September 10, 2012
New Jersey Court Emphasizes Need for Precision in Indemnification Agreements
Written By: Ronald L. Perl and Jonathan H. Katz
A recent Superior Court decision reminds that contracts between community associations and service vendors, particularly for indemnification, must be precise. In Franchini v. Beverly Hills Terrace Condominium Association, decided August 27, 2012, the Appellate Division reversed a ruling in favor of the condominium association against its snow removal contractor for reimbursement of litigation expenses because the parties’ indemnification agreement did not expressly indemnify the association for claims that the association itself was negligent.
The Beverly Hills Terrace Condominium Association contracted with Greenview Landscaping Contractors to perform snow removal and salting services. The contract contained an indemnification clause by which Greenview agreed "to indemnify and save harmless the Association from liability for any damage or loss that occurs during or in connection with the Contractor’s performance of the contract work, whether it be caused by the negligence or fault of the Contractor, its agents, employees, subcontractors or servants, or otherwise. It is the intent of the parties that the contractor’s indemnification and save harmless obligations hereunder are not contingent upon contractor’s fault." The contract contained no explicit reference to claims against the Association for its own negligence.
Franchini, a unit owner, injured herself when she slipped on an icy sidewalk in the condominium, and she sued both Greenview and the Association. She argued at trial that each defendant had committed negligence. The jury, however, found that neither defendant had been negligent and rendered a verdict against the plaintiff. Following trial, the Association moved for an order making Greenview responsible to reimburse the legal fees and costs the Association had expended in defending itself in the case, arguing that the referenced language in the indemnification clause covered those expenditures. The trial court entered an order in favor of the Association, but on appeal, the Appellate Division reversed.
The appellate court explained that the law is that an indemnity contract will not be construed to indemnify the indemnitee for losses resulting from its own negligence unless the intention to do so is expressed in unequivocal terms. In this case, the language of the indemnification clause referred to the contractor’s performance of its work and did not mention the Association’s negligence at all. The court rejected the Association’s argument that by not limiting the indemnification to cases where the contractor was at fault, the clause also covered the negligence of the Association. The court concluded that the contract lacked Greenview’s “clear and explicit assumption of indemnification responsibility for the Association’s negligent conduct.” Since the plaintiff alleged separate negligent acts by the Association and the contractor, the Association was responsible for its costs in defending the negligence claims against it and could not pass those costs to the contractor.
Thus, if the parties to a contract agree that one party will indemnify the other even against claims of the indemnitee’s own negligence, that must be made explicit in the contract. In fact, it is important that contract terms clearly set forth the parties’ intentions; if a written contract does not contain a specific obligation that one of the parties thought was included, that obligation may not be enforceable. For example, if the Association seeks a warranty from the vendor, it should make sure that the contract specifies the warranty and clearly sets forth its terms. Consultation with, and drafting or review of contracts by, the association’s attorney helps assure that all provisions intended by the parties are actually included.
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