Feb 15

Limits to Common Law Indemnification for Owners Against General Contractor

The New York Court of Appeals in McCarthy v. Turner Construction, Inc., 17 N.Y.3d 369, 953 N.E.2d 794, 929 N.Y.S.2d 556 (2011), addressed the so-called scaffold statute, Labor Law § 240(1), which imposes a nondelegable duty upon owners, contractors and their agents to provide safety devices necessary to protect workers from the risks inherent at elevated-related work conditions.

The specific issue in McCarthy was whether a showing that a general contractor who has the contractual authority to direct, supervise or control the injury-producing work, but did not exercise that authority in connection with plaintiff’s work, is alone a sufficient basis for requiring common-law indemnification.

The Court emphatically said no, rejecting the property owners’ argument equating a party with “mere authority to direct, control or supervise with a party who is actively at fault in bringing about the injury suffered by the plaintiff” and holding that the general contractor was not required to indemnify the property owners for plaintiff’s work-site injury.

In McCarthy, the property owners of a retail storefront sought common-law indemnification from the general contractor (“GC”), who was retained by a tenant to perform certain build-out work. By contract, the GC was required to “supervise and direct the Work … [and] be solely responsible for and have control over construction means, methods, techniques, sequences and procedures for … the Work.” The GC agreement further provided that the GC was required to take all safety precautions to protect the workers from injury.

The GC subcontracted certain cable work to a subcontractor, who in turn retained a sub-subcontractor to perform the actual cable installation work. The injured plaintiff was an employee of the sub-subcontractor.

The property owners, who were not in privity with the GC, sought common-law indemnification from the GC, arguing that the GC, by virtue of its contract with the tenant, contractually assumed sole responsibility and control of the entire project, and undertook the contractual authority (1) to direct, supervise and control the means and method’s of plaintiff’s work, and (2) to institute safety precautions to protect the workers.

To be entitled to common-law indemnification, a party must establish (1) it has been vicariously liable without proof of any negligence or actual supervision on its part; and (2) the proposed indemnitor was either negligent or exercised actual supervision or control over the injury-producing work. McCarthy, 17 N.Y.3d at 377-378.

However, the record contained no evidence that the GC supervised, directed or controlled any aspect of the sub-subcontractor’s work, and the GC did not provide any tools or equipment to the sub-subcontractor who performed the work. The Court noted the findings below that the GC “neither was negligent nor directly supervised and controlled plaintiff’s work.”

Consequently, the Court of Appeals rejected the property owners’ common-law indemnification argument, holding:

“Thus, if a party with contractual authority to direct and supervise the work at a job site never exercises that authority because it subcontracted its contractual duties to an entity that actually directed and supervised the work, a common-law indemnification claim will not lie against that party on the basis of its contractual authority alone.”

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Indeed, the property owners’ vicarious liability under Labor Law § 240(1) may not be passed through to [the GC], the non-negligent, vicariously liable general contractor with whom they did not contract. This result is consistent with the law’s notion of what is fair and proper …”

It is important to note that there was no claim for contractual indemnification before McCarthy. In that regard, a contract with terms sufficiently clear on the issues of supervision, direction or control remains as a source of contractual indemnification. Nevertheless, under the rule enunciated in McCarthy, parties will focus even more intently on the facts concerning who is supervising, directing or controlling the work to determine common-law indemnification as they relate to cases under Labor Law § 240(1).

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