EDVA: Indemnification clause for third parties invalid

An insurer could not enforce an indemnification clause in its insured’s architectural contract because provisions requiring contractors to indemnify other parties for negligence are void in their entirety under Code § 11-4.1.

Background

Defendant Lessard Design Inc. provides architectural services, including design plans and construction supervision and consulting services. This case stems from a previous suit in which another architectural firm sued Lessard and another company, PDT Builders, for copyright infringement. After Lessard declined to defend PDT Builders absent conditions, PDT Builders tendered their defense to Plaintiff Travelers Indemnity Company of Connecticut.

The defendants in that suit were granted summary judgment and, as the prevailing parties, sought $990,995 in attorneys’ fees. The parties settled for $745,000. Travelers, as subrogee, then requested that Lessard indemnify Travelers for the outstanding attorneys’ fees and costs, based on a January 25, 2011 Architect’s Agreement. Lessard declined, and Travelers brought this action for breach of contract. Lessard has moved for judgment on the pleadings.

Indemnity clause invalid

The Agreement includes a number of provisions making clear that Lessard has duties and responsibilities related to the “Construction Phase” of the building process. Lessard was required to administer the contract “between the Owner and the [Prime Contractor],” to visit the Project often enough to be familiar with the progress and quality of the work, “to guard the Owner against defects and deficiencies,” and to reject work that didn’t “conform to the Contract Documents.” Given these obligations, the Agreement falls squarely within the category of contracts “relating to construction” within the meaning of § 11-4.1.

Travelers’ attempt to read § 11-4.1 narrowly to apply only to entities that operate solely as construction contractors does not comport with the text or the purposes of § 11-4.1. Under the statute’s plain text, if the contract relates to construction of a building, then the performing party is a “contractor” covered by the statute, whether or not that party is also an architect. The fact that § 11-4.1 covers contracts “relating to” construction suggests that the General Assembly intended to reach beyond construction contractors to include those, including architects, who do other work relating to a contract for construction, repair, or other building-related services.

Other provisions in Virginia law support the reading of § 11-4.1 adopted here. For example, Code § 54.1-1100 defines contractors as persons who do work relating to construction, including “performing, managing, or superintending” construction or improvement of a building. This definition is broad enough to include architects involved in construction supervision, such as Lessard in this case.

Lessard was required to indemnify the Owner and PDT Builders for the Owner’s and PDT Builder’s own negligent acts during construction. The provision at issue makes no exception for cases in which the Owner’s or PDT Builders’ negligence is the sole cause of underlying claims. The use of leverage to require one contractor to indemnify others for their own negligence is precisely the situation the legislature sought to avoid through the enactment of § 11-4.1. For example, if an owner or contractor deviated from the architect’s plans in an unsafe way, the architect could be liable for injuries resulting from those negligent decisions, even if the architect actively opposed those decisions during construction. The text and purpose of § 11-4.1 preclude this situation from arising.

Based on Uniwest Const. Inc. v. Amtech Elevator Servs. Inc., 280 Va. 428 (2010), the indemnification clause must be invalidated in its entirety, and so Lessard was under no duty to indemnify PDT Builders.

Motion for judgment on the pleadings granted.

The Travelers Indemnity Co. of Conn. v. Lessard Design Inc., Case No. 1:17cv1401, June 12, 2018. EDVA at Alexandria (Ellis). VLW No. 018-3-242, 13 pp.