Well, I’m back. It’s been quite a while since my last post due to some busy family times and running my law practice. Hopefully, you will hear from me more often in the future.
Now. . . on with the post:
I have often discussed indemnity provisions here at Construction Law Musings. I’ve posted on a range of things relating to indemnity from when those sticky clauses are unenforceable to what to look out for in such a clause when reviewing your construction contract. A recent case out of Fairfax examines another wrinkle in these indemnity clauses. In Leesburg Pike, Falls Church, LLC v. Paramount Constr. Servs., LLC, the Court examined the language of a fairly typical indemnity clause in a construction contract.
The general facts of the case are as follows. The Plaintiff alleged that it owns the property at 6129 Leesburg Pike, that it entered into a contract with Paramount Construction Services LLC to install clothes washers and dryers in individual units at the property, and that, in the process, Paramount (or one of its subcontractors) negligently severed a water pipe, which caused significant damage to the property. The plaintiff’s property insurance carrier agreed to pay the plaintiff $2,598,918.41. But the actual damages exceeded that payment by $952,020.90. The plaintiff sued Paramount for $952,020, pursuant to an indemnity provision in the contract. Paramount demurred to the Complaint arguing that the indemnity clause did not apply to create liability for Paramount.
The clause that the Court examined and analyzed was the following:
To the fullest extent permitted by law, the Contractor shall indemnify, defend, and hold harmless the Owner, the Owner’s representative, landlord, Architect, Architect’s Consultants and the Agent’s representatives and employees of any of them (the “Indemnified Parties” and each, an “Indemnified Party”) from and against claims, damages, losses, and expenses, including but not limited to attorneys’ fees (“Claims”), arising out of or resulting from performance of the Work, including loss of use resulting therefrom, caused in whole or in part by the 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 is caused in part by the negligence of a party indemnified hereunder.
The Court granted Paramount’s demurrer and dismissed the action because the clause stated above was meant as protection from third-party claims and not as a cause of action for the plaintiff, a party to the contract. After running through various cannons of contract construction, the Court concluded that the indemnity is not one for breach of contract stating:
The most specific word is “defend”; thus, the words “indemnify” and hold harmless” must be construed to embrace only the concept of defend.” For Paramount to “defend” Plaintiff, there must be an action against Plaintiff by a third party; it would be nonsensical to suggest that Paramount is “defend[ing]” Plaintiff where Plaintiff has brought an action against Paramount for breach of contract.
The Court then analyzed the types of “claims” that were covered by the indemnity provision and determined that the Plaintiff’s complaint did not state a “claim” that was covered by the types of claims contemplated by the indemnity provision stating:
The specific word in this group is “claims,” which would refer to a demand to Plaintiff for compensation “arising out of or resulting from performance of the Work … caused in whole or in part by [Paramount’ s] negligent acts or omissions ” It would be nonsensical to suggest that the instant action is a “claim” for which Paramount has agreed to “indemnify, defend, and hold [Plaintiff] harmless” as it is Plaintiff that has brought the action.
In short, the sole count of the Complaint did not state a cause of action because there was no “claim” by the Plaintiff and no way for Paramount to “defend” the Plaintiff against a claim by the Plaintiff.
As always, I highly recommend the full opinion for your reading and that you consult a Virginia construction attorney to discuss whether this case affects any construction contracts and the indemnity provisions found in those contracts. The case could also provide a defense against certain indemnity claims made by “upstream” participants in a construction project.
As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.
