Will this indemnity make the other side pay for OUR own negligence?
Two rules, and which one applies turns on the kind of contract. In a building and construction contract: a contract for the design, construction, alteration, improvement, repair or maintenance of real property, highways, roads or bridges (Minn. Stat. § 337.01, subd. 2): an indemnification agreement contained in or executed in connection with it is UNENFORCEABLE except to the extent the underlying injury or damage is attributable to the negligent or otherwise wrongful act or omission, including breach of a specific contractual duty, of the promisor or the promisor's independent contractors, agents, employees or delegatees, or to the extent an owner, responsible party or governmental entity agrees to indemnify a contractor for strict liability under environmental laws (§ 337.02). Outside that statute, agreements seeking to indemnify the indemnitee for losses occasioned by its own negligence 'are not favored by the law and are not construed in favor of indemnification unless such intention is expressed in clear and unequivocal terms, or unless no other meaning can be ascribed to it', and the Supreme Court said in a footnote, deciding the clauses unenforceable on that ground as well as on public policy, that it had never indicated the requirement applies only to building and construction contracts (Yang).
The trap
The insurance workaround is real but it is narrow and it has its own void clause. Sections 337.01 to 337.05 do not affect the validity of an agreement to provide specific insurance coverage for the benefit of others, EXCEPT that a provision requiring a party to provide insurance coverage to other parties, including third parties, for the negligence or intentional acts or omissions of those other parties is against public policy and void and unenforceable (§ 337.05, subd. 1). Where a promisor agrees to provide specific insurance, a claim arises within its scope, and the promisor did not obtain and keep the insurance in force, the promisee has indemnification to the same extent as the specified insurance, regardless of § 337.02 (subd. 2). In Bolduc the Supreme Court applied § 337.02 to defeat indemnity where the subcontractor was not at fault, holding that any obligation to indemnify would violate § 337.02 unless accompanied by a coextensive insurance agreement under § 337.05, and it found no additional-insured coverage either. The subcontractor won: the Court concluded that regardless of the scope of the indemnification provision in the contract, any requirement that the subcontractor indemnify the contractor was unenforceable, because the only route left open was § 337.05, subd. 2, and that route required the contractor to have complied with its conditions. Note three scope carve-outs in the sections next door: §§ 337.01-337.05 do not apply to an accommodation indemnity from a party permitted to enter adjacent property, nor to an indemnity that is an integral part of a settlement of a disputed claim (§ 337.03), they do not affect the validity of any insurance contract, workers' compensation agreement, construction bond, or other agreement lawfully issued by an insurer or bonding company (§ 337.04), and, subject to § 337.02, §§ 337.01 to 337.06 do not restrict rights to indemnification that the common law may provide (§ 337.06). Holmes v. Watson-Forsberg puts the insurance route to work: because § 337.05 approves a long-standing construction practice, the legislature 'has carved out an exception from the general prohibition contained in section 337.02', so a subcontract clause obliging the subcontractor to buy liability insurance covering the general contractor is enforceable rather than a void indemnity. That route has its own off-switch: the indemnification subdivision 2 gives is 'not available' if the specified insurance was not reasonably available in the market and the promisor so informed the other party before signing, or signed subject to a written exception as to the nonavailable insurance (§ 337.05, subd. 3).
23 authorities
- statuteMinn. Stat. § 337.01enactment date not established
The words that state the rule
"Building and construction contract" means a contract for the design, construction, alteration, improvement, repair or maintenance of real property, highways, roads or bridges. The term does not include contracts for the maintenance or repair of machinery, equipment or other such devices used as part of a manufacturing, converting or other production process, including electric, gas, steam, and telephone utility equipment used for production, transmission, or distribution purposes.
- statuteMinn. Stat. § 337.01enactment date not established
The words that state the rule
"Indemnification agreement" means an agreement by the promisor to indemnify, defend, or hold harmless the promisee against liability or claims of liability for damages arising out of bodily injury to persons or out of physical damage to tangible or real property.
- statuteMinn. Stat. § 337.02enactment date not established
The words that state the rule
An indemnification agreement contained in, or executed in connection with, a building and construction contract is unenforceable except to the extent that: (1) the underlying injury or damage is attributable to the negligent or otherwise wrongful act or omission, including breach of a specific contractual duty, of the promisor or the promisor's independent contractors, agents, employees, or delegatees; or (2) an owner, a responsible party, or a governmental entity agrees to indemnify a contractor directly or through another contractor with respect to strict liability under environmental laws.
- statuteMinn. Stat. § 337.03enactment date not established
The words that state the rule
Sections 337.01 to 337.05 do not apply to an agreement by which a promisor that is a party to a building and construction contract indemnifies a person, firm, corporation, or public agency for whose account the construction is not being performed, but who, as an accommodation, permits the promisor or the promisor's independent contractors, agents, employees, or delegatees to enter upon or adjacent to its property for the purpose of performing the building and construction contract.
- statuteMinn. Stat. § 337.05enactment date not established
The words that state the rule
(a) Except as otherwise provided in paragraph (b), sections 337.01 to 337.05 do not affect the validity of agreements whereby a promisor agrees to provide specific insurance coverage for the benefit of others. (b) A provision that requires a party to provide insurance coverage to one or more other parties, including third parties, for the negligence or intentional acts or omissions of any of those other parties, including third parties, is against public policy and is void and unenforceable. (c) Paragraph (b) does not affect the validity of a provision that requires a party to provide or obtain workers' compensation insurance, construction performance or payment bonds, builder's risk policies, owner or contractor-controlled insurance programs or policies, or project-specific insurance for claims arising out of the promisor's negligent acts or omissions or the negligent acts or omissions of the promisor's independent contractors, agents, employees, or delegatees. (d) Paragraph (b) does not affect the validity of a provision that requires the promisor to provide or obtain insurance coverage for the promisee's vicarious liability, or liability imposed by warranty, arising out of the acts or omissions of the promisor. (e) Paragraph (b) does not apply to building and construction contracts for work within 50 feet of public or private railroads, or railroads regulated by the Federal Railroad Administration.
