Limitation to Indemnification Clauses Where Indemnitees are Negligent

An indemnity clause in a contract allows the contracting parties to dictate liability, usually in the form of personal or property harms.  For example, if A (“Indemnitor”) indemnifies B (“Indemnitee”) against all injuries caused by its construction, and C becomes injured by B’s work, C will have a claim against B for the injury.  B will then have an indemnity claim against A for the cost to defend and for any damages arising from C’s lawsuit.  We have previously discussed indemnification on our blog.  See Top 10 Construction Contract Provisions and Washington’s Defense and Indemnification Statute.

In the construction industry, indemnification clauses typically require the contractor to indemnify the owner for any claims for personal injury or property damage because the contractor is in a better position to control its work.  It is also common for a general contractor to require its subcontractors to indemnify it for injuries arising out of the subcontractor’s work.

In Washington, however, under RCW 4.24.115(a), an indemnitor cannot indemnify an indemnitee for injuries arising out of the pure negligence on the part of the indemnitee.  Pure negligence is where a harm occurs and can be traced back solely to the negligence of a single party.  In United States v. Wallace, the 9th Circuit Court of Appeals held that even indemnifying against “all claims for injury to workmen” did not include an injury resulting from the pure negligence of the owner.  18 F.2d 20, 21 (9th Cir. 1927).

RCW 4.24.115(b) states that where there is “concurrent negligence” (i.e. injury caused by the negligence of one or more parties), the indemnitor is only liable to the extent of its own negligence.  For example, if a subcontractor is 51% responsible for the harm, and the general contractor is 49 % responsible, the liability would be split up proportionately, notwithstanding an indemnification agreement.

In Millican v. N.A. Degerstrom, Inc., the Division II of the Washington Court of Appeals ruled that the contractor can be held partially liable even with a subcontractor’s indemnification.  177 Wn. App. 881, 894, 313 P.3d 1215, 1221 (2013), review denied, 179 Wn.2d 1026, 320 P.3d 718 (2014).  The case arose out of a contractor (Degerstrom) contracting to improve a highway and a subcontractor (Sharp-Line) tasked with painting lines and installing road signs.  The victim (Millican) was killed when a truck’s lever lock system, manufactured by Degerstrom, failed.  Millican’s estate filed suit against N.A. Degerstrom, Inc. for violation of a “non-delegable duty” to provide a safe working environment.  A non-delegable duty is one where the party with the duty can be held vicariously liable even after contracting away that duty. The Court reasoned that there is a non-delegable duty for a contractor to provide a safe environment to work.  In Millican, the negligence by the subcontractor in failing to apply the emergency brake as well as the lever lock does not annul the fact that the general contractor had a primary responsibility to comply with WISHA (Washington Industrial Safety and Health Act) and provide a safe working environment.  Although Sharp-Line agreed to indemnify Degerstrom, that is irrelevant so far as Millican’s WISHA case against Degerstrom.  Id.

Comment:  Avoiding unfavorable contract terms is an important part of any contract negotiation.  Understanding the risks inherent in the project as well as one’s ability to bear such risk is essential in ensuring that an indemnification clause does not leave the general contractor or subcontractor with more on its plate than it can manage.  Likewise, knowing how much risk to pass onto a contractor or subcontractor can avoid taking on unnecessary liability.  To some extent, however, Washington law limits the impact of indemnification agreements to the extent that an indemnitor does not act negligently.

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