Builders and Contractors Exchange
Weekly Bulletin: 11 july 2008
GC's Implied Indemnity Claim Won't Stand in VA Courts
By: Sheryn E. Joy
Unless a special relationship exists, a general contractor's claim for implied indemnity against a contractor will probably not stand in Virginia courts. For example, Virginia laws say that an owner's causes of action in a lawsuit will usually only stick against the party that they contracted with, which is often the general contractor ("GC"). Therefore, to protect itself, a contract between a GC and another contractor may contain an indemnification clause where the contractor agrees to indemnify the GC when the owner (or another party) sues the GC for problems arising out of the project. When there is no express indemnification agreement, a GC's indemnification claim against the contractor will be implied. However, unless a special relationship exists between the GC and the contractor, a claim by the GC against the contractor for implied indemnity will not hold up in Virginia courts.
A GC's claim for implied indemnity against a contractor will not stand merely because a contractual relationship exists between the parties. There is a dearth of Virginia case law on the specific subject; however federal courts interpreting Virginia law have specifically analyzed implied indemnity arising out of a contractual relationship (written and oral). In one federal case, the court found that implied indemnity did not exist because if the parties desired to insert an indemnification agreement in their written contract, they could have done so expressly in the contract. The court found that although an implied right of indemnity may be read into some contracts, only unique factors or a special relationship between the parties give rise to such a right. In another federal case interpreting Virginia law, the parties had no written contract and the court found that no claim for implied indemnity could stand because there were no unique factors or no special contractual relationship between the parties. In other words, implied indemnity does not exist simply as a matter of right.
Because of the lack of Virginia case law, it is difficult to assess when a "special relationship" exists between a GC and a contractor which would give rise to implied indemnity. One United States Supreme Court case found that a "special relationship" existed between a ship owner and a stevedoring company because the stevedoring company had agreed to perform all the ship owner's stevedoring operations. Another federal case found that certain provisions from federal statutes and Interstate Commerce Commission regulations created a special contractual relationship between a shipper and a common carrier which failed to secure a load properly. Thus, it is difficult for a GC to establish a "special relationship" with a contractor because there is no clear guidance on the matter.
Therefore, if a general contractor intends for the contractor to indemnify it, the GC should have a written, express indemnification clause inserted into the contract. Otherwise, unless there is something that gives rise to a "special relationship," a general contractor's claim for implied indemnity against a contractor will probably fail in a Virginia court.
Questions?
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.