The Supreme Court of Ohio recently addressed the application of indemnification clauses found in most construction contracts. This type of clause typically requires either a contractor or subcontractor to indemnify the other party to the contract (owner or general contractor) for any losses, damage, or expense (including attorney’s fees) that may arise out of a claim for damages due to personal injury or property damage.
Although indemnification clauses are generally enforceable, Ohio law prohibits a party from being indemnified for its own negligence. For example, if a general contractor is negligent in excavating a trench and a worker is injured when the trench collapses, the general contractor cannot look to a subcontractor to pay any judgment entered against the general contractor.
The Supreme Court recently reiterated that an indemnification clause is enforceable if its application does not result in the indemnification of a party’s own negligence. In Kemmeter v. McDaniel Backhoe Service an employee of the project owner fell into a ditch on the job site. He filed suit against the general contractor, G.A. Fibbe Co., and the plumbing subcontractor, Gil Ruehl Plumbing Co. Fibbe then filed a claim against Ruehl based upon an indemnification clause that required Ruehl to hold Fibbe harmless from “any claim or demand for damages for injury to persons or property arising directly or indirectly from operations carried on for the completion of the Work.” The case proceeded to trial and the court dismissed the plaintiff’s claims against Fibbe. The jury then found in favor of the plaintiff against Ruehl in the amount $1,500.
Fibbe then filed a motion with the court seeking to have the court order Ruehl pay the attorney’s fees it incurred in defending the lawsuit. Fibbe based its request on the indemnification clause. The trial court denied the motion but this decision was reversed by the Court of Appeals and attorney fees were awarded to Fibbe. Ruehl appealed this decision to the Supreme Court.
The Supreme Court overruled the appellate court’s decision. It first noted that R.C. 2305.31 prohibits a subcontractor from indemnifying a general contractor for the negligence of the general contractor. This ensures that parties will be responsible for the costs or damages caused by their own negligence. These costs include the attorney fees incurred to defend a claim of negligence. Thus, a party should not be able to look to another to pay its attorney fees if its own negligence created the lawsuit or claim. In the Court’s view, the crucial inquiry is to determine whether, in fact, the party seeking relief under an indemnification clause will be indemnified for costs arising out of its own negligence. The Supreme Court held that the mere fact that the claims against Fibbe had been dismissed does not mean colorable claims were not made against Fibbe. Fibbe could recover attorney fees only if the allegations against it arose solely out of the negligence of Ruehl. Neither the trial court nor the appellate court determined that the allegations against Fibbe arose from activities under Ruehl’s contractual control. Thus, the Supreme Court sent the case back to the trial court to make this determination.
The Court’s decision shifts the focus to the actual effect of an indemnification clause. This, in turn, decreases the importance of whether the language of an indemnification clause violates Ohio law. Thus, if a contract contains a clause which clearly contemplates a subcontractor indemnifying the general contractor for its own negligence, the general contractor still may be able to obtain indemnification if it can show the subcontractor’s actions were the sole cause of the damage. This will become very important in construction disputes where indemnification is sought.
Kemmeter v. McDaniel Backhoe Service, 89 Ohio St.3d 409 (2000)
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