Contractual Indemnification Case Decided

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

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

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

Judge Read dissented, writing that the lack of specificityin these contracts, which are often form contracts, circumvented the purpose ofthe 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 theAgreement between the parties in this case “is substantially similar to thatused . . . in form-documents prepared byThe American Institute of Architects (AIA) and widely used and accepted throughthe construction industry.” . . . This type of generic indemnification, draftedfor use nationwide . . . does not clearly and unambiguously signal anemployer’s express agreement for the purposes of [the Workers’Compensation Law.] Surely an employermust explicitly agree to indemnification . . . [o]therwise, [the Workers’Compensations Law’s] promise of relief from third-party actions is illusory forlarge categories of employers – such as subcontractors – that routinely enterinto contracts with standard form indemnifications.”

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

[Meredith R. Miller]