Written by Kevin Kennedy, Esq.
Edited by Bill Pfund, Esq.
When a claimant is injured at a construction site, his attorney typically names the general contractor as the lead defendant in the case and the party responsible for the condition that gave rise to the injury. The general contractor’s first response is to quickly bring third party claims against multiple subcontractors who may have had involvement with whatever part of the construction project gave rise to the personal injury claim. Those third party claims usually consist of two main theories of recovery. The first theory is the standard negligence claim. For example, the framer responsible for securing cross beams negligently performed his work, thus causing the beam to fall and strike the pedestrian. However, the more powerful claim is often rooted in an indemnification clause that the subcontractor accepted as part of the contract when it agreed to perform a portion of the construction project for the general contractor. That clause may read something like “subcontractor agrees to indemnify and hold harmless general contractor for any and all claims arising out of [the construction project], caused by or resulting from the negligence of either the subcontractor or the general contractor.” The general contractor will assert in its third party claim that this indemnification clause requires the subcontractor to assume the defense of the case and pay for any judgments taken against the general contractor in the underlying suit. But is this contract valid under Virginia law, and does the subcontractor have to accept the general contractor’s tender?
Many states have taken action to protect subcontractors with diminished bargaining power from having to sign off on what are viewed as unjust contractual terms foisted on them by a general contractor who controls their source of work. These anti-indemnification statutes enacted by state legislatures are designed to protect subcontractors from assuming legal responsibility for negligence of another party. However, these statutes are not uniform. The most recent review of these statutes show two general approaches to this issue. Twenty-eight states bar a general contractor (or any other indemnitee) from being indemnified for its own negligence, whether the indemnitee is partially at fault or wholly at fault. In other words, the indemnification clause would only be effective if the subcontractor was the sole at fault party and the general contractor seeking indemnification was not negligent. In the Mid-Atlantic region where KPM practices, North Carolina has adopted this approach. Sixteen states have taken a middle ground approach and only reject contract clauses that purport to indemnify a party for claims arising from its sole negligence. In these states (including Maryland and West Virginia), a general contractor or other indemnitee can be indemnified in situations of shared negligence, but cannot pass on responsibility when it was the only at fault party. Six states and Washington D.C. allow full freedom of contract on this issue and allow solely at fault parties to obtain indemnification from other contract partners.
Where does Virginia belong in this analysis? While the state legislature has enacted a statute that appears to adopt the middle ground, Virginia Supreme Court analysis of the issue has yielded a surprising ruling. Under Va. Code §11-4.1, “Any provision … by which the contractor … purports to indemnify or hold harmless another party to the contract against liability for damage arising out of bodily injury… caused by or resulting solely from the negligence of such other party or his agents or employees… is void[.]” The use of the word “solely” in the statute would seem to indicate that the legislature intended to allow a party to enforce indemnity for situations of joint negligence. The Virginia Supreme Court examined this statute and came to the opposite conclusion. See Uniwest Construction, Inc. v. Amtech Elevator Services, Inc. 280 Va. 428, 699 S.E.2d 233 (2010). The Uniwest case arose from a tragic scaffolding accident where one Amtech employee was killed and another was injured while they were involved in elevator work. The court examined whether the contract between the parties effectively indemnified Uniwest from a claim asserting that it was jointly negligent with Amtech.
The Virginia Supreme Court parsed the language of Va. Code §11-4.1 and considered two possible readings of the phrase “caused by or resulting solely from” used in the statute. The word “solely” can be interpreted to modify the entire phrase, or the phrase can be seen as disjunctive, meaning that “caused by” and “resulting solely from” are describing two separate and distinct scenarios. The Court ultimately decided on the latter interpretation and found that the Virginia state legislature had intended to bar indemnification for any claims arising under either scenario. In other words, indemnification is not permitted when caused partially or wholly by the indemnitee’s negligence. This ruling means that Virginia follows the North Carolina approach and a party seeking to enforce an indemnification clause can only do so if it was not negligent.
The Uniwest ruling greatly limits the ability of “upstream” contractors in Virginia to force “downstream” contractors to assume the defense on cases arising from construction site accidents. Plaintiffs want to keep as many parties in as possible and will typically allege in the Complaint that all named defendants were actively negligent. Even if the Complaint alleges joint negligence by subcontractors, that subcontractor can rely on the Uniwest case precedent to deny a request to assume the defense for another party. Whether the statutory language will be revisited in future legislative sessions is an open question, but for now, the knowledgeable litigator can rely on Uniwest to demonstrate to lower courts in Virginia that the language of the statute is enforced in a manner likely unexpected by someone reading the statute in a vacuum. Adjusters evaluating exposure for clients must also understand the importance of this ruling when considering questions of tender that commonly arise in construction litigation. Having a full picture of the shared risk by all parties involved is critical for proper assessment of liability and building an effective path towards case resolution.