A recent decision by Florida’s Fifth District Court of Appeal on Florida’s "anti-indemnity" statute" is one that should catch the attention of lawyers who draft and negotiate construction contracts in Florida.
In CB Contractors, LLC v. Allens Steel Products, Inc., 2108 WL 6579215 (Fla. 5th DCA 2018), a Florida appeals court held that even though a subcontract indemnity provision did not fully comply with the requirements of Section 725.06 of the Florida Statutes, which requires limits on certain indemnity obligations in construction contracts, only the offending portion of the indemnity provision was void and unenforceable under the statute, not the provision as a whole. The court’s decision meant that notwithstanding this statutory violation, the subcontractors could still be contractually required to indemnify the general contractor for the subcontractors’ own acts and omissions.
The dispute in CB Contractors arose out of construction defect claims asserted by a condominium association. Relying on the indemnity provision in its subcontracts, the general contractor asserted claims against several subcontractors and demanded indemnity for the condominium association’s claims. The trial court found that because the contract required indemnity for the contractor’s own negligence without the monetary cap required Section 725.06, Fla. Stat., the entire subcontract provision was void and unenforceable.
In reversing the trial court, the appellate court based its decision on the statutory language that makes "[a]ny portion of any agreement" that does not comply with the monetary limitation requirement on indemnity, void and unenforceable. See § 725.06, Fla. Stat. Instead of considering the entire indemnity provision as the "portion" of the agreement at issue, the court only focused on the part of the indemnity provision that required the subcontractors to indemnify the general contractor for its own negligence, finding only that part of the provision violated the law. So, while the subcontractors’ liability for indemnity would be limited, they would still be responsible to the general contractor for claims to the extent the claims were caused by the subcontractors. Although the opinion does not address whether the subcontract form at issue contained a severance clause, the decision had the effect of essentially creating one for the parties.
This decision is a great reminder to pay close attention to indemnity provisions when negotiating construction agreements in Florida. Given the connection between liability, risk allocation and insurance coverage, the indemnity provision must be a focus of careful drafting and review to ensure that parties actually get the protections they seek in their contracts.