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Friday, October 21, 2005

Contractual Indemnification Case Decided

The New York Court of Appeals has decided Rodrigues v. N&S Building Contractors, Inc., a contractual indemnification case mentioned in a previous post.

The New York Workers’ Compensation Law disallows third-party indemnification or contribution claims against employers, except where (1) the employee sustains a “grave injury” or (2) the claim is based upon a provision in a written contract “by which the employer had expressly agreed to . . . indemnification.” This case involved the second exception, raising the issue whether an indemnification agreement between a general contractor and subcontractor was specific enough to satisfy the requirements of the Workers’ Compensation Law. At the center of the appeal were competing interpretations of the word “expressly.”

The Appellate Division held that, because the written contract did not explicitly cover the particular project site where the worker was injured, it did not fall within the contract exception to the Workers’ Compensation Law. The New York Court of Appeals disagreed and reversed. The majority held that the written agreement was sufficiently clear and unambiguous, and the Workers’ Compensation Law did not require indemnification provisions to specify the project sites, persons and types of losses covered.

Judge Read dissented, writing that the lack of specificity in these contracts, which are often form contracts, circumvented the purpose of the Workers’ Compensation Law. Concerning the statute’s use of the word “expressly,” she wrote:

Merriam Webster’s Collegiate Dictionary defines “express” as “1a: directly, firmly, and explicitly stated <my ~ orders> b: exact, precise 2a designed for or adapted to its purpose b: of a particular sort: specific <for that ~ purpose>” (410 [10th ed 1997]). As amicus New York State Builders Association, Inc., points out, however, the language in the indemnification provision of the Agreement between the parties in this case “is substantially similar to that used . . . in form-documents prepared by The American Institute of Architects (AIA) and widely used and accepted through the construction industry.” . . . This type of generic indemnification, drafted for use nationwide . . . does not clearly and unambiguously signal an employer’s express agreement for the purposes of [the Workers’ Compensation Law.] Surely an employer must explicitly agree to indemnification . . . [o]therwise, [the Workers’ Compensations Law’s] promise of relief from third-party actions is illusory for large categories of employers – such as subcontractors – that routinely enter into contracts with standard form indemnifications.”

Hat tip: Matthew Lerner (he argued for the appellant).

[Meredith R. Miller]

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