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INDEMNIFICATION: PROTECTING YOURSELF FROM YOUR CONTRACTOR’S (UNKNOWN?) SUB-CONTRACTOR

Your Association contracted with a contractor.  That contractor was provided specifications and the Association will pay.  But, what happens if the contractor subcontracts with another company and the sub-contractor’s negligence causes injuries to a homeowner?  Will the association have to indemnify both companies?  Maybe, depending on what the contracts provide.  Can the association rely on protection from the sub-contractor’s indemnification to the contractor?  What language must be included?

A Florida appellate court recently ruled that a sub-contractor had a duty to indemnify the contractor for its own negligence in performing excavation work to provide access to underground utility lines, but the sub-contractor did not have a duty to indemnify the main contractor.  The facts in Blok Builders, LLC v. Katryniok, 43 Fla. L. Weekly D 253 (Fla 4th DCA, January 31, 2017) indicate that BellSouth contracted with Mastec North America, Inc. to perform the work necessary to provide access to the underground lines located in neighborhood easements.  Mastec subcontracted with sub-contracted Blok Builders to perform the excavation work to access the underground utility lines.

After Blok performed excavation near a driveway in one of the neighborhoods, a homeowner was injured after falling when his driveway collapsed.  The homeowner sued Blok, Mastec and BellSouth for damages.  Mastec and BellSouth filed claims against Blok for indemnification pursuant to Mastec’s contract with Blok.

This is where careful contract reading becomes important, perhaps unfortunately in retrospect for the losing party.  The Court quickly moved to read the contract between Mastec and Blok, which provided that Blok indemnify Mastec for Mastec’s own negligence as follows:

Indemnification. A) Subcontractor [Blok] agrees to indemnify and hold harmless Contractor [Mastec] and is directors, officers, employees and agents (collectively the “Indemnitees”) … regardless of whether it is, or is alleged to be, caused in whole or part (whether joint, concurrent, or contributing) by any act, omission, default or negligence (whether active or passive) of the indemnitees, or any of them…”

The trial court entered summary judgment in favor of Mastec and BellSouth, finding that the contracts required Blok to indemnify both Mastec and BellSouth in the personal injury lawsuit filed by the homeowner.

The Florida appellate Court agreed that under the contract quoted above Blok had a duty to indemnify Mastec.  The court noted that BellSouth did not have a direct contract with Blok. BellSouth’s relationship to Blok was through its contract with Mastec, and Blok’s indemnity contract provisions with Mastec only mentioned Mastec and not BellSouth. Thus, Blok did not have a duty to indemnify BellSouth.

As a second important issue for contracting associations as well as other property owners, Blok argued that the Mastec indemnification provisions were invalid because the Blok-Mastec contract failed to comply with Section 725.06, Fla. Stat. (2008).  That statute provides that an indemnity is unenforceable unless the contract contains a monetary limitation on the amount of the liability.  Because this contract did not contain such a limitation, Blok maintained that the indemnification provision was invalid.

The court pointed out that the statute only applies to “construction, alteration, repair or demolition of a building, structure, appurtenance, or appliance…”  Because the project in this case involved the laying and maintenance of utility lines, and did not involve the construction of a building, the court found that the statute did not apply to this contract.

Drafting indemnification agreements can be a tricky affair as can be seen by this case.  The issues are doubled when there is a sub-contract.  If you have any questions as to whether your association would be required to provide indemnification or would itself be indemnified under a contract, contact your association’s counsel, and your insurance agent.