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Who Do Your Contracts Require You To Indemnify?

We have previously written about the importance of indemnification clauses in both construction and design contracts. Of all of the provisions in construction contracts, indemnification clauses are among the most important, most difficult to negotiate, and can have the most far-reaching legal consequences.  

A recent Florida case (Blok Builders v. Mastec North America and BellSouth Communications) shows how a subcontractor evaded an obligation to indemnify a project owner because of language in both the prime contract and subcontract. The case was decided in April of this year by the Florida Court of Appeals.

The Blok Builders case arose when BellSouth decided to improve its underground telecommunications services. BellSouth hired Mastec to perform the work necessary to access telecommunications lines buried in certain neighborhoods. In turn, Mastec signed a contract with a subcontractor, Blok Builders, to excavate the existing underground utility lines. After Blok performed excavation work near a homeowner’s driveway, the driveway collapsed and caused a homeowner to fall and sustain permanent, life-altering injuries.

The homeowner sued both BellSouth, as owner of the project, and Mastec, as general contractor. Both BellSouth and Mastec sued Blok, demanding indemnification. The trial court entered final judgment against Blok, ruling that Blok was contractually required to indemnify both BellSouth and Mastec.

Blok appealed to the Court of Appeals for the Fourth District of Florida. The Florida appeals court reversed the part of the trial court’s decision requiring Blok to indemnify BellSouth, the owner of the project with whom Blok did not have a contract. The appeals court reasoned as follows:

Blok’s subcontract with Mastec incorporated by reference the prime contract between Mastec and BellSouth. The prime contract, in turn, had an indemnification provision similar to the subcontract indemnification provision, requiring Mastec to indemnify BellSouth. Significantly, however, the Mastec/BellSouth prime contract was silent as to whether Mastec’s subcontractors were also obligated to indemnify BellSouth against personal injury claims. At trial, because Blok’s subcontract incorporated the prime contract by reference, the trial court ruled that Blok also had a duty to indemnify BellSouth.  

But the Florida Court of Appeals ruled that, because the prime contract was silent on the matter, the trial court should not have read additional language into the subcontract and imposed such a duty on Blok. This was a huge victory for Blok because the appeals court then reversed the award of BellSouth’s attorneys’ fees and costs against Blok.

Lessons to take away from the Blok Builders case? If you are a subcontractor and your subcontract incorporates the prime contract by reference, ask to see the prime contract so that you are aware of any extra risk or potential liability you might be taking on in the general contract. Do not assume that all indemnification clauses and all construction contracts are created equal, because they are not. Contractual indemnification provisions are among the most legally significant clauses in your construction contract because they can be used to force you to pay someone else’s legal bill. Read all parts of your contract carefully, including the indemnification section, and consult with your construction law specialist in the event of any uncertainty.

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