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This Wisdom of the Crowd (ACC member discussion) addresses whether certain provisions that limit the parties' obligations to indemnify are enforceable under US law. This resource was compiled from questions and responses posted on the forum of the New To In-house ACC Network.*


*(Permission was received from ACC members quoted below prior to publishing their eForum comments in this Wisdom of the Crowd Resource)




Below is text that I have not seen before in an indemnification section of a contract. This statement seems to limit our indemnification obligations. Can someone confirm and advise any background on why this is in the contract? Does anyone know which states have enforced?


"The parties acknowledge and agree that notwithstanding the foregoing, in the event a court of competent jurisdiction holds that a statute limiting the scope of Contractor's indemnification obligations hereunder is applicable to the Work, Contractor's indemnification obligations hereunder shall only extend to the extent permitted by such statute."

Response #1: This might be from Texas. Last legislative session, the Legislature passed a law related to liability of engineers and architects.1

Response #2: Is it a construction contract? Illinois and a lot of other states have anti-indemnification statutes targeting construction contracts, usually involving circumstances where the indemnification covers the indemnitee's own negligence. The keyword is "anti-indemnity statute", there are a few 50 state surveys floating around online for free. Some states have statutes limiting indemnification in other circumstances, but I am not an expert in this area.2

Response #3: I assume this indemnity provision was preceded by broad and overbearing indemnity provisions, including ones that require a subcontractor to indemnify the contractor and/or owner for any kind of damages, even if the damages were incurred due to their part or sole negligence?

I believe that certain states have enacted statutes that make such indemnity provisions void unless very specific prerequisites are met, such as a cap on liability in relation to the contract price, or a portion of the contract price must be tied to the indemnity provision, etc.
I'm not familiar with Florida's construction statutes, but this seems to be a decently written article discussing some of Florida's indemnification limitation statutes.
Ultimately, it's just an attorney's attempt to add something to a construction agreement that would hopefully incite a Court to "blue pencil" or grant at least partial enforcement of what otherwise may be a non-compliant contract provision.3

Response #4: I think this language is contemplating some state laws that limit the scope of a contractor's indemnity obligations to an owner. For instance, in Texas construction contracts, an owner cannot be indemnified by a contractor for the owner's own negligence. The language you cited seems to be some type of 'saving' clause intended to prevent an entire indemnity from being struck down in the event it is not lawful as drafted.4

Response #5: The language may be addressing statutes in states that prohibit or require specific language for indemnification of the indemnitee's own negligence. Some states may not uphold a provision if the indemnification is against public policy e.g. some states may not enforce an obligation in a construction contract that requires indemnity for the indemnitee's own negligence or wrongdoing. I think the ACC website or more broadly a GoogleTM search may turn up some good resources for 50 state surveys on indemnification which would give you a starting point on where to further review the state laws for the areas you are doing business in.5

Response #6: I have not seen language like this included in the indemnification clause before either, but the first thing that comes to mind as to the reason for it is to address the potential application of the statute of repose in construction defect claims. Statutes of repose are akin to statutes of limitation in that they bar a party from filing a claim after a specified period of time has elapsed, with the difference between the two being the point from which the limitation of time is measured. Most states have a statute of repose on the books, with the most common time period being 10 years to file the claim, which in many states includes indemnity claims.6

Response #7: Without seeing the remainder of the indemnification provision, I'm only speculating here, but I would guess this language is in recognition of those states that have passed laws making provisions which require a party to a construction contract to indemnify the other party for that party's own negligence void as against public policy and unenforceable.7

Response #8: This type of carve-out might come into play in California. Under CA Law, there are limits to when a contractor can be forced to indemnify (or insure) another party for that party's active negligence.8

1Dena Stroh, General Counsel, North Texas Tollway Authority (Apr. 8, 2016)
2Matthew Rudolph, Assistant General Counsel, Netrix, LLC (Apr. 8, 2016)
3Warren Clayton, General Counsel, MSI-Viking Gage, LLC (Apr. 8, 2016)
4Bilal Ezzeddine, Staff Attorney, Braskem America, Inc. (Apr. 8, 2016)
5Anonymous (Apr. 8, 2016)
6David Story, Staff Attorney, SAGE Dining Services, Inc. (Apr. 8, 2016)
7Cody Robertson, Corporate Counsel, Innovage (Apr. 8, 2016)
8Beth Marino, Vice President – Legal & Corporate Affairs, Santa Maria Energy, LLC (Apr. 8, 2016)
Region: United States
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