{"id":898721,"date":"2021-05-05T16:09:00","date_gmt":"2021-05-05T22:09:00","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=898721"},"modified":"2021-05-05T16:09:02","modified_gmt":"2021-05-05T22:09:02","slug":"anti-indemnification-statute-virginia","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/anti-indemnification-statute-virginia\/","title":{"rendered":"Uniwest And Virginia\u2019s Anti-Indemnification Statute: The Trap For The Unwary Should Be Closed"},"content":{"rendered":"\n

James P. Bobotek | Virginia State Bar<\/a><\/p>\n\n\n\n

When preparing commercial contracts, parties strive for certainty to prevent post-execution risk allocation surprises. This is particularly true when drafting indemnification clauses<\/a> in construction-related contracts. To prevent downstream parties with little contracting leverage from being asked to indemnify upstream parties for those upstream parties\u2019 own negligence, the vast majority of states have enacted \u201canti-indemnity<\/a>\u201d legislation limiting the breadth of indemnification clauses in contracts touching on construction projects.1 These statutes generally fall into two camps: (i) 16 states permit a party (the \u201cindemnitee\u201d) to be indemnified for its own negligence as long as it is not solely negligent;2 and (ii) 28 states do not permit the indemnitee to be indemnified for its own negligence under any circumstances, whether in whole or in part.3 Six states and the District of Columbia allow broad indemnity whereby an indemnitee can be required to indemnify the indemnitor even if the indemnitor is solely at fault.4<\/p>\n\n\n\n

Virginia\u2019s anti-indemnity statute states, in relevant part: Any provision contained in any contract relating to the construction, alteration, repair or maintenance of a building \u2026 by which the contractor performing such work purports to indemnify or hold harmless another party to the contract against liability for damage \u2026 caused by or resulting solely from the negligence of such other party \u2026 is against public policy and is void and unenforceable.5<\/p>\n\n\n\n

Inclusion of the word \u201csolely\u201d in Section 11-4.1 leads most readers to conclude that it was drafted to fall into the first camp (bringing Virginia within those states barring indemnification for an indemnitee\u2019s negligence only when the indemnitee is solely negligent). But therein lies the trap. Presumably unintentionally, the drafters of Section 11-4.1\u2019s 1991 amendment structured the operative language in a manner similar to, but slightly different from, the anti-indemnity statutes that fall within the first camp. Almost all statutes included in the first camp use identical causation language, as follows: \u201ccaused by or resulting from the sole negligence of the \u2026 indemnitee.\u201d6 But Section 11-4.1\u2019s operative language reads: \u201ccaused by or resulting solely from the negligence of [the indemnitee].\u201d7<\/p>\n\n\n\n

To provide context, while Section 11-4.1\u2019s language is slightly different from the other first camp\u2019s statutes, it is very different from the language of those falling in the second camp (that do not permit indemnification for an indemnitee\u2019s own negligence under any circumstances). The major difference is that none of the statutes falling within the second camp include the limiting words \u201csole\u201d or \u201csolely.\u201d8 There is no need to include the word \u201csole\u201d or any variation thereof because these second camp statutes are broader, precluding indemnification for an indemnitee\u2019s negligence whether the indemnitee is solely or only partially negligent.9<\/p>\n\n\n\n

Without this context, Section 11-4.1\u2019s placement of \u201csolely\u201d after \u201cresulting\u201d permits a reader to more easily interpret the clause in at least two manners: (i) that \u201csolely\u201d modifies the entire phrase \u201ccaused by or resulting\u201d; or (ii) that \u201ccaused by or resulting solely from\u201d is disjunctive, meaning that there are really two disconnected phrases, \u201ccaused by\u201d and \u201cresulting solely from.\u201d These alternate interpretations make a significant difference. Analysis under the first example results in the clause falling within the first camp; a limitation on indemnity for the indemnitee\u2019s negligence only when the indemnitee is solely negligent. To the contrary, scrutiny under the second example leads to a broader bar; the indemnitee cannot be indemnified for its own negligence, whether sole or partial.<\/p>\n\n\n\n

The Supreme Court of Virginia interpreted Section 11-4.1 in Uniwest Construction, Inc. v. Amtech Elevator Services, Inc.10 Uniwest, the prime contractor, engaged Amtech as a subcontractor to perform elevator work.11 One Amtech employee was injured, and another died as a result of a scaffolding collapse.12<\/p>\n\n\n\n

