Construction Project Indemnification Upheld

JNJ Foundation Specialist, Inc. (“JNJ”) contracted with D.R. Horton, a developer, to pour entry sidewalks for a subdivision. Plaintiff Gary Hall was driving near the front of the subdivision when he saw construction barrels in the middle of the travel lane. Hall stopped his vehicle and was rear-ended by another vehicle. Hall sued D.R. Horton alleging that Horton was negligent in entrusting operation of the construction site to a John Doe which had failed to adequately mark the lane closure and created a hazard. D.R. Horton answered the complaint and filed a third-party complaint against JNJ and its insurer, Columbia National Insurance Company (“Columbia National”). D.R. Horton alleged that JNJ was liable for refusing to provide a defense and indemnification pursuant to the construction contract entered into between JNJ and D.R. Horton. The trial judge granted summary judgment for D.R. Horton and found that, contractually, JNJ was liable for indemnification. The Court of Appeals agreed.

JNJ argued that the indemnification agreement did not apply because: (a) there was no evidence that JNJ placed the construction barrels in the roadway; (b) there was no evidence that the barrel placement was the direct and proximate cause of Hall’s injury; and (c) the complaint did not allege facts that came within the scope of JNJ’s work. The contract provided that JNJ had a duty to defend and indemnify D.R. Horton for any claims “in any way occurring, incident to, arising out of, or in connection with . . . the work performed or to be performed by contractor or contractor’s personnel, agents, suppliers, or permitted subcontractors.” JNJ argued that there was no evidence that Hall’s injury arose out of its work.

Under Georgia law, the phrase “arising out of” in indemnification provisions does not mean proximate cause in the strict legal sense nor does it require a finding that the injury was directly caused by the indemnitor’s actions. According to the Court “almost any causal connection or relationship will do.” Because there was evidence that JNJ placed the construction barrels in the roadway and was working in the area and pouring concrete around the time of the accident, Hall’s claim either arose out of or was connected in some way to JNJ’s work. Therefore, JNJ had a duty to defend and to indemnify D.R. Horton pursuant to its contract.

The Court of Appeals also rejected Columbia National’s argument that it had not received notice of the claim “as soon as practicable” from D.R. Horton and found that a jury question exists as to whether Columbia National has been prejudiced by late notice of the lawsuit by D.R. Horton.

This case provides good arguments for any owner or contractor seeking to enforce a broad indemnification agreement. Any involvement of the subcontractor whatsoever in the portion of the project giving rise to an injury might bring about the duty to indemnify. Subcontractors should take the time to carefully review their contracts to make sure they are aware of the potential scope of their indemnification.

Please let me know if you have any questions or would like a copy of the opinion. Have a great Labor Day.


About the Author

Michael Rust graduated from Emory University in 1980 and Emory University School of Law in 1983 where he was Notes and Comments editor of the Emory Law Journal (Law Review). Since that time, he has maintained an active trial practice in the state of Georgia both in State and Federal Courts. Mr. Rust teaches litigation as part of Emory University School of Law’s annual Trial Practice Program. He has received AV rating from Martindale Hubble, the highest rating afforded to lawyers by their peers.