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January 30, 2015

New Form of Indemnity Identified in Non-Precedential Decision

The Superior Court, in a non-precedential opinion, recently acknowledged the doctrine of intermediate form indemnity. In Bracken v. Burchick, (October 10, 2014), a general contractor entered into a subcontract for masonry work on a construction project. The subcontractor employed the decedent plaintiff who was injured and killed while performing work on the project.The court considered (1) whether the agreement between the two parties required the subcontractor to indemnify the general contractor under certain cirumstances, and (2) whether the trial court erred in denying the general contractor’s request to join the plaintiff’s employer/the subcontractor as an additional defendant based on the agreement.

The court ruled that, based on the contractual language between the parties, the general contractor should have been permitted to join the plaintiff’s employer/the subcontractor as an additional defendant where the agreement between the two parties required the subcontractor to indemnify the general contractor under certain cirumstances.

The court’s holding was based on the specific terms of the contract between the parties. In this analysis, the court upheld general principles regarding contractual indemnifications. In reaching its decision, the court acknowledged the immunity provision of the Worker’s Compensation Act, but also accepted that the immunity can be waived by way of an indemnity contract with a third party. The court held that any such waiver must be clear and unequivocal. Any vagueness will be ruled in favor of immunity. However, it also held that “if the indemnification agreement is clear and includes indemnification in the event of either the indemnitee’s or the employer’s own negligence, its enforceability does not require that the employer, in addition, expressly and in haec verba waive the immunity provided by the Act.”

After considering the contractual language at issue, the court held as follows:

  • An intermediate form indemnity requires the indemnitor to save and hold harmless the indemnitee from all liability excluding that which arises out of the indemnitee’s sole negligence.
  • The court will not assume the indemnitor intended to assume this responsibility unless the express terms of the contract put it beyond doubt. Therefore, it is required that contracting parties must clearly and unequivocally provide that (1) the employer/indemnitor waives immunity under the Act by stating that the employer/indemnitor will indemnify a third party against claims by employees of the employer/indemnitor, and (2) the employer/indemnitor agrees to indemnify a third party for liability arising from acts of the employer/indemnitor which result in harm to the employer/indemnitor’s employees.
  • The court rejected the general contractor’s argument that the language indicating that the subcontractor would indemnify the general contractor “whether or not” the general contractor was alleged to be negligent was sufficient to impose indemnification liability on the subcontractor for negligence arising from the general contractor’s work. The court explained that the language failed to sufficiently express, by clear and unequivocal language, that the subcontractor agreed to indemnify the contractor for the contractor’s negligent acts under any circumstances. The court explained that such clause merely clarifies that the subcontractor will indemnify the general contractor for the subcontractor’s negligence, and that any contributory negligence that may be attributed to the subcontractor will not bar the general contractor from indemnification for damages arising from the subcontractor’s negligence.
  • Broad and general language stating that the subcontractor would “assume the entire liability and … defend any action, pay all costs … and satisfy any judgment”was also rejected as insufficient. Based on such generalized language, the court refused to assume the parties intended to enter into an intermediate form indemnity agreement.
  • However, the court held that because the subcontractor agreed to indemnify the general contractor for the entire liability if the liability stemmed from the subcontractor’s partial or sole negligence, such language was sufficient as it provides for indemnification and set further the terms of indemnification. (If any person (including employees of the subcontractor ) suffers injury or death … as a result, in whole or in part of neflignce of the subcontractor … then the subcontractor shall assume the entire liability thereof.)
  • In reaching its conclusion, the court also relied on the following language contained in the contract. (The subcontractor agrees to indemnify the general contractor against any and all claims … arising from or relating to the work performed by the subcontractor on the project … whether or not the general contractor was alleged to be negligent, unless the general contractor was alleged to be solely negligent.)
  • The court held that this language is sufficient to establish the parties’ intent to enter into an intermediate form indemnity agreement.
  • The court further held that the subcontractor also explicitly waived the immunities provided by the Act. (“[Subcontractor]’s indemnity obligations under this paragraph shall not be limited by applicable worker's compensation laws, and, with respect to this indemnity, [Subcontractor] hereby expressly waives all immunities and defenses it may have under such Laws.”). Therefore, the court found that the subcontractor agreed to indemnify the general contractor for the entire liability if the liability stemmed from the subcontractor’s partial or sole negligence.
  • It ruled that the trial court erred by dismissing the general contractor’s additional defendant complaint and reversed the trial court order dismissing the additional defendant complaint, and remands the matter to the trial court for a determination regarding the extent, if any, of the subcontractor’s negligence for the underlying liability in this matter.
What It Means to You

While the doctrine of intermediate form indemnity has not been widely discussed in Pennsylvania law, it is merely an extension and application of long standing principles regarding the requisite clarity and intent of the parties necessary when interpreting contracts. This case should be monitored for future developments in that if the decision remains non-precedential, it will simply be anomalous, while if taken up by the Supreme Court, could further refine evaluations of indemnity provisions.