Will Montana enforce this indemnity clause, and what does it require the indemnitor to do?
Yes, subject to a general-code chapter that supplies default rules and two construction-specific limits. Montana codifies indemnity as its own contract type: “Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties or of some other person” (§ 28-11-301, MCA), and the statute is quoted above in its own words rather than through any opinion. Unless the contract itself provides otherwise, Montana's code chapter fills in the indemnitor's duties by default: most importantly a duty to DEFEND, which § 28-11-316 states in terms and then backs with a consequence: if after request the indemnitor “neglects to defend the person indemnified, a recovery against the person indemnified suffered by the person indemnified in good faith is conclusive in favor of the person indemnified against the person indemnifying.” The Montana Supreme Court reads the section that way: in State, Judicial Branch, Office of the Court Administrator v. Berdahl the Court described “§ 28-11-316, MCA, which makes an indemnitor who ‘neglects to defend the person indemnified’ liable for a recovery against the indemnitee”, while holding that a more specific statute on indemnification of government employees controls over it. Two timing rules complete the default set: on an indemnity against LIABILITY “the person indemnified is entitled to recover upon becoming liable”, while on an indemnity against “claims, demands, damages, or costs” the indemnitee “is not entitled to recover without payment thereof” (§ 28-11-314). Timing matters to validity: an agreement to indemnify against an act NOT YET DONE is void if that act is known to the indemnitor, at the time of doing it, to be unlawful (§ 28-11-302); an agreement to indemnify against an act ALREADY DONE is valid even if known to be wrongful, unless it was a felony (§ 28-11-303). And for construction contracts specifically, § 28-2-2111 is a dedicated indemnification-provisions section that sits alongside the general chapter rather than replacing it: it voids one kind of clause and permits two others, and says nothing about the chapter's default interpretive rules, so both apply to a construction indemnity.
The trap
The Montana code's default interpretive rules for indemnity contracts (§§ 28-11-314 through 317, incorporated by § 28-11-313 “unless a contrary intention appears”) can be displaced by your drafting, but the duty-to-defend default in § 28-11-316 is a real, litigated obligation, not boilerplate, and § 28-11-317 puts a limit on drafting around its consequence: a stipulation that a judgment against the indemnitee binds the indemnitor “is inapplicable if the person indemnifying had a good defense upon the merits that by want of ordinary care the person indemnified failed to establish in the action.” Read City of Dillon carefully before relying on it for the size of the exposure. The district court there did hold the indemnitor “liable to Dillon for the entire amount of the Williams judgment, including the principal amount, interest, and attorney fees”, and the Montana Supreme Court REVERSED: it held the loss fell outside the coverage the parties had agreed, so MMIA “had no duty to provide coverage” to the city and “could not be held liable to Dillon for the liabilities or any other losses it incurred because of its conversion of the Williams pension” (the opinion prints a page number inside that sentence, which is why the quotation is taken in two pieces), and “[t]he District Court is reversed and the judgment against MMIA is vacated.” The passage that reads the two indemnity sections onto those facts is in the dissent, not in the Opinion of the Court. § 28-11-302's future-unlawful-act void rule turns on the indemnitor's OWN knowledge at the time the act is done, not the indemnitee's: First Bank (N.A.) v. Transamerica Insurance read it narrowly, holding it does not bar liability insurance for compensatory damages even where the underlying conduct was malicious, fraudulent, or oppressive. For a construction contract § 28-2-2111 adds a layer the general chapter does not contain. It provides: “Except as provided in subsections (2) and (3), a construction contract provision that requires one party to the contract to indemnify, hold harmless, insure, or defend the other party to the contract or the other party's officers, employees, or agents for liability, damages, losses, or costs that are caused by the negligence, recklessness, or intentional misconduct of the other party or the other party's officers, employees, or agents is void as against the public policy of this state.” Subsection (2) then permits the clause the drafter usually wants: an indemnity, hold-harmless or insure obligation “only to the extent that the liability, damages, losses, or costs are caused by the negligence, recklessness, or intentional misconduct of a third party or of the indemnifying party or the indemnifying party's officers, employees, or agents”, and separately permits requiring a party to buy a project-specific policy such as owner's and contractor's protective, project management protective liability, or builder's risk insurance. Subsection (3) takes two relationships out altogether: “This section does not apply to indemnity of a surety by a principal on a construction contract bond or to an insurer's obligation to its insureds.” So in Montana a comparative-fault indemnity survives while an own-negligence one does not, and neither a surety bond nor an insurer's duty to its own insured is touched by the section. Nothing in § 28-2-2111 displaces §§ 28-11-301 through 317, and no conflict between them appears on the face of either: the construction section is about which allocations of fault are void, and the general chapter is about what an indemnity means and when it pays.
17 authorities
- statuteMont. Code Ann. § 28-11-301enactment date not established
The words that state the rule
Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties or of some other person.
