COVID-19 Resource Center

November 27, 2007

Indemnification Requires Clear Statement Of Intent

Owner hired general contractor, Thermal C/M, to construct an addition to its facility. In turn, Thermal C/M contracted with Refrigeration Design and Services (RDS) to provide refrigeration equipment, including an overhead air handling unit. RDS was subject to a contract with York Refrigeration to promote and sell York products. This contract provided that RDS would indemnify York as follows:

[RDS] assumes and agrees to indemnify, defend and hold [York] harmless from and against any and all liability … with respect to claim for bodily injury, or death, or property loss or damage by whomsoever such claims may be asserted which are based in whole or in part upon any act or omission on the part of [RDS] … in connection with the performance of any obligation of [RDS] under this Agreement.

RDS proceeded to install the overhead air handling unit. Subsequently, the unit failed and destroyed food products stored in the facility.

Following trial, the jury awarded in excess of $7 Million in damages and assigned 75% liability to York and 25% liability to RDS. York sought indemnification from RDS, which the trial court granted. RSD appealed.

On appeal, the PA Superior Court denied York request for indemnification from RDS for York's own negligence. The Court held that the indemnification clause failed to include clear and unequivocal language that required indemnification for York’s own negligence, otherwise known as the “Perry/Ruzzi Rule.”

Furthermore, the Superior Court found that the trial court erred in relying on the case of Topp Copy v. Singletary, which held that an exculpatory clause immunizing a landlord from claims of negligence asserted by a tenant need only be “plainly expressed.” The Superior Court found the Topp Copy case and its plain language standard to be inapplicable because such exculpatory clauses in lease agreements are not as “hazardous” as indemnification agreements. 

What It Means to You

When faced with either a contractual indemnification clause or an exculpatory provision, the precise language employed in the document is paramount. This case clarifies the standard applicable to contractual indemnity versus an exculpatory clause. To obtain indemnification for one’s own negligence, the contractual language must be expressed in unequivocal terms. However, an exculpatory clause, which immunizes a party from its own negligence, requires less precision and need only be stated in plain terms. In these types of cases, iIt is important to determine (1) whether you have an indemnity or exculpatory provision and (2) whether the language used meets the language requirements in order to effectively protect against one’s own negligent acts.
 

Sources

Ocean Spray Cranberries, Inc. v. Refrigerated Food Distributors, Inc., 2007 WL 2984121 (Pa. Super. October 15, 2007)