{"id":891888,"date":"2017-03-30T11:48:11","date_gmt":"2017-03-30T17:48:11","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=891888"},"modified":"2017-03-30T11:48:11","modified_gmt":"2017-03-30T17:48:11","slug":"indecent-exposure-new-decision-confirms-subcontractors-liability-cd-damages-expansive","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/indecent-exposure-new-decision-confirms-subcontractors-liability-cd-damages-expansive\/","title":{"rendered":"Indecent Exposure: New Decision Confirms Subcontractors Liability To CD Damages Is Expansive"},"content":{"rendered":"<p>Michael Ludwig | <a href=\"http:\/\/www.jshfirm.com\/News.aspx?id=598\" target=\"_blank\">Jones, Skelton &amp; Hochuli, PLC<\/a> | March 24, 2017<\/p>\n<p>How broad is a \u201cbroad-form\u201d indemnity provision in a construction contract?\u00a0 A recent decision by the Arizona Court of Appeals has held such a provision allows a developer great latitude in recovering monies paid for settlement and also its attorneys\u2019 fees and costs.<\/p>\n<p><i>Amberwood Development v. Swann\u2019s Grading<\/i>, 1-CA-CV15-0786, arose from a lawsuit by homeowners against Amberwood alleging, among other things, construction defects from soil movement.\u00a0 Amberwood arbitrated the dispute with some of the homeowners resulting in a $1.75 million award against it and it settled the claims of the remaining homeowners for another $723,000. Swann\u2019s Grading had provided a defense to Amberwood for the arbitration but did not indemnify Amberwood.\u00a0 This suit was Amberwood\u2019s effort to recover indemnity from Swanns for the arbitration award and settlement.<\/p>\n<p>Like many construction contracts, Amberwood\u2019s subcontract contained a \u201cbroad form\u201d indemnity provision which required Swanns to defend and indemnify Amberwood \u201cfrom any and all claims, damages or Attorney\u2019s fees\u2026arising out of the acts or omissions of [Swanns]\u2026with regard to the performance or omission of any of [Swanns] duties and obligations under the contract.\u201d\u00a0 At the bench trial, Amberwood presented expert testimony that because Swanns performed the rough and fine grading, the majority of the damages awarded \u201carose out of\u201d its work. This evidence was unrebutted by Swanns\u00a0 expert who only argued that Swanns work did not cause any of the claimed damages.\u00a0 The trial judge agreed with Amberwood and found that 70.6 % of the litigation settlement and 72.7 % of the arbitration award were for issues that \u201carose out of\u201d Swanns\u00a0 work. The trial judge entered an award against Swanns to reimburse Amberwood those amounts. This award was upheld on appeal.<\/p>\n<p>This case made clear several important lessons for construction defect litigants and insurers.\u00a0 A broad form indemnity provision is highly advantageous for developers and disadvantageous for subcontractors.\u00a0 To prevail, a developer is not required to prove that a subcontractor was negligent, it need only prove that the claims and damages sought by Plaintiffs \u201carose out of\u201d the work performed by the subcontractor, even if other trades were perhaps partially responsible. Put another way, \u201cfault\u201d of the subcontractor is of little consequence.\u00a0 Once the developer prevails, it is entitled to recover that portion of indemnity and defense fees that are attributed to the subcontractor. The former is usually determined by the jury, the latter by the judge post trial. And as made abundantly clear in <i>Amberwood<\/i>, this liability can even include being held responsible for the fu ll amount of damages even where another trade is perhaps partially responsible.\u00a0\u00a0 In CD cases, the attorneys\u2019 fees and expert costs (of the developer and Plaintiff) can be as sizable as the construction defect damages at issue.<\/p>\n<p>In conclusion, broad form indemnity provisions can now result in greater potential exposure to subcontractors than previously thought.\u00a0 Early analysis of a subcontractors scope of work compared to claims alleged by Plaintiff should be done to assist in identifying early potential exposure.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Michael Ludwig | Jones, Skelton &amp; Hochuli, PLC | March 24, 2017 How broad is a \u201cbroad-form\u201d indemnity provision in a construction contract?\u00a0 A recent decision by the Arizona Court of Appeals has held such a provision allows a developer great latitude in recovering monies paid for settlement and also its attorneys\u2019 fees and costs.&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/indecent-exposure-new-decision-confirms-subcontractors-liability-cd-damages-expansive\/\">Continue reading <span class=\"screen-reader-text\">Indecent Exposure: New Decision Confirms Subcontractors Liability To CD Damages Is Expansive<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9,4],"tags":[9895,153,72,19,9026],"class_list":["post-891888","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","category-construction-defects","tag-advise-consult","tag-arizona","tag-construction-contracts-2","tag-construction-defects-2","tag-indemnity-provision","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Indecent Exposure: New Decision Confirms Subcontractors Liability To CD Damages Is Expansive - Advise &amp; 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