Parties to construction contracts have historically used indemnity clauses to shift the responsibility to pay damages from one party (the indemnitee) to another party (the indemnitor) without regard to who actually caused the damage. Over time, however, states enacted so-called “antiindemnity” statutes to limit the amount of liability that parties to construction contracts can allocate to others.
To date, all but four states and Washington D.C. have enacted such statutes that limit and control the ability of certain parties to pass liability to others. While most of these statutes are similar in nature, there are distinct – and sometimes subtle – differences between them, which can have a significant impact on the ability of owners/general contractors to pass liability onto other parties. If the indemnity provision in a construction contract is struck down because it violates an anti-indemnity statute, the indemnitor may be saddled with liability that it did not intend for. Accordingly, any party entering into a construction contract should consider analyzing the applicable state’s anti-indemnity statute when drafting such a contract.
This article will discuss the history of these anti-indemnity statutes and then analyze two common issues that arise: the applicable scope of most anti-indemnity statutes; and whether these anti-indemnity statutes apply only to the sole negligence of the indemnitee or to both sole negligence of the indemnitee and concurrent negligence by both the indemnitee and indemnitor. The intent of this article is to identify and describe some of the important differences in the varying anti-indemnity statutes, and to offer some suggestions for how counsel and risk managers can proactively limit the potential risk involved in indemnity claims.