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Englert v. The Home Depot

A-7058-03T3 (N.J. Super App. Div. 2006) (Unpublished)

AGREEMENTS; INDEMNIFICATION — An indemnification agreement between two parties in which one party will indemnify the other for the other’s own negligence, by its terms, must clearly and unequivocally show that to be the parties’ intention.

A general contractor contracted to construct a new store. The general contractor retained a subcontractor to perform structural steel work for the project. The sub-contract between these parties included an article entitled “Indemnification.” That article addressed under which terms the subcontractor would indemnify the general contractor. It contained phrases that would allow for an argument that the subcontractor, provided it was negligent to a third party, would also indemnify the general contractor for the general contractor’s own negligence to the third party. The sub-contractor, in a rider, also contained a separate and different indemnification provision without those crucial phrases. All forms were drafted by the general contractor.

An employee of a sub-sub-contractor injured himself while welding structural steel components and sued both the general contractor and the subcontractor on the basis of negligence. A settlement was reached prior to trial and that amount was to be apportioned by a jury trial. In a pretrial motion, the lower court held that the subcontractor was required to indemnify the general contractor unless the jury found the general contractor solely negligent. The jury found the sub-contractor twenty-five percent liable, the general contractor fifteen percent liable, and the employee’s employer sixty percent responsible for the employee’s accident. By the terms of the sub-contract, the sub-contractor was to be liable to the general contractor for the sub-sub-contractor’s share. The lower court ordered the sub-contractor to indemnify the general contractor for the entire settlement, plus reasonable attorneys’ fees and costs. The subcontractor appealed.

On appeal, the Appellate Division addressed whether the indemnity, as required by law, contained an unequivocal expression of an intention to indemnify the general contractor for its own negligence. The Court noted that an indemnity agreement had to specifically reference the negligence or fault of the indemnitee. It found the allegedly triggering language within the indemnification article sufficiently ambiguous as to who the subcontractor would indemnify and under what specific terms. It further found that the indemnity agreement in the rider did not contain the critical phrases at all. In fact, the rider further contributed to the ambiguity. In sum, the Court held that the indemnity agreement failed to express, in unequivocal terms, the intention of the subcontractor to indemnify the general contractor for its own negligence. Moreover, the Court found that all documents had been drafted by the general contractor, and held that an ambiguous contract must be construed against the drafter. Therefore, the Court reversed the order requiring the subcontractor to indemnify the general contractor for the entire settlement amount and for attorney fees and costs, and directed the subcontractor to indemnify the general contractor only for the full settlement amount less the percentage of the general contractor’s negligence.

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