The 2012 Washington Legislature amended Washington’s Construction Indemnification Statute, RCW 4.24.115, and added the duty and cost to defend to its restrictions. The legislation became effective on June 7, 2012. This article follows up our earlier April 17, 2012 blog post.
Before explaining the amendment to the statute, it is important to understand how the duty to defend and indemnify are two separate obligations. An example is illustrative.
A General Contractor (“GC”) subcontracts with an Electrical Contractor (“EC”) to install an electrical service in a building. The Subcontract contains an indemnification provision which requires EC to defend and indemnify GC from liabilities to third parties arising from EC’s work. A building inspector (“Inspector”) comes in contact with exposed electrical wiring, suffers electrical burns, and is damaged. GC is 1% negligent for the Inspector’s injuries and EC is 99% negligent. Inspector brings suit against GC who seeks defense and indemnification from EC pursuant to the indemnification provision contained in the Subcontract. Assuming the indemnification provision is properly drafted and complies with RCW 4.24.115, as amended in 2012, EC owes GC a duty to defend GC, and pay the attendant costs of defense, including attorneys’ fees and experts’ expenses, and EC owes GC a duty to indemnify GC by paying any damages which GC is required to pay to Inspector, but both duties are limited to the extent of EC’s negligence, 99%.
It is important to note that the duty to defend, and incur the attendant expenses (attorneys’ fees, expert fees, and other defense costs), is separate from the duty to indemnify. The duty to defend, and pay the attendant expenses, requires the indemnitor, EC in the example above, to pay the expense incurred for the defense of GC, but only to the extent of the negligence of EC, 99% in the example above. The duty to indemnify, on the other hand, requires EC to pay a proportionate part of the damages which GC is required to pay to Inspector in the example above, but only to the extent of the negligence of EC, 99% in the example above.
RCW 4.24.115 originally addressed only the duty to indemnify, and not the duty and cost to defend. The 2012 amendment to RCW 4.24.115 has changed that. RCW 4.24.115 now makes any provision contained in a construction contract purporting to indemnify, including the duty and cost to defend, another against liability for damages arising out of bodily injury to persons or damage to property:
(a) Caused by or resulting from the sole negligence of the indemnitee (GC in the example above), and his or her agents or employees, is void as against public policy and unenforceable.
(b) Caused by or resulting from the concurrent negligence of (i) the indemnitee (GC in the example above), or the indemnitee’s agents or employees, and (ii) the indemnitor (EC in the example above), or the indemnitor’s agents or employees, is valid and enforceable but only to the extent of the indemnitor’s negligence, and only if the provision specifically and expressly provides therefor….
In light of the amendment to RCW 4.24.115, General Contractors and Owners who seek to be indemnitees in their construction contracts need to modify those contracts so that the duty to defend will be enforceable in the event of the concurrent negligence of an Owner and General Contractor in the instance of an indemnification provision contained in a Prime Contract, or the negligence of a General Contractor and a Subcontract, in the case of an indemnification provision contained in the Subcontract. If the revisions are not made, and the provision does not address both the duty to defend and the duty to indemnify in instances of concurrent negligence, the duty to defend will not be enforceable to the extent of the indemnitor’s negligence. A sample indemnification provision for insertion in a Subcontract, in compliance with the amendment to RCW 4.24.115, showing the changes to comply with the amendments to the statute is set forth below:
Subcontractor agrees to defend, indemnify, and hold Contractor, Owner, and any upper-tier contractor (“Indemnitees”) harmless from any and all claims, demands, losses, and liabilities to or by third parties arising from, resulting from, or connected with services and work performed or to be performed under this Subcontract by Subcontractor or Subcontractor’s agents, employees, and lower-tier subcontractors and suppliers of any tier, even though such claims may prove to be false, groundless, or fraudulent, to the fullest extent permitted by law and subject only to the limitations provided below.
Subcontractor’s duty to indemnify, including the duty and cost to defend, Indemnitees shall not apply to liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of Contractor or Contractor’s agents or employees.
Subcontractor’s duty to indemnify Indemnitees, including the duty and cost to defend, from liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the concurrent negligence of (a) Contractor, its agents or employees, and (b) Subcontractor, its agents or employees, and lower-tier subcontractors or suppliers of any tier, shall apply only to the extent of negligence of Subcontractor, its agents or employees, and lower-tier subcontractors or suppliers of any tier.
Subcontractor specifically and expressly waives any immunity that may be granted it under the Washington State Industrial Insurance Act, Title 51 RCW, and all other applicable industrial insurance/workman’s compensation acts or their equivalent in the applicable jurisdiction. Further, the indemnification obligation under this Subcontract shall not be limited in any way by any limitation on the amount or type of damages, compensation, or benefits payable to or for any third party under workers’ compensation acts, disability benefits acts, or other employee benefits acts; PROVIDED Subcontractor’s waiver of immunity by the provisions of this paragraph extends only to claims against Subcontractor by Contractor and does not include, or extend to, any claims by Subcontractor’s employees directly against Subcontractor.
Defense cost recovery shall include all fees (of attorneys and experts), and costs and expenses incurred in good faith. In addition, Contractor shall be entitled to recover compensation for all of its in-house expenses (including materials and labor) consumed in its defense.
Claims by Contractor for defense and indemnity against Subcontractor shall be exempt from RCW 4.16.040, RCW 4.16.300, and RCW 4.16.310 to the same extent that claims by the Owner or any upper-tier contractor are exempt from those statutes. Notwithstanding any other statutory or contractual provision to the contrary, claims for defense and/or indemnity by Contractor against Subcontractor shall not be time-barred, provided that they are brought within 90 days of the service of suit on such claims against Contractor by Owner, any upper-tier contractor, or third party to this Subcontract.
Similar changes must be made to indemnification provisions contained in contracts between an Owner and a General Contractor to make such provisions enforceable with regard to the duty to defend in the event of the concurrent negligence of the Owner and the General Contractor.
Our lawyers are available to assist our clients in making the required changes to both their Subcontracts and General Contracts in order that the indemnification provisions contained in such contracts comply with the amendments to RCW 4.24.115.