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Tuesday, September 13, 2005

Oral Argument in Contractual Indemnification Case

Coahead01_1 This week, the New York Court of Appeals will hear oral argument in Rodrigues v. N&S Building Contractors, Inc. In this case, an employee of a subcontractor (Caldas) was injured at a construction site. The employee sued the general contractor (N&S) who, in turn, commenced a third-party action against the subcontractor for indemnification. The subcontractor and general contractor had an "Insurance, Indemnification and Safety Agreement" providing that:

To the fullest extent permitted by law, Subcontractor shall indemnify and hold harmless [the general contractor] and Owner against any claims, damages, losses, and expenses, including legal fees, arising out of or resulting from performances of subcontracted work to the extent caused in whole or in part by the Subcontractor or anyone directly or indirectly employed by the Subcontractor.

Section 11 of New York Workers’ Compensation Law precludes third-party indemnification against employers unless (1) the employee sustains a "grave injury" or (2) the claim is "based upon a provision in a written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution to or indemnification of the claimant or person asserting the cause of action for the type of loss suffered." The contractor argued that the indemnification agreement between the parties came within the second exception.

The trial court dismissed the indemnification claim. The appellate court affirmed, holding that the agreement did not specify the types of losses or locations to be covered. The court noted that the Workers’ Compensation Law was intended to limit employers’ exposure to third-party liability and "[w]hen a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed. . . ."

[Meredith R. Miller]

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