- statuteMinn. Stat. § 337.06enactment date not established
The words that state the rule
Subject to section 337.02 , sections 337.01 to 337.06 do not in any way restrict rights to indemnification that the common law may provide.
The words that state the rule
Agreements seeking to indemnify the indemnitee for losses occasioned by its own negligence are not favored by the law and are not construed in favor of indemnification unless such intention is expressed in clear and unequivocal terms, or unless no other meaning can be ascribed to it.
The words that state the rule
Although many of our indemnification decisions have involved the construction setting, we never have indicated that the requirement of clear and unequivocal language applies only to building and construction contracts.
The words that state the rule
We examine the enforceability of exculpatory and indemnification clauses under different standards. Indemnification clauses are subject to greater scrutiny because they release negligent parties from liability, but also may shift liability to innocent parties.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Because Bolduc was not at fault for the pipeline damage, any obligation by Bolduc to indemnify ECI would violate MinmStat. § 337.02 unless that obligation was accompanied by a coextensive insurance agreement under Minn.Stat. § 337.05.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Because we conclude that ECI did not qualify as an additional insured with respect to the pipe damage and that Bolduc cannot be required to indemnify ECI without violating Minn. Stat. § 337.02 , we reverse.
- statuteMinn. Stat. § 337.03enactment date not established
The words that state the rule
Sections 337.01 to 337.05 do not apply to an indemnification agreement that is an integral part of an offer to compromise or settlement of a disputed claim, if: (a) the settlement is based on consideration; (b) the dispute relates to an alleged event that is related to a construction contract and that occurred before the settlement is made; and (c) the indemnification relates only to claims that have arisen or may arise from the past event.
- statuteMinn. Stat. § 337.05enactment date not established
The words that state the rule
If: (a) a promisor agrees to provide specific types and limits of insurance; and (b) a claim arises within the scope of the specified insurance; and (c) the promisor did not obtain and keep in force the specified insurance; then, as to that claim and regardless of section 337.02 , the promisee shall have indemnification from the promisor to the same extent as the specified insurance.
- statuteMinn. Stat. § 337.05enactment date not established
The words that state the rule
The indemnification stated in subdivision 2 is not available if: (a) the specified insurance was not reasonably available in the market; and (b) the promisor so informed the other party to the agreement to insure before signing the agreement, or signed the agreement subject to a written exception as to the nonavailable insurance.
- statuteMinn. Stat. § 337.04enactment date not established
The words that state the rule
Sections 337.01 to 337.05 do not affect the validity of any insurance contract, workers' compensation agreement, construction bond, or other agreement lawfully issued by an insurer or bonding company.
- caseMinn. (Aug. 28, 1992)Holmes v. Watson-Forsberg Co.Minn.decided 1992
The words that state the rule
The characterization of provision 7 as an invalid indemnification agreement is erroneous, not only because it ignores the clear and unambiguous language of the contractual provision which obligates this subcontractor to obtain “general liability insurance coverage and endorsements as will insure the provisions of this paragraph,” but also because by operation of Minn.Stat. § 337.05, the legislature itself has approved its use and, for practical purposes, has carved out an exception from the general prohibition contained in section 337.02.
- caseMinn. (Aug. 28, 1992)Holmes v. Watson-Forsberg Co.Minn.decided 1992
The words that state the rule
We therefore decline to impose a restrictive reading on either the legislation or provision 7 of the subcontract and direct the reinstatement of the trial court’s decision, declaring that Watson-Forsberg is entitled to the benefit of the insurance pro *476 cured by Pro-Tech in performance of its subcontract agreement.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Section 337.02 therefore renders unenforceable indemnification agreements in which a party assumes responsibility to pay for damages that are not caused by the party’s own wrongful conduct.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Therefore, when faced with questions about the enforceability of an indemnification provision in a construction contract, we must “consider[] the combined effect of sections 337.02 and 337.05,” and “even though an indemnification provision may be unenforceable under section 337.02, a promise to purchase insurance to cover any negligent acts by the promisee is valid and enforceable.” Katzner, 545 N.W.2d at 381 .
The words that state the rule
Strictly construed, the indemnification clauses do not contain language that (1) specifically refers to negligence, (2) expressly states that the renter will indemnify Voya-gaire for Voyagaire’s negligence, or (3) clearly indicates that the renter will indemnify Voya-gaire for negligence occurring before the renter took possession of the houseboat.
The words that state the rule
Therefore, we conclude that the indemnification clauses in the houseboat rental agreement, which purport to require Xiong to indemnify Voyagaire for Voyagaire’s negligence, violate public policy and are unenforceable.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Therefore, the only way in which Bolduc could indemnify ECI without violating the statutory scheme is if ECI complied with the requirements of MinmStat. § 337.05, subd. 2.
- case825 N.W.2d 695Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co.Minn.decided 2013read it at the source ↗
The words that state the rule
Therefore, we conclude that regardless of the scope of the indemnification provision in the contract, any requirement that Bol-duc indemnify ECI is unenforceable because any such requirement would violate Minn.Stat. § 337.02.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.