- statuteMont. Code Ann. § 28-11-302enactment date not established
The words that state the rule
An agreement to indemnify a person against an act thereafter to be done is void if the act be known by such person, at the time of doing it, to be unlawful.
- statuteMont. Code Ann. § 28-11-303enactment date not established
The words that state the rule
An agreement to indemnify a person against an act already done is valid, even though the act was known to be wrongful, unless it was a felony.
- statuteMont. Code Ann. § 28-2-2111enactment date not established
The words that state the rule
A construction contract may contain a provision: (a) requiring one party to the contract to indemnify, hold harmless, or insure the other party to the contract or the other party's officers, employees, or agents for liability, damages, losses, or costs, including but not limited to reasonable attorney fees, only to the extent that the liability, damages, losses, or costs are caused by the negligence, recklessness, or intentional misconduct of a third party or of the indemnifying party or the indemnifying party's officers, employees, or agents
- statuteMont. Code Ann. § 28-11-316enactment date not established
The words that state the rule
The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the person indemnified in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct defenses if the person indemnified chooses to do so. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the person indemnified suffered by the person indemnified in good faith is conclusive in favor of the person indemnified against the person indemnifying.
- statuteMont. Code Ann. § 28-2-2111enactment date not established
The words that state the rule
Except as provided in subsections (2) and (3), a construction contract provision that requires one party to the contract to indemnify, hold harmless, insure, or defend the other party to the contract or the other party's officers, employees, or agents for liability, damages, losses, or costs that are caused by the negligence, recklessness, or intentional misconduct of the other party or the other party's officers, employees, or agents is void as against the public policy of this state.
- statuteMont. Code Ann. § 28-2-2111enactment date not established
The words that state the rule
This section does not apply to indemnity of a surety by a principal on a construction contract bond or to an insurer's obligation to its insureds.
- statuteMont. Code Ann. § 28-11-313enactment date not established
The words that state the rule
In the interpretation of a contract of indemnity, the rules prescribed in 28-11-314 through 28-11-317 are to be applied unless a contrary intention appears.
- case220 P.3d 623City of Dillon v. Montana Municipal Insurance AuthorityMont.decided 2009read it at the source ↗
The words that state the rule
The District Court concluded that MMIA had breached its duty to defend and was therefore liable to Dillon for the entire amount of the Williams judgment, including the principal amount, interest, and attorney fees.
- caseFirst Bank (N.A.)-Billings v. Transamerica Insurance Co. (Mont., decided 2 April 1984)First Bank (N.A.) v. Transamerica InsuranceMont.decided 1984
The words that state the rule
Even Transamerica would not argue that Section 28-11-302 erects a bar to liability insurance for compensatory damages, be they awarded for ordinary negligence or malicious, fraudulent or oppressive conduct. The need to reduce financial risks and promote economic stability in modern society has rendered this statute applicable only to conduct defined as criminal.
- statuteMont. Code Ann. § 28-2-2111enactment date not established
The words that state the rule
(b) requiring a party to the contract to purchase a project-specific insurance policy, including but not limited to an owner's and contractor's protective insurance, a project management protective liability insurance, or a builder's risk insurance.
- statuteMont. Code Ann. § 28-2-2111enactment date not established
The words that state the rule
As used in this section, "construction contract" means an agreement for architectural services, alterations, construction, demolition, design services, development, engineering services, excavation, maintenance, repair, or other improvement to real property, including any agreement to supply labor, materials, or equipment for an improvement to real property.
- case220 P.3d 623City of Dillon v. Montana Municipal Insurance AuthorityMont.decided 2009read it at the source ↗
The words that state the rule
Therefore, MMIA had no duty to provide coverage to Dillon on 7 the Williams claim and could not be held liable to Dillon for the liabilities or any other losses it incurred because of its conversion of the Williams pension.
- case220 P.3d 623City of Dillon v. Montana Municipal Insurance AuthorityMont.decided 2009read it at the source ↗
The words that state the rule
The District Court is reversed and the judgment against MMIA is vacated.
- case2017 MT 26State, Judicial Branch, Office of the Court Administrator v. BerdahlMont.decided 2017read it at the source ↗
The words that state the rule
Berdahl briefly argues that § 2-9-305(6)(c), MCA, contradicts § 28-11-316, MCA, which makes an indemnitor who “neglects to defend the person indemnified” liable for a recovery against the indemnitee. However, § 2-9-305, MCA, is the specific provision governing indemnification of government employees and controls over other, general provisions.
- statuteMont. Code Ann. § 28-11-314enactment date not established
The words that state the rule
Upon an indemnity against liability, expressly or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable. (2) Upon an indemnity against claims, demands, damages, or costs, expressly or in other equivalent terms, the person indemnified is not entitled to recover without payment thereof.
- statuteMont. Code Ann. § 28-11-317enactment date not established
The words that state the rule
A stipulation that a judgment against the person indemnified is conclusive upon the person indemnifying is inapplicable if the person indemnifying had a good defense upon the merits that by want of ordinary care the person indemnified failed to establish in the action.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.