnify the project owner even for its own negligence, the language allowing indemnification “to the fullest extent permitted by law” acted as a “savings clause”, meaning that the contract clause could be enforced at least as much as the property owner was not being indemnified for its own negligence. As the court found no evidence that the property owner had been negligent, it held that the property owner was entitled to indemnification from its contractor.

[1] 115 A.D.3d 462, 981 N.Y.S.2d 678 (1^st Dep’t 2014)

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The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

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