Anti-Indemnification Statute Weakened

Kegler Brown Construction Newsletter

It is increasingly common for those in the construction industry to encounter indemnity provisions in their contracts, that being an agreement where one party, the promisor, agrees to protect and hold harmless the other party, the promisee, from liability arising from personal injury or property damage on the job. These provisions, in essence, can shift the risk of liability from a negligent party, the promisee, to an innocent party, the promisor, and therefore have been justly criticized as being unfair.

Ohio has a statute, Ohio Revised Code ยง2305.31, which provides that an indemnity provision in a construction contract that purports to indemnify and hold harmless a party from his own negligence is void as against public policy and unenforceable. This statute has been interpreted to mean that the promisor (i.e. general contractor) cannot be required to indemnify the promisee (i.e., owner) for the promisee's own negligence or even that of the promisor himself if he is an independent contractor of the promisee. Durgin v. Dugan & Meyers Constr., Inc., (1982), 7 Ohio App.3d 326. It has also been interpreted to prohibit the shifting of liability arising from the negligence of the promisee, regardless of whether such negligence is sole or concurrent. Kendall v. U.S. Dismantling Co., (1985), 20 Ohio St.3d 61. This means that such a prohibition is applicable whether the promisee (i.e. owner) is 1% negligent or 100% negligent.

Based upon these cases, we have traditionally advised contractors and subcontractors that they should not worry too much about these indemnity provisions believing that they were unenforceable. However, a recent Court of Appeals case out of Dayton, Moore v. Dayton Power and Light Company, 99 Ohio App.3d 138, held differently, and determined that hold harmless language insisting that the contractor pay the owner's attorney's fees and expenses (but not the damages for the injuries suffered by the injured employee) incurred by the owner in defending a claim asserted by the contractor's injured employee was enforceable. This case appears to carve out a new exception to the general unenforceability of such provisions under Ohio law.

This means that while a contractor should be protected against an injured employee's direct claims under worker's compensation, if he sued or threatened to sue the owner, the contractor may be liable (at a minimum) for the owner's attorney's fees and costs. The same problem exists for subcontractors who sign such provisions obligating them to pay the contractor's attorney's fees and expenses. In view of this case, it is increasingly important for subcontractors and contractors to closely scrutinize their contracts and modify the indemnification provisions appropriately.