2008 Amendment to §2782 - Special Issue by Ray Coates

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The Legislature has made another attempt to try to correct the indemnification mess in the residential construction arena. This is its third attempt.

In 2005, the Legislature changed the framework for analysis of indemnity contracts entered into after December 31, 2005. Under that framework, clauses were analyzed as to whether they were a Type I, Type II or Type III clause, that is, whether they provided indemnity for the general contractor’s active or passive negligence. The 2005 bill provided that residential construction contracts containing Type I and Type II indemnity clauses favoring builders against subcontractors entered into after January 1, 2006 were unenforceable. This meant subcontractors could not be compelled by contract to indemnify the contractor for construction defect claims arising out of the negligence of the builder, or the builders’ agents or other independent contractors. The bill did preserve the defense obligations of subcontractors’ insurers under additional insured endorsements.

In 2007, an amendment to the law was signed, providing that contracts entered into after January 1, 2008 which included any Type I or Type II indemnity agreement against a subcontractor and in favor of a general contractor not affiliated the builder were also unenforceable. This was an effort to outlaw an attempt to avoid the statute by simply hiring another general contractor to act in the builder’s stead in making contracts with subcontractors.

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