An important case for contractors and subcontractors has surfaced at the Michigan Supreme Court. Skanska USA Building, Inc. v. M.A.P. Mechanical Contractors, Inc. raises the question: is property damage coverage under a standard commercial general liability policy...
Contractors and subcontractors should be aware of their lingering liability under contractual indemnity provisions that might currently be overlooked. These obligations and the potential for liability can outlast other types of contract claims because they might not accrue until long after the project is done.
The Court of Appeals recently enforced an arbitration agreement between a contractor and its subcontractor in a dispute involving indemnity and insurance coverage for a claim by subcontractor’s injured worker. (Spence Bros. v Kirby Steel, March 2017). In this case, the general contractor, Spence Brothers, was the project manager overseeing the University of Michigan’s expansion of the Crisler Arena. Spence subcontracted with Kirby Steel to provide structural and metal work. Spence’s letter accepting Kirby’s proposal directed Kirby to list Spence as an additional insured. The parties’ subcontract contained a standard indemnity clause requiring Kirby to defend and indemnify Spence against all losses. The subcontract also required that Kirby’s insurance policy name Spence as a named insured.
The Michigan Court of Appeals recently affirmed a contractor’s right to defense and indemnity from its subcontractor under the plain language of the parties’ subcontract. Provenzino v Macomb County Department of Roads, et al (January 2017).
In this case, Mr. Provenzino alleged that he was injured when he fell from his motorcycle after encountering a disparity in height between adjacent milled and unmilled lanes of traffic in a construction zone. Provenzino sued multiple parties including Florence Cement Company, the general contractor, and Lois Kay Contracting Company (LKCC), the subcontractor who milled the roadway surfaces. Florence filed a cross claim against LKCC seeking indemnity based upon the indemnification provision in the parties’ subcontract. That provision stated:
Subcontractor agrees, and shall bind all sub-subcontractors to agree to indemnify Contractor, Owner and all other parties the Contractor is obligated to indemnify pursuant to the Prime Contract (hereinafter “Indemnitees”), and to defend and hold Indemnitees forever harmless from and against all suits, actions, legal and administrative proceedings, claims, demands, damages, interest, attorney fees, costs and expenses of whatsoever kind or nature whether arising before or after completion of Subcontractor’s work and in any manner directly or indirectly caused or claimed to be caused by any action or negligence of Subcontractor or Sub-subcontractor, and regardless whether directly or indirectly caused or claimed to be caused in part by a party indemnified hereunder or by anyone acting under their direction, control or on their behalf, until such time as a judgement [sic] is entered against Contractor by a court of law. …[emphasis added].