Skip to Main Content
Services Talent Knowledge
Site Search
Menu

Alert

Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

August 27, 2020

NYS Appellate Court Issues Decision on Novel Indemnification Claim in Construction Case

In Lamela v. Verticon, LTD., the NYS Appellate Division, Third Department addressed whether a subcontractor who agreed to a one-way contractual indemnification provision in favor of a general contractor could seek common-law indemnification from the same general contractor for a settlement agreement that the subcontractor argued was entered into in bad faith. The court concluded the subcontractor’s common-law indemnification claim had no merit.

The claim arose from a construction site accident where the plaintiffs, who were employed by the subcontractor, were injured when an unsecured wall collapsed. The subcontractor was to indemnify the general contractor and the property owner for any liability arising from the subcontractor’s work to the fullest extent permitted by law (not for liability arising from the general contractor’s own negligence). The contract didn’t provide for indemnification from the general contractor to the subcontractor. In the lawsuit, the general contractor and the owner sought contractual indemnity against the subcontractor for any liability for the plaintiffs’ injuries.

The trial court found the general contractor and the owner strictly liable for the injuries suffered by the plaintiffs under the NY Labor Law. The parties agreed to a settlement by which the general contractor and the owner paid the plaintiffs approximately $2.2 million, of which $2 million was apportioned to the owner.

The subcontractor wasn’t a party to the settlement and objected that it was improperly designed in bad faith to shift the share of liability arising from the general contractor’s negligence to the non-negligent owner. The subcontractor argued this was done at the direction of the liability insurer for the general contractor and owner as the effect of this apportionment was to require the subcontractor to indemnify the owner for the general contractor’s negligence. The trial court rejected this argument and dismissed the subcontractor’s claims for common-law indemnification.

On appeal, the Third Department affirmed, holding the subcontractor’s common-law indemnity claims failed because indemnification was governed by the contract and only went one way—in favor of the general contractor—and the subcontractor was seeking indemnity for a voluntarily assumed contractual obligation flowing to the owner and general contractor, rather than one imposed vicariously or otherwise by operation of law. As such, the court upheld the dismissal of the subcontractor’s claim for common-law indemnity.

The decision in Lamela is a reminder that indemnification clauses are powerful risk-shifting tools, especially in tort cases involving multiple parties, and NYS courts will enforce them strictly. Parties to construction projects must review these clauses carefully before entering into contracts.

If you have any questions regarding the content of this alert, please contact Sanjeev Devabhakthuni, counsel, at sdevabhakthuni@barclaydamon.com; Brenda Baddam, associate, at bbaddam@barclaydamon.com; or another member of the firm’s Torts & Products Liability Defense or Insurance Coverage & Regulation Practice Areas.

Featured Media

Alerts

NYS Submits 1115 Waiver Amendment (Health Equity Reform) to CMS

Alerts

Federal Court Sanctions Party Where Corporate Representative Answered "I Don't Know" over 100 Times During 30(b)(6) Deposition

Alerts

COVID-19 Business Interruption Update: Second Circuit Issues Decisions in Favor of Insurers Dismissing Claims

Alerts

NYS Governor Hochul Signs Bill Expanding the Decision-Making Rights of Individuals With Intellectual and Developmental Disabilities

Alerts

Board of Regents Adopts Emergency Regulations on the Mental Health Diagnostic Privilege

Alerts

Utility Companies Not Liable for Substations They Do Not Own, Operate, or Supervise

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out