Is this indemnity in our construction subcontract enforceable in North Carolina?
Not for the promisee's own negligence, and not as a duty to defend a design professional. N.C.G.S. § 22B-1(a) makes provisions in, or in connection with, a construction agreement or design professional agreement that purport to require a promisor to indemnify or hold harmless the promisee, its independent contractors, agents, employees or indemnitees against liability for damages arising out of bodily injury or property damage proximately caused by or resulting from the negligence, in whole or in part, of the promisee or its people, against public policy, void and unenforceable, while the same subsection preserves an indemnity 'against liability for damages resulting from the sole negligence of the promisor, its agents or employees'. Subsection (b) adds a fault condition of its own: an indemnity against losses, damages or expenses is void unless the fault of the promisor or its derivative parties is a proximate cause of the loss, damage or expense indemnified. Subsection (c) then voids the DEFEND obligation where design professional services are involved: a provision requiring a design professional to defend a promisee or its people against liability or claims for damages or expenses, including attorney's fees, proximately caused or allegedly caused by professional negligence in whole or in part of the promisor, the promisee or their derivative parties, whether the claim is brought in tort or in contract, is against public policy, void and unenforceable. Read (c) with the definition it uses: 'defend' is defined by (f)(2) as any obligation to pay for or furnish counsel at the promisor's expense to defend the promisee or its people against third-party claims in any court or other tribunal 'before the court or tribunal has reached a final determination of fault', so what (c) strikes is the obligation to fund the defence before fault is determined.
The trap
The scope sections decide more cases than the voiding sections. 'Construction agreement' is defined by § 22B-1(f)(1) as any promise or agreement in, or in connection with, a contract relative to the design, planning, construction, alteration, repair or maintenance of a building, structure, highway, road, appurtenance or appliance, including moving, demolition and excavating connected with it, so a pure supply or services contract untied to that work, and which is not a design professional agreement under (f)(5) either, is outside the section, and this rule says nothing about it. Subsection (e) carves out two more things: the section does not affect an insurance contract, workers' compensation or any other agreement issued by an insurer, and it does not apply to lien or bond claims asserted under Chapter 44A. And subsection (d) is a saving provision drafters miss: attorneys' fees, litigation or arbitration expenses and court costs actually incurred by the promisee defending THIRD PARTY claims are not excluded from an indemnity enforceable under (a) and (b), if the fault of the promisor or its derivative parties is a proximate cause of those fees or costs. The defined terms carry that weight. 'Fault' under (f)(7) includes a breach of contract and a violation of applicable statutes or regulations, not only a tort. 'Derivative parties' under (f)(3) reaches a party's subcontractors, agents, employees and any other person or entity for which the party may be liable or responsible as a result of any statutory, tort or contractual duty, so the fault condition in (b) and the saving provision in (d) can be satisfied by fault well down the chain. And the (c) defend ban runs only against a 'design professional', defined by (f)(4) as a person or entity licensed under and providing professional services regulated by Chapters 83A, 89A, 89C, 89E or 89F, with 'design professional services' in (f)(6) tied to the same licensure chapters, so a consultant whose work needs no licence under those chapters is not reached by (c) on the section's own words. NOT ASSERTED: the North Carolina common law of indemnity outside § 22B-1, and whether an additional-insured endorsement achieves what (a) forbids. No opinion on either was read, and published opinions mentioning § 22B-1 do exist and have not been read here.
11 authorities
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Provisions in, or in connection with, a construction agreement or design professional agreement purporting to require a promisor to indemnify or hold harmless the promisee, the promisee's independent contractors, agents, employees, or indemnitees against liability for damages arising out of bodily injury to persons or damage to property proximately caused by or resulting from the negligence, in whole or in part, of the promisee, its independent contractors, agents, employees, or indemnitees, is against public policy, void and unenforceable.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Nothing contained in this subsection shall prevent or prohibit a contract, promise or agreement whereby a promisor shall indemnify or hold harmless any promisee or the promisee's independent contractors, agents, employees or indemnitees against liability for damages resulting from the sole negligence of the promisor, its agents or employees.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
This section shall not affect an insurance contract, workers' compensation, or any other agreement issued by an insurer. This section shall not apply to lien or bond claims asserted under Chapter 44A of the General Statutes.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Construction agreement. - Any promise or agreement in, or in connection with, a contract or agreement relative to the design, planning, construction, alteration, repair, or maintenance of a building, structure, highway, road, appurtenance, or appliance, including moving, demolition, and excavating connected therewith.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Provisions in, or in connection with, a construction agreement or design professional agreement purporting to require a promisor to indemnify or hold harmless the promisee, the promisee's independent contractors, agents, employees, indemnitees, or any other person or entity against losses, damages, or expenses are against public policy, void, and unenforceable unless the the fault of the promisor or its derivative parties is a proximate cause of the loss, damage, or expense indemnified.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
(3) Derivative parties. - With respect to a party, any of that party's subcontractors, agents, employees, or other persons or entities for which the party may be liable or responsible as a result of any statutory, tort, or contractual duty.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Provisions in, or in connection with, a construction agreement that includes design professional services or a design professional agreement purporting to require a design professional to defend a promisee, the promisee's independent contractors, agents, or employees, the promisee's indemnitees, or any other person or entity against liability or claims for damages or expenses, including attorney's fees, proximately caused or allegedly caused by the professional negligence, in whole or in part, of the promisor, the promisee, or their derivative parties, whether the claim is alleged or brought in tort or contract, is against public policy, void, and unenforceable.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
(4) Design professional. - A person or entity who is licensed under and provides professional services regulated by Chapters 83A, 89A, 89C, 89E, or 89F of the General Statutes. (5) Design professional agreement. - Any promise or agreement in, or in connection with, a contract or agreement with a design professional to provide design professional services. (6) Design professional services. - A service or work performed by a design professional for which licensure is required under Chapters 83A, 89A, 89C, 89E, or 89F of the General Statutes.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Defend. - Any obligation to pay for or furnish counsel at the expense of the promisor to defend a promisee, the promisee's independent contractors, agents, employees, or indemnitees against claims alleged or brought against the promisee, the promisee's independent contractors, agents, employees, or indemnitees by a third party alleged or brought in any court or other tribunal, including forms of alternative dispute resolution required by law or contract, before the court or tribunal has reached a final determination of fault.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Nothing in this section shall be interpreted to exclude from any indemnity or hold harmless provisions enforceable under subsections (a) and (b) of this section attorneys' fees, litigation or arbitration expenses, or court costs actually incurred by the promisee to defend against third party claims alleged in any court, tribunal, or alternative dispute resolution procedure required of the promisee by law or by contract, if the fault of the promisor or its derivative parties is a proximate cause of the attorney's fees litigation or arbitration expenses, or court costs to be indemnified.
- statuteN.C.G.S. § 22B-1enactment date not established
The words that state the rule
Fault. - A breach of contract; negligent, reckless, or intentional act or omission constituting a tort under applicable statutes or common law; or violations of applicable statutes or regulations.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.