Risk allocation...indemnity provisions in Kansas....remember January 1, 2009

Time to have your construction attorney review ALL construction contracts as indemnification provisions are now to be dramatically revised by virtue of a new statute. Check www.midwestconstructionlaw.com for more information or Dave Seitter at dseitter@spencerfane.com.

New Amendment to the Missouri Indemnity Statute for Contractors

RSMo. 434.100 effective August 28: (changes in bold print)

434.100. 1. Except as provided in subsection 2 of this section, in any contract or agreement for public or private construction work, a party's covenant, promise or agreement to indemnify or, hold harmless, insure, or defend another person from that person's own negligence or wrongdoing or the person's officers, employees, or agents for liability, claims, damages, losses, or expenses, including attorney's fees, that are caused by the negligence or wrongdoing of the other person, including the other person's employees, agents, subcontractors, or others for whom the other person is liable, is void as against public policy and is wholly unenforceable.

2. The provisions of subsection 1 of this section shall not apply to:

(1) A party's covenant, promise or agreement to indemnify or, hold harmless, insure, or defend another person from the party's own negligence or wrongdoing or the negligence or wrongdoing of the party's subcontractors and suppliers of any tier and the party's officers, employees, and agents;

(2) A party's promise to cause another person or entity to be covered as an insured or additional insured in an insurance contract purchase a project-specific insurance policy, including an owner's or contractor's protective liability insurance, project management protective liability insurance, or builder's risk insurance;

(3) A contract or agreement between state agencies or political subdivisions or between such governmental agencies;

(4) A contract or agreement between a private person and such governmental entities for the use or operation of public property or a public facility;

(5) A contract or agreement with the owner of the public property for the construction, use, maintenance or operation of a private facility when it is located on such public property;

(6) A permit, authorization or contract with such governmental entities for the movement of property on the public highways, roads or streets of this state or any political subdivision;

(7) Construction bonds, or insurance contracts or agreements; or

(8) An agreement containing a party's promise to indemnify, defend or hold harmless another person, if the agreement also requires the party to obtain specified limits of insurance to insure the indemnity obligation and the party had the opportunity to recover the cost of the required insurance in its contract price; provided, however, that in such case the party's liability Railroads regulated by the Federal Railroad Administration.

3. For the purposes of this section, construction work shall include, but not be limited to, the construction, reconstruction, renovation, alteration, maintenance or repair of any building, structure, highway, bridge, viaduct, or pipeline, or public or private real property, buildings, structures, improvements, highways, streets, bridges, viaducts, shafts, wells, water or sewer systems, gas or other distribution systems, pipelines, or appliances, including demolition, moving or excavation connected therewith, and shall include the furnishing of surveying, design, engineering, supervision, testing, observation, development, planning or management services, or labor, materials or equipment, in connection with such work.

4. As used in this section, 'indemnify' or 'hold harmless' includes any requirement to name the indemnified party as an additional insured in the indemnitor's insurance coverage for the purpose of providing an indemnification for any liability not otherwise allowed in this section.

The provisions of this section shall apply only to contracts or agreements entered into after August 28, 1999 2008.

2008 MO S.B. 1077 (NS)
END OF DOCUMENTunder the indemnity obligation shall be limited to the coverage and limits of the required insurance; or

(9)5. All provisions, covenants, or clauses, in a construction work contract, pursuant to which a substantial portion of the construction work is to be performed in the state of Missouri, shall be made subject to the laws of this state. Any litigation, arbitration, or other dispute resolution proceeding arising from the contract shall be conducted in this state. Any provision, covenant, or clause, in a construction work contract that conflicts with the provisions of this section shall be void and unenforceable.

More on Indemnity Provisions - in Illinois, Missouri and beyond.

The Clausen Miller law firm recently pointed out under a recent decision in Illinois a party can not be indemnified from its own negligence under specific Illinois laws (Anti-Indemnity Act). It may also be invalid if it is read as a contractual contribution section (Contribution Act).

Kansas and Missouri have specific statutes dealing with these issues as well....

