In a unanimous decision extending the Appellate Division, Third Department’s treatment of the retroactive application of indemnity obligations, the court held that a party must demonstrate a mutual shared intent between parties as a condition precedent for the retroactive application of a “hold harmless” provision.
Although the indemnification provision at issue in Guthorn v. Saranac Lake, 2019 N.Y. Slip. Op. 01469 (3d Dep’t Feb. 28, 2019) was alleged to have been included in a contractor-subcontractor agreement, the Third Department held that a question of fact existed as to whether the parties intended for the indemnification provision to apply retroactively.
The subcontractor’s project manager was injured after falling from a ladder in December 2011. It was unclear whether the indemnification clause was included in the parties’ initial September 2011 agreement or instead first arose in a backdated replacement agreement prepared by the general contractor and executed four months after the project manager’s accident after the originally executed agreement could not be located. Even after the parties agreed to backdate the agreement to September 2011, the court was unpersuaded that the agreement evidenced the requisite mutual intent.
Importantly, Guthorn is in parity with the Appellate Division, First Department’s decision in Temmel v. 1515 Broadway Assocs., 117 A.D.3d 1130 (1st Dep’t 2005). There, the First Department refused to construe an indemnification clause contained in a post-accident-dated purchase order to impose any indemnification obligation as the contractor’s bid document made no reference to indemnification. This was in spite of the fact that the request for proposals required the contractor to “indemnify and hold harmless” the property’s owner, and additional language deemed the request for proposals to be part of the contract documents.
It is clear from these cases that courts will not entertain any far-reaching inquiry to either locate or imply the mutual intent necessary to support the retroactive application of an indemnification provision. Thus, the Appellate Division, First and Third Departments, has effectively imposed two requirements for an indemnification provision to be imposed retroactively: (1) the initial (or post-accident) agreement must include an express indemnification provision and, more importantly, (2) if a retroactive agreement, the agreement must indicate on its face that, although being made after the date of loss, the indemnification obligation is intended to relate back to the time of the accident.
If you have any questions regarding the content of this alert, please contact Steven Mach, associate, at smach@barclaydamon.com, or another member of the firm’s Torts & Products Liability Practice Area.