As it becomes more commonplace to receive tender demands from general contractors (“GCs”), the analysis required continues to evolve. Gauging the strength (or validity) of one requires assessing a variety of factors. Below is a short, but by no means exhaustive, checklist of factors to assess when you analyze a GC’s tender demand:
Is the Tender Demand Based on a Contractual Indemnity Provision?
The world of construction contracts is as much of a mosaic as the various projects you see going up across Florida. Many times you will receive a tender demand quoting directly an obvious indemnification provision from a contract. However, oftentimes the contracts either do not contain these provisions at all, or the “contract” is simply a signoff on a bid. The latter situation may create no contract-based indemnity obligation at all (instead leaving only common law indemnity as an option). Conversely, if there is a contract-based indemnity provision, a close review of its language is key.
What Does the Indemnification Provision Say?
A close reading of the provision will generally tell you everything you need to know. It will set forth:
Who is an indemnitee?
What constitutes an indemnification trigger (i.e., claims “arising from” or “caused by” the subcontractor in the performance of the work)? Whether the indemnification provision may encompass indemnity for an indemnitee’s own negligence (e.g., the GC self-performed some defective work and now wants the subcontractor to indemnify them for their own fault (which gives rise to a separate analysis under section 725.06, Florida Statutes).
Why Is the Indemnitee Seeking Indemnity?
This is a more nuanced inquiry that is extremely important. For example, assume that an indemnity provision clearly does not encompass indemnity for the indemnitee’s own negligence. Further presume the underlying allegations against a general contractor are restricted solely to a GC-specific duty (such as coordination of trades).
Is the indemnity provision at issue triggered by this claim?
Similarly, consider the same scenario but the indemnity alters the provision to arguably encompass indemnity for the indemnitee’s own negligence. Have you run the provision against the factors outlined in section 725.06, Florida Statutes? Does it hold up?
Is the tender premature?
Consider a situation where the provision appears to hold up under any analysis. What is its timing component? As noted above, many provisions require that the claims or damages be “caused by” or “arise from” the specific subcontractor’s acts or omissions. The inquiry here is whether, by virtue of the language, the obligation itself is not triggered until there is a factual determination (i.e., a judgment of fault). Depending on the language, the indemnification demand may simply be premature until trial. However, an extremely careful review of the provision is necessary since many are arranged to be triggered far sooner than an actual judgment. The tips set out above are but a few grains of sand in the vast world of indemnification in construction, but we are here to help you navigate it all.
For more information, contact construction@kubickidraper.com.
