Construction Litigation In Indiana: 2022 Year In Review

• Jurisdiction: Indiana,United States
• Law Firm: Ice Miller LLP
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Arbitration & Dispute Resolution, Construction & Planning
• Author: Mr Nathaniel Uhl and James Bulow
• Published date: 13 January 2023

A number of opinions issued by Indiana appellate courts in 2022 addressed disputes related to construction projects. The most significant of such opinions focused on four aspects of the law that have the potential to impact many construction projects: who may assert a mechanic's lien, enforcing arbitration clauses, responsibility for injuries sustained during the course of projects, and the scope of additional insured insurance coverage.

Mechanic's Liens

The Indiana Supreme Court increased the scope of the mechanic's lien remedy, permitting a material supplier who supplies materials to another material supplier to assert a mechanic's lien claim, in Service Steel Warehouse Co., L.P. v. United States Steel Corp. 182 N.E.3d 840 (Ind. 2022). For the past century, Indiana courts ruled that those supplying materials for a construction project may assert a mechanic's lien only if they supplied their materials to someone who performed work on-site. Plotting a new course, the Indiana Supreme Court analyzed the language of the statute and found the "mechanic's lien statute unambiguously confers broad lien rights on suppliers and does not require them to furnish materials to one who performs on-site work." In other words, "a supplier that furnished materials for the erection of a building, regardless of the recipient, can have a lien on that building and the accompanying land." (Emphasis in the original.) The Court noted that, while there may be valid reasons to prohibit supplier-to-supplier-based liens, the legislature needs to decide if such liens should be barred, not the courts.

In Service Steel, the supplier provided steel to another supplier who then fabricated it for the project. The steel supplier identified the project on its invoices, making it clear the steel was intended for the specific project. Often materials purchased by a supplier from another supplier are not earmarked for a specific project (i.e., studs, wiring, etc.), and the supplier purchasing the materials then supplies the materials to multiple projects. Such second-tier suppliers will have difficulty asserting mechanic's liens. But this opinion represents a broadening of the class of potential lien claimants on a project, in particular for suppliers providing specialty materials. Owners should make sure contracts require downstream subcontractors and material suppliers to provide lien waivers and be even more diligent in making sure such lien waivers are provided during the course of the...