In a recent decision from the New York Supreme Court, Appellate Division, Second Department, Garcia v. Fed LI, LLC, the court addressed a dispute involving personal injury, Labor Law liability, and contractual indemnification. The case arose from an incident in which an electrician fell from an extension ladder while working on a commercial property. The property was owned by several entities and leased by Multi Packaging Solutions, Inc. (collectively MPS). The electrician and his wife filed suit under Labor Law § 240(1), also known as the Scaffold Law, which holds owners and contractors strictly liable for injuries to workers from falling objects or falls from elevations. The plaintiffs sought summary judgment on liability, while MPS sought to transfer responsibility to the electrician's employer, J.P.S. Electric Co., Inc. (JPS), through a third-party contractual indemnification claim.
Indemnification emerged as the key issue on appeal. MPS contended that a purchase order issued to JPS approximately one month after the accident incorporated "Terms and Conditions" that included an indemnification clause. However, the court found this argument legally insufficient. Incorporation by reference requires that the referenced document be clearly identified and mutually understood by both parties. The material to be incorporated must be so well known to the contracting parties that a mere reference is sufficient. In this case, the purchase order did not specifically mention any indemnification clause, nor were the Terms and Conditions provided to JPS prior to the accident. The vague reference lacked the legal certainty required for incorporation, rendering the clause invalid.
Even if the indemnification clause had been valid, its timing presented another problem. Courts do not apply indemnity agreements to past events unless the contract clearly expresses that intention. In this case, neither the purchase order nor the Terms and Conditions manifested any intent to cover an incident that had already occurred. Because there was no clear language making the clause retroactive, it could not be used to shift responsibility for the accident. The court emphasized that indemnity agreements signed after an incident apply only when both parties clearly intended that outcome.
As a result, the court affirmed the dismissal of the third-party cause of action for contractual indemnification. JPS had no legal duty to indemnify MPS. This decision underscores the importance of clarity and timing in indemnity agreements. Parties seeking to shift liability must ensure that indemnification clauses are explicitly stated and properly incorporated.
Jose A. Aquino(@JoseAquinoEsq on X) is a special counsel at Duane Morris LLP's New York office, where he is a member of Construction Group, specializing in construction law, lien law, and government procurement law. He is also a member of the Cuba Business Group.
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