All to say that the implementation or enforcement of an indemnity agreement is always a source of concern and review of the laws of the state where the contract is entered or the work is to be performed is critical!

Kansas law on indemnification: Update

NOTE THE INDEMNIFICATION PROVISIONS UNDER K.S.A. 16-201 HAVE BEEN SUBSTANTIALLY CHANGED. PLEASE CONTACT YOUR LOCAL KANSAS ATTORNEY FOR AN UPDATED INTREPRETATION OF THIS IMPORTANT PROVISION!

Indemnity law in the US regarding construction: Kansas update!

Kansas SB 379 passed the Senate and is now in the House Judiciary Committee. The local contractor groups generally are behind the legislation to prohibit indemnification clauses in construction contracts. The existing Kansas law was enacted in 2006, and it provides that indemnification provision in a construction contract or other agreements entered into in connection with a construction contract, requires the indemnitor to indemnify the indemnitee for the indemnitee's negligence is against public policy and is void and unenforceable. The purpose of the existing law is to prohibit shifting of tort liability in construction contracts.

Indemnity Clauses

I think I am re-hashing a subject I brought up earlier in the year but Calif. has enacted this year an indemnification clause in sales of new homes by a contractor. This is consistent with the growing trend of legislatures to limit the ability of a contractor to limit their liability.

Has anyone recently investigated the status of indemnity provisions on a nationwide basis? I shared with all a list located on the American Subcontractors Association website...nice product but the lesson learned is that there is still a growing trend in all states to look at these provisions closely and carefully to see from year to year what changes have been made...and to call your legislator to discuss the same as someone in your state is doing the same thing......perhaps for a position you may not be altogether happy about!

Indemnification in Kansas

Be on the lookout in Kansas as the legislature is back in business! This time indemnification provisions are being introduced into committee for review and consideration. KSA 2005 Supp. 16-121 as proposed appears to apply to all contracts, not just construction contracts and will be considered as being void and unenforceable, even if back by insurance if the provisions of the contract call for the indemnitor to indemnify the indemnitee's negligence or intentional acts or omissions.

More certainly to follow.

Indemnity Agreements

I read a recent post by attorneys with Peckar & Abramson on the risks and liabilities imposed by the unlimited guaranties contractors sign with surety companies....and these folks are correct.....because of the re-emergence of surety bonds after the contraction in the '90's and economic slowdown that occurred in the first few years of this century, perhaps there are any number of contractors who have not had experience in seeing the downside of indemnification agreements.

The bottom line....the surety will recover all costs and expenses from the contractor, including attorneys fees for any loss. And now with the passage of the new bankruptcy law, I expect the ability to discharge surety claims to now be more difficult than ever.

What would I do.....try to exempt out your homestead from any claims of the surety, look at using a Delaware Asset Protection Trust, seek to pour monies into an IRA...and do your best to limit any claims a surety might claim against you!

Indemnity Agreements

Governor Terminator, I mean Schwarzenegger, signed a new bill into law concerning indemnity agreements. Previously a bill in place in favor of builders that permitted indemnification of builders. Now they are not enforceable in the context of residential construction projects, except where the indemnity involves sole negligence of the builder or the builders willful misconduct. Now the subcontractor and builder can work together on defended a claim.

Frankly, it is important to remember that when you know the indemnity laws of the state in which you are doing work...the American Subcontractor Association has an outline of the indemnity laws in all 50 states. It is not up to date, as indemnity laws change all the time....like it will in January of 2006 in California.

Indemnity law in the US

Help me with this one kids....a NY court is willing to enforce an indemnification provision in a contract...even though the contract was not executed? Well, there is something more here, as the contractor acknowledged the contract's existence, performed pursuant to the contract and was paid pursuant to the contract. (Flores v. Lower East Side Service Center, Inc.) The Court did note that an indemnification provision could be relied upon only if it was enforceable under common law....see my comments earlier this week on this point.

Well, perhaps you really can enforce a verbal agreement....oh, ja, it helps if you did everything according to the contract other than sign it!