Gerald I. Katz, Esquire and Stephen W. Smith, Esquire
In many prime contracts, architects are included among the parties that the general contractor is to indemnify against claims by employees of subcontractors and other third parties. However, as East-Harding, Inc. v. Horace A. Piazza & Associates, 80 Ark. App. 143, 91 S.W.3d 547 (2002), demonstrates, express exceptions to a contractual indemnity clause may undermine the protection the clause is intended to provide to the architect.
In East-Harding, an employee of a subcontractor suffered serious injuries in a construction accident when he fell from a staircase that had been purchased from the manufacturer. The employee brought suit against the general contractor, architect, and manufacturer, alleging causes of action for product liability and negligence. Specifically, his allegations against the architect were for negligence in the installation, use, and design of the stairway, as well as failure to properly supervise the manufacturer. The suit was settled without a finding of fault on the part of either the general contractor or the architect. However, the architect filed a cross-complaint against the general contractor to enforce the indemnity clause of the contract between the general contractor and the project's owner, which purported to protect the architect against such claims as the employee's. The indemnity provision at issue was Paragraph 14.12 of the American Institute of Architects' Document A117 (1987 edition), which provides:
To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense if attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the work itself) including loss of use resulting there from, but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss of expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 14.12.
(Emphasis added.) However, Paragraph 14.12.2 provides:
The obligations of the Contractor under this Paragraph 14.12 shall not extend to the liability of the Architect, the Architect's consultants, and agents and employees of any of them arising out of (1) the preparation or approval of maps, drawings, opinions, reports, surveys, Change Orders, Construction Change Directives, designs or specifications, or (2) the giving of or the failure to give directions or instructions by the Architect, the Architect's consultants, and agents and employees of any of them provided such giving or failure to give is the primary cause of the injury or damage.
The general contractor contended that the indemnification provision in Paragraph 14.12 did not apply because, under Paragraph 14.12.2, its duty of indemnification did not extend to the employee's claim that the architect was negligent. The general contractor also argued that the "but only to the extent caused" language in Paragraph 14.12 limited the scope of its liability only to that portion of "claims, damages, losses and expenses" caused by the negligence of the general contractor or those under its supervision. Finally, the general contractor argued that, even though the architect did not design the stairs, because they were a prefabricated kit, the architect was nevertheless precluded from seeking indemnity because the architect prepared or approved the design and drawings, which included the specifications of the stairs. Nonetheless, the trial court granted summary judgment in favor of the architect, finding that the indemnification provision applied, even without a finding of fault on the general contractor's part. The general contractor then appealed, arguing that the indemnity agreement required a finding of fault on the general contractor's part before the indemnity provision would apply, and that the exclusion for the architect's negligence would preclude application of the indemnity provision.
Agreeing with the general contractor's first point, the appellate court reversed the summary judgment. The appellate court concluded that, if the employee's injuries were caused in whole or in part by the general contractor, or those for whom it was responsible, the general contractor would be required to reimburse the architect, but only for the general contractor's percentage of expenses and attorney fees incurred in defending against the employee's suit. In considering indemnification provisions almost identical to the one in this case, the appellate court held, courts in other jurisdictions had concluded that the phrase "but only to the extent caused" expressed an intent to limit the indemnitor's liability solely to that portion of fault attributed to the indemnitor. Because the architect was responsible for the approval of the specifications and design of the project, any claim of negligent design involving the staircase was necessarily directed only at it or the manufacturer of the staircase. Thus, the court concluded, Paragraph 14.12.2's limitation on the general contractor's liability was applicable.
However, the court did not agree with the general contractor's argument that its duty to defend and indemnify the architect did not arise because the injured employee's complaint included a claim against the architect for professional negligence. Paragraph 14.12.2, the court found, only excludes indemnification for the liability of the architect resulting from his professional negligence. Although the employee contended that the architect had committed professional negligence, the case settled without any party being found liable. This interpretation, the court determined, was consistent with the finding by other jurisdictions that, under identical construction indemnity agreements, it is a finding of liability, not merely a claim for negligence, that triggers the exclusion. Because the indemnity clause is a standard provision in the construction industry, the court concluded, a consistent interpretation was appropriate. Moreover, the court found, actions for damages arising from the professional services of an architect rarely exclude claims of professional negligence. Therefore, accepting the general contractor's argument that the indemnity provisions excluded all actions against the architect based on professional negligence claims, regardless of the architect's liability therefore, would essentially void any such indemnity agreement.
As East-Harding suggests, architects should ensure that the prime contract protects and indemnifies them against mere claims by third parties. Moreover, if possible, architects should see that their indemnification by the general contractor is not limited solely to the extent of the general contractor's liability, preferably by striking out the phrase "but only to the extent" found in Paragraph 14.12 above.
Gerald I. Katz is a partner in the law firm of Katz & Stone, L.L.P., with offices in Vienna, Virginia, Washington D. C. and Rockville, Maryland, specializing in resolving construction disputes. Mr. Katz has extensive experience representing owners, contractors, sureties and design professionals in complex construction litigation.
Stephen W. Smith is an associate with the law firm of Katz & Stone, L.L. P., where he specializes in the representation of contractors and owners in construction and related disputes. Before joining Katz & Stone, Mr. Smith represented nationally known sureties in construction, indemnity and suretyship matters.
Mr. Katz and Mr. Smith may be contacted as follows: KATZ & STONE, L..L. P., 8230 Leesburg Pike, Suite 600 Vienna, Virginia 22182. Telephone: (703) 761-3000, Fax: (703) 761-6179 Website: www.katzandstone.com
NOTE: This article is intended for general discussion of the subject, and should not be mistaken for legal advice. Readers are cautioned to consult appropriate advisors for advice applicable to their individual circumstances.
© a/e ProNet. All Rights Reserved.