Business and Legal Insights

Nothing can be certain, except death, taxes, and arguments about the enforceability of indemnification provisions in construction contracts.  Indeed, the most commonly raised defense to a demand for indemnification is that the provision fails to comply with Florida’s Anti-Indemnification Statute, Section 725.06, Fla. Stat.  This section applies to limit indemnification in construction contracts where an indemnitor (often a subcontractor) is required to indemnify an indemnitee (often a general contractor) for the indemnitee’s own negligence unless the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract.  Simple enough.

Or is it?  Just because the statute is titled “Construction contracts; limitation on indemnification” does not mean it can be applied with a broad brush over all construction contracts.  To the contrary, Section 725.06 clearly limits its applicability to construction projects impacting a “building, structure, appurtenance, or appliance.  While a majority of construction contracts fall squarely within this definition, utility contracts often do not.  One such contract was recently at issue in an opinion issued by Florida’s Fourth District Court of Appeals.

In Blok Builders, LLC v. Katryniok, 43 Fla. L. Weekly D253b (Fla. 4th DCA 2018), a utility owner hired a general contractor to overhaul its underground utilities.  The contractor subcontracted the excavation and site work to Blok Builders, LLC (“Blok”).  Not surprisingly, the subcontract between the contractor and Blok required Blok to indemnify the contractor for losses caused, in whole or in part, by any act, omission, default, or negligence of the contractor.

However, when an injury occurred during the project and the contractor looked to Blok for indemnity, Blok refused, contending the provision was subject to Section 725.06 and void and unenforceable as it failed to contain a monetary limitation.  The contractor disputed Blok’s contention, arguing that the incorporated prime contract satisfied the requirement.  Cross motions for summary judgment were filed and the contractor prevailed.

In what may have been a surprise to both parties, the Fourth District Court of Appeals ignored the issue of the monetary limitation and instead, pointed to the clear and unambiguous limiting the applicability of Section 725.06 to contracts dealing with the “. . . construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance . . .”  Since the scope of the subcontract at issue dealt with the installation and maintenance of underground utilities and was otherwise unrelated to any buildings, structures, appurtenances, or appliances, the court held Section 725.06 was inapplicable and could not operate as a limitation on Blok’s indemnification.  In so ruling, the Fourth District also noted its same analysis would apply to above ground utilities, and, presumably, and any other contract whose scope is not tied to “buildings, structures, appurtenances, or appliances.” 

 Simple enough.