Appellate Division Clarifies Scope of Indemnification Clauses in Construction Injury Litigation

This case involves a fall at a construction site in which a jury found the defendant, a general contractor, partially liable for the plaintiff’s injuries, awarding him and his wife damages. The defendant appealed the lower court’s determination that it was not entitled to contractual indemnification from the co-defendants, a steel company, for sums it was required to pay for not accepting plaintiffs’ offer of judgment.

The general contractor subcontracted with the steel company to install steel rebar for the project. That agreement contained an indemnification provision. Upon initiation of the plaintiff’s lawsuit, the general contractor demanded that the steel company assume its defense, which they declined. Thereafter, the lower court ruled that the defendant general contractor was not entitled to indemnification. On appeal, they argued that the judge erred when he concluded it was not entitled to indemnification by the defendant steel company, arguing that the provision’s language required indemnification for “any and all…fines…penalties,…damages, liability, losses, costs and expenses, including…attorney’s fees,” which would include the offer of judgment penalties.

The Appellate Court concluded that the lower court judge’s interpretation of the indemnification agreement as either not contemplating an offer of judgment or requiring the parties to draft a specific provision relating to the consequences of not accepting an offer of judgment, was in error. The court reversed that portion of the court’s April 5, 2024, order and remanded for entry of an order requiring the defendant steel company to indemnify the general contractor for the consequences of not accepting plaintiffs’ offer of judgment.