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November 24, 2011With a carefully worded indemnification clause, the owner or general contractor on a construction project should be entitled to indemnification in a lawsuit brought by an employee of a subcontractor or vendor who is injured on the job. The U.S. Court of Appeals for the Sixth Circuit recently upheld an award of attorneys’ fees and costs to Honeywell International pursuant to an indemnification provision found in a contract Honeywell had signed with a subcontractor on a construction project. Honeywell International, Inc. v. Lutz Roofing Co. C.A. 6, 2011, No. 09-1877.
Honeywell was the general contractor of a high school improvement project in Michigan and contracted with Lutz Roofing Co. to do some of their work. Under their Agreement, Lutz provided indemnification to Honeywell for any claims arising out of Lutz’s negligence. During the project, one of Lutz’s employees fell from the school roof suffering injuries and sued Honeywell. Lutz refused to provide a defense for Honeywell because the employee did not allege in his complaint that Lutz was negligent. As a result, Honeywell sued Lutz in a separate action. Honeywell was then granted summary judgment against Lutz which then led to this court appeal.
According to the Sixth Circuit Court of Appeals, the language in the indemnity provision was very clear. Even though there had not been any allegations in the suit that Lutz was negligent, there was expert testimony provided by the injured worker that the accident would not have happened if Lutz had taken proper safety precautions. Because there was no evidence presented that Honeywell had breached any duty owed to Lutz’s employee, Lutz had the responsibility to defend Honeywell against the employee’s suit. As a result, Honeywell was awarded all of its attorneys’ fees in defending the action.
The indemnification provision also provided that Lutz would name Honeywell as an “additional insured” under its general liability policy. Lutz failed to provide such coverage to Honeywell. The court affirmed the findings of the trial court that Lutz was liable for also failing to provide such additional insurance coverage. It is interesting to note that Lutz provided to Honeywell a Certificate of Insurance saying that it would provide “primary” insurance to Honeywell. However, it was later discovered that Lutz had only purchased from its insured a policy to provide excess coverage for Honeywell.
It is important to always examine the language in your indemnification clauses if you are dealing with vendors and subcontractors and their employees on a construction site or other project where hazards exist. Also keep in mind that in Ohio, your indemnification provision must provide specific language indicating that the subcontractor or third party is waiving their indemnity rights under Chapter 4123 of the workers’ compensation statutes in order for you to enforce your indemnification provision.
Finally, always be careful when another party offers to add you as the “additional insured” on their policy. Merely providing you with a copy of the certificate of insurance does not establish the coverage. You should always ask for a copy of the endorsement from the policy as proof of coverage.
