In November, the Sunshine State became even a little balmier and more welcoming a place for construction subcontractors to do business, due to the American Subcontractors Association (ASA) and several persistent subcontracting businesses that appealed a trial court’s decision. On Nov. 15, the Florida 2nd Court of Appeal handed down a decision that will help subcontractors in the state avoid paying the defense costs of general contractors pursing valid indemnity claims. Endowed by its Subcontractors Legal Defense Fund (SLDF), ASA submitted an amicus curiae, or “friend of the court,” brief supporting the subcontractors in the case of Barton-Malow Company v. Grunau Company et al.
“It is indeed a brighter day for subcontractors in Florida,” said ASA President Anne Bigane Wilson, president of Chicago-based Bigane Paving Company. “When a subcontractor’s obligation to indemnify the general contractor against certain third-party claims is void, the subcontractor should not have to pay the general contractor’s defense costs either. ASA is proud to have participated in this important appeal, which vindicates common sense.”
The case before the 2nd District Court of Appeal stems from a $9-million settlement agreement between the construction team and the occupants of a so-called “sick building” that was evacuated. After the settlement, the general contractor sued the subcontractors for the legal fees it incurred, arguing that the indemnity provision within the subcontract stipulated a district “duty to defend” the general contractor. The trial court held that the indemnity in the subcontract agreements was prohibited by Florida’s anti-indemnity statute, but that the subcontractors nevertheless owed a share of defense costs.
In its decision, the appellate court rejected general contractor Barton-Malow’s contention that “it was entitled to recover all its defense costs and attorneys’ fees because the ’duty to defend’ was severable from the duty to indemnify.”
The subcontract included an indemnity provision requiring each subcontractor to “protect, defend, indemnify and save harmless … Barton-Malow Company … from and against all losses, claims, demands, payments, damages, suits, actions, attorney’s fees, recoveries and judgements of every nature and description brought or recovered against … Barton-Malow Company.”
The unanimous opinion of the 2nd District Court of Appeal, written by Senior Judge John Scheb, stated:
We see nothing in this language that indicates that the parties intended the duty to defend to be severable from the remainder of the duties in the indemnity provision. Here … the indemnity provision intertwines the duty to indemnify and the duty to defend. Therefore, the structure of the indemnity provision does not support Barton-Malow’s argument of the trial court’s interpretation of the provision.
ASA’s brief, prepared by Donald Gregory, of ASA General Counsel firm Kegler, Brown, Hill & Ritter, Columbus, OH, argued that a subcontractor should not be forced to pay defense costs when the underlying indemnity obligation is void: “The Lower court erred in finding the subcontractors had an independent duty to defend Barton-Malow after ruling the indemnification clause — which contained the language regarding defense fees and costs — unenforceable and invalid pursuant to Florida’s anti-indemnity statute. Such a ruling allows through the back door what Florida’s legislature intended to foreclose from the front door: risk-shifting and costly liability for non-negligent parties.”
The brief cites numerous cases holding that the obligation to pay defense costs can exist only when there is a valid obligation to indemnify.
ASA’s Subcontractors Legal Defense Fund supports ASA’s critical activities to protect the interests of all subcontractors, and is funded solely by contributions. SLDF funds are invested to defend subcontractors in precedent-setting cases.
For more information, visit www.asaonline.com.
