Under Construction - June 2013: New Mexico’s Anti-Indemnity Act and Additional Insured Provisions

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The New Mexico Anti-Indemnity Act related to construction projects was adopted to “promote safety in uniquely hazardous work place environments,” like construction sites, by holding each party accountable for its actions on a construction site. See N.M.S.A. § 56-7-1 (“the Act”). The Act reads, in pertinent part:

  1. A provision in a construction contract that requires one party to the contract to indemnify, hold harmless, insure or defend the other party to the contract, including the other party's employees or agents, against liability, claims, damages, losses or expenses, including attorney fees, arising out of bodily injury to persons or damage to property caused by or resulting from, in whole or in part, the negligence, act or omission of the indemnitee, its officers, employees or agents, is void, unenforceable and against the public policy of the state.
     
  2. A construction contract may contain a provision that, or shall be enforced only to the extent that, it:
    1. requires one party to the contract to indemnify, hold harmless or insure the other party to the contract, including its officers, employees or agents, against liability, claims, damages, losses or expenses, including attorney fees, only to the extent that the liability, damages, losses or costs are caused by, or arise out of, the acts or omissions of the indemnitor or its officers, employees or agents; or
    2. requires a party to the contract to purchase a project-specific insurance policy, including an owner's or contractor's protective insurance, project management protective liability insurance or builder's risk insurance.

N.M.S.A §§ 56-7-1(A) & (B) (emphasis added). The Act also broadly states its intent to apply to any public or private contract that relates to the construction, alteration, repair or maintenance of any real property in New Mexico, and that it is intended to void any contractual provision that would require a party to name another as an “additional insured” in a way that would indemnify the “additional insureds” own negligence. See N.M.S.A. §§ 56-7-1(E) & (F).[1]

What does this mean, in practical terms, for those involved in construction in New Mexico?  Simply put, it means the New Mexico Anti-Indemnity Act is a broad statement of public policy intended to invalidate any provision of any construction contract that would seek to require one party (the indemnitor) to defend, indemnify, hold harmless or insure another party (the indemnitee) for the indemnitee’s own negligence. The two exceptions to this are those listed in the Act:  (1) indemnity for the indemnitor’s own negligence; or (2) a contractual requirement that a party purchase a project specific insurance policy, including an OCP (owner’s or contractor’s protective), PPLM (project management protective liability) or builder’s risk insurance policy. See N.M.S.A. §§ 56-7-1(B)(1) & (2). In fact, New Mexico courts have gone so far as to hold that a contractual provision seeking indemnity for an indemnitor’s own negligence is severable from a provision seeking indemnity for a party’s own negligence. See Holguin v. Fulco Oil Services, L.L.C., 149 N.M. 98, 107, 245 P.3rd 42, 51 (N.M. App. 2010).

Moreover, to the extent the Act does not address the issue (and it likely does), New Mexico choice of law rules have been held to prevent a contracting party from avoiding the Act through a forum selection clause or by entering a contract in a foreign jurisdiction.  See Tucker v. R.A. Hanson Co., Inc., 956 F.2d 215, 217-18 (10th Cir. 1992) (New Mexico’s public policy preventing indemnity provisions on construction projects requires the statute be applied to any construction project based in New Mexico, regardless of where the contract was entered). Thus, the Act will likely control any project that is physically located in New Mexico.

[1] The Act was amended in 2003 to clarify the scope of the Anti-Indemnity Act. Before 2003, the Act (which was originally adopted in 1971) voided any provision within any construction Contract that sought indemnity for an indemnitee’s own negligence, even if it also sought indemnity for the indemnitor’s negligence. Thus, if a particular contract predates July 2003, the earlier version of the Act may apply. If you have any question about this issue, you should consult with counsel.

Topics:  Additional Insured, Anti-Indemnification Statutes, Construction Contracts, Indemnification

Published In: General Business Updates, Construction Updates, Insurance Updates, Labor & Employment Updates, Personal Injury Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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