This document discusses construction risk management strategies related to indemnification agreements and additional insured requirements. It provides an overview of how indemnification clauses in construction contracts can be used to shift risk between owners, general contractors, and subcontractors. The document also examines issues around procuring adequate insurance and ensuring parties are properly named as additional insureds. Key topics covered include direct versus vicarious liability, anti-indemnity statutes, insured contracts, and how policy language determines the scope of additional insured coverage.

1. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Construction Risk:Construction Risk:
Indemnification andIndemnification and
Additional InsuredsAdditional Insureds
Daniel W. GerberDaniel W. Gerber
Goldberg Segalla LLPGoldberg Segalla LLP
PENNSYLVANIA NEW YORK NEW JERSEYPENNSYLVANIA NEW YORK NEW JERSEY
Philadelphia BuffaloPhiladelphia Buffalo  SyracuseSyracuse  AlbanyAlbany  Manhattan PrincetonManhattan Princeton
RochesterRochester  White PlainsWhite Plains  Long IslandLong Island

2. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
OWNER

3. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
GENERAL

4. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
SUB

5. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Shifting the Risk:Shifting the Risk:
Indemnification provisionsIndemnification provisions
Additional insured requirementAdditional insured requirement

6. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Indemnification Agreements inIndemnification Agreements in
Construction ContractsConstruction Contracts
• ““[T]he Contractor shall indemnify and[T]he Contractor shall indemnify and
hold harmless the Owner…from andhold harmless the Owner…from and
against claims, damages, losses andagainst claims, damages, losses and
expenses, including but not limited toexpenses, including but not limited to
attorneys’ fees,attorneys’ fees,

7. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Indemnification Agreements inIndemnification Agreements in
Construction ContractsConstruction Contracts
• arising out of or resulting fromarising out of or resulting from
performance of the Work, provided thatperformance of the Work, provided that
such claim, damage, loss or expenses issuch claim, damage, loss or expenses is
attributable to bodily injury…”attributable to bodily injury…”

8. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Indemnification Agreements inIndemnification Agreements in
Construction ContractsConstruction Contracts
• “…“…but only to the extent caused in whole or inbut only to the extent caused in whole or in
part by negligent acts or omissions of thepart by negligent acts or omissions of the
Contractor, a Subcontractor, anyone directly orContractor, a Subcontractor, anyone directly or
indirectly employed by them or anyone forindirectly employed by them or anyone for
whose acts they may be liable, regardless ofwhose acts they may be liable, regardless of
whether or not such claim, damage, loss orwhether or not such claim, damage, loss or
expense is caused in part by a party indemnifiedexpense is caused in part by a party indemnified
hereunder.”hereunder.”

9. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Direct vs. Vicarious Liability:Direct vs. Vicarious Liability:
Anti-Indemnity StatutesAnti-Indemnity Statutes
• Three types of contractual indemnityThree types of contractual indemnity
clausesclauses
– Broad: reimbursement for entire loss
– Intermediate: subject to negligence
– Limited: specific indemnification

10. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Direct vs. Vicarious Liability:Direct vs. Vicarious Liability:
Anti-Indemnity StatutesAnti-Indemnity Statutes
• New York §5-322.1 General ObligationsNew York §5-322.1 General Obligations
LawLaw
– “A covenant…in connection with or
collateral to a [construction] contract …
purporting to indemnify or hold harm-less
the promisee against liability for damage…
resulting from the negligence of the
promisee…whether such negligence be in
whole or in part, is against public policy and
void and unenforceable….

11. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Direct vs. Vicarious Liability:Direct vs. Vicarious Liability:
Anti-Indemnity StatutesAnti-Indemnity Statutes
Itri Brick v. AetnaItri Brick v. Aetna

12. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
CONTRACTUALCONTRACTUAL
INDEMNIFICATIONINDEMNIFICATION
Dutton v. Charles Pankow BuildersDutton v. Charles Pankow Builders
BrooksBrooks

13. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
CONTRACTUALCONTRACTUAL
INDEMNIFICATIONINDEMNIFICATION
DuttonDutton (con’t.)(con’t.)
Provision:Provision:
““. . . To the fullest extent permitted by applicable. . . To the fullest extent permitted by applicable
law. . . .”law. . . .”
. . . .. . . .
““[the general contractor] is partially negligent . . .[the general contractor] is partially negligent . . .
exclud[ing] only liability created by theexclud[ing] only liability created by the
[general contractor’s] sole and exclusive[general contractor’s] sole and exclusive
negligence.”negligence.”

14. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
CONTRACTUALCONTRACTUAL
INDEMNIFICATIONINDEMNIFICATION
Dutton (con’t.)Dutton (con’t.)
Results:Results:
20% liability general contractor20% liability general contractor
80% sub/employer80% sub/employer
PARTIAL INDEMNIFICATIONPARTIAL INDEMNIFICATION

15. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Indemnification ProvisionIndemnification Provision
• Does provision have to be written: Yes.Does provision have to be written: Yes.
• Does it have to be signed?Does it have to be signed?
• Can it be made Retroactive:Can it be made Retroactive: Yes.Yes.

16. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Failure to Procure InsuranceFailure to Procure Insurance
• Requirement to procure and nameRequirement to procure and name
additional insured.additional insured.
• Failure to procure.Failure to procure.
• Party procures own.Party procures own.
• Remedy/Damage.Remedy/Damage.
– Not full indemnification.
– Out of pocket/deductible.
– Certificates of Insurance

17. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Contractual LiabilityContractual Liability
Does not apply where insured is obligatedDoes not apply where insured is obligated
to pay by reason of assumption of liabilityto pay by reason of assumption of liability
in contractin contract

18. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Contractual LiabilityContractual Liability
Exception to exclusion:Exception to exclusion:
Insured ContractsInsured Contracts

19. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Contractual LiabilityContractual Liability
Insured Contract:Insured Contract:
Assume tort liability of another … ifAssume tort liability of another … if
agreement made before damage takesagreement made before damage takes
placeplace

20. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Additional Insured StatusAdditional Insured Status
IMA
(NAMED)
IZZY
(ADD’L)

21. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
• Policy Language ControlsPolicy Language Controls
– Coverage for Additional Insured’s Direct
Liability
– “arising out of”
Additional Insured StatusAdditional Insured Status

22. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
• ““Additional insured…shall be entitled toAdditional insured…shall be entitled to
coverage…arising solely out of yourcoverage…arising solely out of your
negligent performance of ‘your work.’negligent performance of ‘your work.’
Additional Insured StatusAdditional Insured Status

23. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
• No obligation for defense or indemnity underNo obligation for defense or indemnity under
the policy is provided to any additional insuredthe policy is provided to any additional insured
for ‘claims’ or ‘suits’ directly or indirectlyfor ‘claims’ or ‘suits’ directly or indirectly
‘arising from’ the status, actions, or inaction,‘arising from’ the status, actions, or inaction,
including (without limitation) for vicarious,including (without limitation) for vicarious,
derivative or strict liability of said additionalderivative or strict liability of said additional
insured, its agents, servants, contractors orinsured, its agents, servants, contractors or
subcontractors (other than the actions orsubcontractors (other than the actions or
inaction of a named insured or additionalinaction of a named insured or additional
named insured).named insured).
Additional Insured StatusAdditional Insured Status

24. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
• Pecker Iron Works v. TravelersPecker Iron Works v. Travelers
• BP Air v. OneBeaconBP Air v. OneBeacon
Additional Insured StatusAdditional Insured Status

25. Philadelphia  Buffalo  Syracuse  Albany  Manhattan  Rochester  White Plains  Long Island  Princeton
Construction Risk:Construction Risk:
Indemnification andIndemnification and
Additional InsuredsAdditional Insureds
Goldberg Segalla LLPGoldberg Segalla LLP
PENNSYLVANIA NEW YORK NEW JERSEYPENNSYLVANIA NEW YORK NEW JERSEY
Philadelphia BuffaloPhiladelphia Buffalo  SyracuseSyracuse  AlbanyAlbany  Manhattan PrincetonManhattan Princeton
RochesterRochester  White PlainsWhite Plains  Long IslandLong Island