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(A revised version of this article appears in The
Construction Lawyer, Volume 20, No. 3, July 2000, published
by the American Bar Association's Forum on the Construction
Industry.)
By
John W. Ralls
Thelen Reid Brown Raysman & Steiner LLP
At
the conclusion of a commercial project, the owner claimed
the work was defective, including the tile work. The general
contractor sought contractual indemnity from the tile subcontractor.
The
subcontract contained an indemnity clause which provided:
"All work covered by this agreement… shall be
at the risk of SUBCONTRACTOR exclusively. SUBCONTRACTOR
shall, with respect to all work which is covered by or incidental
to this contract, indemnify and hold CONTRACTOR harmless
from… [a]ny claim… including reasonable attorneys'
fees… resulting from contractor's alleged or actual
negligent act or omission, regardless of whether such act
or omission is active or passive…. However, SUBCONTRACTOR
shall not be obligated under this Agreement to indemnify
CONTRACTOR with respect to the sole negligence or willful
misconduct of CONTRACTOR, his agents or servants or subcontractors
who are directly responsible to CONTRACTOR, excluding SUBCONTRACTOR
herein.'"
The
tile subcontractor refused to defend or indemnify the general
contractor. The general contractor settled with the owner
and then filed an indemnity action against the tile subcontractor
in which it sought reimbursement for the money it had paid
the owner on the tile claim as well as the attorney fees
it incurred in defending the claim.
At
trial, the jury found that neither the general contractor
nor the subcontractor had been negligent. A judgment was
nonetheless entered against the tile subcontractor for the
money paid by the general contractor as well as attorney
fees incurred based on the contractual indemnity obligation.
The subcontractor appealed. The California Court of Appeal
affirmed.
On
appeal, the tile subcontractor argued that it was not required
to indemnify the general contractor "in the absence
of some showing that it had been negligent." The court
treated the issue as one of contractual interpretation.
Examining the contract language, the court found the expression
of the subcontractor's agreement to provide indemnity in
the absence of any fault was clear.
The
court rejected the subcontractor's argument that every cause
of action for indemnity requires a showing of fault on the
part of the indemnitor. Centex Golden Constr. Co. v.
Dale Tile Co., 93 Cal. Rptr. 2d 259, 2000 Cal. App.
LEXIS 150 (Cal. App. 2000). "An agreement by a subcontractor
to indemnify a general contractor for any claim made with
respect to the work covered by or incidental to their subcontract
may require indemnity even if the claim is not meritorious
and subcontractor is not guilty of any negligence."
The
court found the agreement conformed to public policy. The
contract did not require the subcontractor to assume unlimited
liability because the claim had to arise out of the subcontractor's
work. In addition, as required by California Civil Code
§2782, the agreement relieved the subcontractor of
liability when the claim or loss arose out of the sole negligence
or willful misconduct of the general contractor or its other
subcontractors.
"Under
the contract as we have interpreted it, [the general contractor]
was only required to show that the claim was connected to
[the subcontractor's] work and that it did not grow out
of [general contractor's] sole negligence or willful misconduct."
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-369-7210 or at jralls@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2000
Thelen Reid Brown Raysman & Steiner LLP
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