Construction Law Insights

Travelers Indem. Co. v. Lessard Design, Inc., 2018 U.S. Dist. LEXIS 98937, 2018 WL 2939014 (E.D. Va. June 12, 2018)

In a previous lawsuit, Humphreys & Parnters Architects, LP (“Humphreys) sued Lessard Design, Inc. (“Lessard Design”), PDT Builders, LLC (“PDT”), and other Penrose Group entities (the “Penrose Group”) for copyright infringement. PDT tendered its defense to Lessard Design. After Lessard Design declined to defend PDT, the Penrose Group and PDT tendered their own defense to Travelers Indemnity Company of Connecticut (“Travelers”) pursuant to the Penrose Group’s Commercial General Liability policy (“CGL Policy”). Travelers accepted the tender of defense and paid the attorneys’ fees and costs associated with the defense in the Humphreys litigation. As such, Travelers was subrogated to the rights of its insureds, PDT and the Penrose Group. After granting summary judgment, the district court awarded $792,765.00 in attorneys’ fees to the defendants in the Humphreys litigation, which the parties later settled for $745,000.00. Travelers, as subrogee, then requested that Lessard Design indemnify Travelers for the outstanding attorneys’ fees and costs, which Lessard Design declined. Travelers then filed suit against Lessard.

The court dismissed Count I (breach of contract) of Travelers’ complaint because the indemnification provision relied upon by Travelers was forbidden by Virginia Code § 11-4.1. Virginia Code § 11-4.1 which invalidates and voids indemnification provisions in their entirety if: (i) the contract containing the indemnification provision is a contract relating to construction; (ii) the indemnifying party is a contractor; and (iii) the indemnification provision requires the contractor to indemnify other parties to the contract against liability for damage caused by the other parties’ sole negligence. Travelers’ indemnity request was based on an indemnification provision in a January 25, 2011 Architect’s Agreement (the “Agreement”). Under the Agreement, Lessard Design was responsible for the “Construction Phase” of the building process, including administering the contract between the owner and prime contractor, visiting the project to be familiar with the progress and quality of the work, to guard the owner against defects and deficiencies, and reject nonconforming work. As such, the Agreement was a contract “relating to construction” and was covered by Virginia Code § 11-4.1. Furthermore, Lessard Design was a “contractor” under Virginia Code § 11-4.1 because a party performing a contract related to the construction of a building is a “contractor” regardless of whether or not that party is also an architect. The indemnity provision in the Agreement required Lessard Design to “[i]ndemnify, defend and hold the Owner [and] Owner’s Developer . . . harmless from and against any and all . . . costs and expenses, including, but not limited to reasonable attorneys’ fees and court costs relating to the services performed by the Architect hereunder…” The court held that the Agreement’s indemnity provision was forbidden by Virginia Code § 11-4.1 because it did not make any exception for cases where the liabilities or claims are caused by the negligence of the Owner or PDT. 

PLDR Law Mark Burgin 1 PLDR Law Scott Kowalski 1 Wolf Tom v2 Stout Kenneth 2016

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