Upon receipt of a new claim or lawsuit involving a construction site accident or defect, risk transfer is an important consideration. The starting point is analyzing the subcontract that exists between a general contractor and the subcontractor for a contractual indemnity clause or additional insurance coverage. An additional consideration is whether the subcontract imposes a duty to provide defense.
If the subcontract contains an express indemnification provision, the next question is whether it applies and whether it is valid. In Massachusetts, indemnification clauses are interpreted like any other contract, with attention to language, background and purpose. There is, however, a statute (M.G.L. c. 149, §29C) that may declare void an indemnity provision if it requires the subcontractor to indemnify any party for injury to persons or damage to property not caused by the subcontractor. It is important that the indemnity clause contain savings language (“to the fullest extent permitted by law”). If the validity of the indemnity provision is challenged in litigation, the presence of savings language will allow the court to excise portions of the clause that run afoul of the statute, while the remainder of the indemnity provision remains in force.
Another important consideration is the timing of demands for defense and indemnity. It is important to make the demand for defense and indemnity as soon as practical. A recent case, Consigli Construction Co., Inc. v. Travelers Indemnity Co. et al., 256 F.Supp.3d 62, 65 (D. Mass. 2017), illustrates the potential issues concerning the timing of a demand for defense and indemnity. In this case, the court found that the general contractor did not in a timely fashion make the insurer aware of facts that would be sufficient to bring the general contractor within the scope of an insured under the subcontractor’s insurance policy. Thus, the court held that the insurer had no duty to defend the general contractor during the time period in dispute. It is therefore important to both make the demand for defense and indemnity as soon as possible, while at the same time making sure there are adequate facts to support the demand.