ContrACTUAL Liability: Challenges And Considerations An Indemnitee May Face By Failing To Allow An Indemnitor To Participate In Settlement

Construction defect litigation often involves a number of parties and cross and third-party claims, stemming from a host of claimed construction, design and development defects at any given site. A number of factors are considered by a party when determining whether to settle a claim in a construction defect case. One factor that is often considered by a party is whether he/she/it can seek reimbursement of money paid in a settlement from another through a claim for contractual indemnification. An example in the construction context is when a general contractor seeks contractual indemnity from a subcontractor for money paid to settle a claim arising from the subcontractor's defective work.

A critical factor, often overlooked by the party seeking reimbursement (the indemnitee), is the indemnitte's burden of proof in a subsequent suit against the party from whom indemnity is sought (the indemnitor). Under Florida law, the indemnitee's burden of proof is dictated by whether the indemnitor was given notice and opportunity to review, pass upon or participate in the settlement. This article discusses the relevant law and challenges an indemnitee may face in a subsequent suit if the indemnitee fails to provide an indemnitor notice and opportunity to review, pass upon or participate in the settlement in an underlying construction defect case.

To establish a cause of action for contractual indemnity under Florida law, a plaintiff must plead and prove the existence of a valid contractual right to indemnification and the inclusion of the claim within the scope of the contractual duty. Dade County School Bd. v. Radio Station WQBA, 731 So. 2d 638, 642-43 (Fla. 1999). The terms of the agreement will dictate whether the indemnitor is obligated to reimburse the indemnitee for a particular contractual indemnity claim. Id. at 642 (Fla. 1999); First Baptist Church of Cape Coral, Florida, Inc. v Compass Constr., Inc., 115 So. 3d 978, 986 (Fla. 2013). Construction contracts often include indemnity provisions. An example of a contractual indemnity provision in a construction contract may state as follows:

Indemnification: Subcontractor agrees to indemnity and hold the general contractor harmless from any and all claims, loss, damage, injury, liability, and expense arising or incurred in connection with the subcontractor's negligence or work on XYZ project.

Assume a general contractor contracts with subcontractors to perform various scopes of work to complete...