Various lawsuits arose involving indemnification and insurance, all of which made their way to the Court in a consolidated appeal.13 Without discussion, or reference to any legislative intent, and without comparing Section 11-4.1\u2019s language with other states\u2019 anti-indemnity clauses to gain context, the Court concluded that the phrases \u201ccaused by\u201d and \u201cresulting solely from\u201d in the statute are disjunctive, meaning that they must be treated as separate clauses.14 From this, the Court found that the statute precludes indemnification for two types of damages: (i) those that are \u201ccaused by\u201d; or (ii) those that \u201cresult[ing] solely from\u201d an indemnitee\u2019s negligence.15 In other words, under Section 11-4.1 an indemnitee can never be indemnified for its own negligence whether it is solely negligent or only partially negligent. The Court held that the indemnification provision at issue \u201cclearly reaches beyond the negligence of other parties and indemnifies [the indemnitee]. Therefore, it violates Code 11-4.1 and is void.\u201d16<\/p>\n\n\n\n

Many practitioners, fifty-state compendia, and even some treatises, review Section 11-4.1 and, finding the language so similar to those other jurisdictions that permit an indemnitee to be indemnified for its own negligence as long as it is not solely negligent, conclude that Virginia falls within that camp. Indeed, an internet search for anti-indemnity statutes results in myriad compendia and articles interpreting Section 11-4.1 and Virginia\u2019s law on construction-related contractual indemnification clauses as permitting an indemnitee\u2019s indemnification for its partial negligence, and precluding such indemnification only when the indemnitee is solely negligent. Thus, the trap is sprung.<\/p>\n\n\n\n

The result in some cases has been a finding that flies in the face of the contract certainty for which parties yearn \u2014 that the indemnification clause the parties agreed to, permitting a party to be indemnified for its own partial negligence, is in fact void ab initio and cannot be reformed.17 Other jurisdictions with statutory language similar to Section 11-4.1 do not preclude indemnification for an indemnitee\u2019s concurrent or partial negligence, instead limiting the statutory prohibition to damages arising out of an indemnitee\u2019s sole negligence.18 Yet after Uniwest, despite the similarity in language to these other statutes where indemnification is prohibited only for an indemnitee\u2019s sole negligence, Section 11-4.1 is interpreted in a more expansive fashion, also precluding indemnification for the indemnitee\u2019s partial negligence.<\/p>\n\n\n\n

It is high time for the General Assembly to correct the uncertainty created by the statute\u2019s ambiguous language. If Section 11-4.1\u2019s intent is to preclude an indemnitee\u2019s indemnification only when it is solely negligent, as many states do, then it should modify Section 11-4.1 to read \u201ccaused by or resulting from the sole negligence of such other party.\u201d Alternatively, if the intent is really as the Court found in Uniwest, then the General Assembly should remove Section 11-4.1\u2019s current ambiguity by modifying it to read \u201ccaused partially or solely by, or resulting partially or solely from, or arising partially or solely out of the negligence of such party.\u201d Further, given some of Uniwest\u2019s progeny, the revised legislation should clarify that savings clauses inserted in indemnification clauses, such as the commonplace \u201cto the fullest extent permitted by law,\u201d will permit reformation of a non-conforming clause rather than a finding that it is void ab initio. At the end of the day, contractual certainty is best for all.<\/p>\n\n\n\n

James P. Bobotek, a partner in Pillsbury\u2019s McLean office, guides clients through all phases of development and construction of office, multifamily housing, hotel, and other commercial properties, including preparation, review and negotiation of development, design, construction, design-build, and related agreements. Bobotek also counsels clients in analyzing insurance coverage claims, formulating risk management strategies, and developing contractual insurance requirements. He has secured many favorable outcomes for commercial policyholders on CGL, builder\u2019s risk, commercial property, business interruption, cyber, professional liability, D&O, pollution, fidelity, and other claims.<\/p>\n","protected":false},"excerpt":{"rendered":"

James P. Bobotek | Virginia State Bar When preparing commercial contracts, parties strive for certainty to prevent post-execution risk allocation surprises. This is particularly true when drafting indemnification clauses in construction-related contracts. To prevent downstream parties with little contracting leverage from being asked to indemnify upstream parties for those upstream parties\u2019 own negligence, the vast… Continue reading Uniwest And Virginia\u2019s Anti-Indemnification Statute: The Trap For The Unwary Should Be Closed<\/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],"tags":[9895,385,224,10742,357],"class_list":["post-898721","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-anti-indemnity","tag-construction-contract","tag-indemnification-provision","tag-virginia","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nUniwest And Virginia\u2019s Anti-Indemnification Statute: The Trap For The Unwary Should Be Closed - 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