Jeremy Stewart – June 22, 2013
In Utah, an agreement to indemnify in a construction contract is governed by Utah’s anti-indemnification statute, Utah Code Ann. § 13-8-1. Utah’s anti-indemnification statute defines an “indemnification provision” as an agreement between any combination of construction managers, general contractors, subcontractors, sub-subcontractors or suppliers (collectively, “construction workers”) “requiring the promisor to insure, hold harmless, indemnify, or defend the promisee against liability” arising out of bodily injury, property damage or economic loss if “the damages are caused by or resulting from the fault of the promisee” or others. See Utah Code Ann. § 13-8-1(1)(a)-(b). Utah’s anti-indemnification statute declares that any such indemnification provision—that requires indemnity for either the sole or partial negligence of the indemnitee—“is against public policy and is void and unenforceable.” See Utah Code Ann. § 13-8-1(2).
Utah’s anti-indemnification statute provides an exception for indemnification agreements that require construction workers to hold the owner (who is not acting as a construction worker) harmless against joint or concurrent liability. See Utah Code Ann. § 13-8-1(3). Such an indemnification provision is enforceable as long as the owner was not operating as a “construction worker” at the time the liability arose. See Utah Code Ann. § 13-8-1(3)(b). In such a case, Utah’s anti-indemnification statute mandates that if the owner has protected itself in this manner, the portion of the damages caused by the owner “shall be apportioned among the [construction workers] pro rata based on the proportionate share of fault of each of the [construction workers].” See Utah Code Ann. § 13-8-1(3).
Importantly, Utah’s anti-indemnification statute does not prohibit agreements requiring one party in a construction contract to purchase insurance that covers liability stemming from the other party’s negligence. Such “additional insured” provisions are common in construction contracts and typically require one party to purchase insurance naming the contractor, owner or others as an insured party in, for example, a CGL (Commercial General Liability) policy. In Meadow Valley Contractors, Inc. v. Transcontinental Ins. Co., 2001 UT App 190, the defendant insurance company argued that Utah’s anti-indemnification statute voids all such “additional insured” provisions because it prohibits any “agreement . . . requiring the promisor to insure . . . .” See 2001 UT App ¶ 18; see also Utah Code Ann. § 13-8-1(1)-(2). The Utah Court of Appeals held, however, that “the plain meaning of the statute voids only agreements requiring one party in a construction contract to personally insure against liability stemming from the other party’s negligence.” 2001 UT App ¶ 18 (emphasis supplied). An agreement to procure insurance is not an agreement to insure, but merely an agreement to allocate the cost of procuring insurance from third parties, and does not, therefore, violate Utah’s anti-indemnification statute. Id. ¶¶ 18-19.