Winter 2023

Uniwest Revisited: The Status of Anti-indemnification in Virginia

Construction projects can be risky endeavors, and indemnity provisions are a way to allocate the inherent risks of the business. An understanding of the law governing an indemnity provision is critical for all parties involved. This is especially true in Virginia, where the legal landscape remains somewhat murky.

In an indemnity agreement, one party to a contract agrees to assume responsibility for certain liability resulting from third-party claims against the other party to the contract. How this usually works in practice is that a general contractor will agree to indemnify the owner of a project from personal injury or property damage claims resulting from the work. A subcontractor on the project will often agree to indemnify the general contractor in a similar fashion. An indemnification agreement is often embedded into the contract or incorporated by reference into the contract from another source. As we will see, there may be more than one potential source for indemnification.

In the 1970s, state legislatures began enacting laws designed to prohibit certain indemnity provisions in construction contracts. The purpose of these “anti-indemnity” statutes is twofold. First, they promote construction and building safety by requiring each party involved to bear the costs for their own mistakes. Second, they prevent the parties with greater leverage, usually general contractors or large construction entities, from using their leverage to force subcontractors to indemnify them for their own negligence.

Virginia’s anti-indemnity statute states, in relevant part: “Any provision contained in any contract relating to the construction, alteration, repair or maintenance of a building … by which the contractor performing such work purports to indemnify or hold harmless another party to the contract against liability for damage … caused by or resulting solely from the negligence of such other party … is against public policy and is void and unenforceable.” Va. Code Ann. § 11–4.1.

Fast-forward to 2010, when the Supreme Court of Virginia issued its decision in Uniwest interpreting Code § 11–4.1. The court concluded that the phrases “caused by” and “resulting solely from” in the statute are disjunctive, meaning that they must be treated as separate clauses without either phrase modifying the other. From this, the Uniwest court concluded that an indemnification provision in a construction contract is void if it requires the indemnitor to indemnify the indemnitee for the indemnitee’s own negligence. In other words, a party cannot be indemnified for its own negligence under Uniwest.

While this decision may appear straightforward, courts and practitioners alike have been mystified by Uniwest, and the enforceability of indemnification provisions in construction contracts remains unclear in Virginia. There appears to be at least two reasons for the confusion. First, courts have issued precious few opinions applying Uniwest. Second, and more consequently, there is a lack of attention paid to the end of the Uniwest opinion and the second indemnification provision that the court found to be enforceable. Despite the seemingly sweeping language used in the opinion, Uniwest, when read properly, is not a rigid anti-indemnification decision.

Naturally, further discussion requires a deeper dive into the facts of Uniwest. In Uniwest, a general contractor sought contractual indemnification from a subcontractor. The subcontract between the parties contained an indemnification provision that was voided by the Supreme Court. This invalid provision stated in relevant part: “If any claims … be made or asserted, whether or not such claim(s) are based upon the negligence of [contractor] or [owner], [subcontractor] agrees to indemnify and save harmless [contractor] from any and all such claims . . .”

Later in the opinion, however, the Supreme Court found that there was an enforceable indemnification provision in the prime contract. The prime contract was between the owner and the general contractor. The general contractor was able to rely upon the indemnification clause in the prime contract because the subcontract incorporated the terms of the prime contract and required the subcontractor to assume towards the general contractor the same obligations the general contractor assumed towards the owner. While the Supreme Court of Virginia did not specify the reason why this provision did not violate Code § 11–4.1 and public policy, the clues lie in context.

Note the relevant language in the enforceable provision. The subcontractor was required to indemnify the general contractor “To the fullest extent permitted by law . . . from and against claims, damages, losses and expenses . . . arising out of or resulting from performance of the Work  . . . but only to the extent caused in whole or in part by negligent acts or omissions of [contractor], a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder.” (Emphasis added).

Uncertainty has persisted following Uniwest. For example, take Supchak v. Fuller Construction Corporation, a 2013 decision from the Chesapeake Circuit Court. Here, the court voided an indemnification provision that stated in relevant part: “To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harm less … the Contractor … but only to the extent caused in whole or in part by negligent acts or omissions of the Subcontractor’s … regardless of whether or not such a claim, damage, loss or expense is caused in part by a party indemnified hereunder.”[1]

Sound familiar? Well, the Supchak court found that the subject provision was “almost identical” to the indemnification clause in Uniwest. But the court concluded that, like in Uniwest, the subject provision required the indemnitor to indemnify the indemnitee “regardless of whether the indemnitee’s own negligence caused the claim” and was therefore void under Code § 11–4.1.

The Supchak court was correct that the indemnification provision it voided was almost identical to a provision in Uniwest. The problem, of course, is that the Supchak provision mirrored the enforceable provision in Uniwest, not the voided provision. The Supchak provision, like the enforceable provision in Uniwest, appears to be based on Paragraph 3.18.1 of the American Institute of Architect’s (AIA) General Conditions of the Contract for Construction. Importantly, both provisions contained the phrase “to the fullest extent permitted by law,” which is considered a saving clause. Next, both provisions clarify that the indemnitor is only liable “to the extent” the indemnitor’s negligence or the negligence of a third party caused the damages. An indemnitee, in either case, would not actually be indemnified for damages caused by the indemnitee’s own negligence under proper contractual interpretation. Contrast this with the voided provision in Uniwest, which did not contain any relevant limiting language.

This interpretation is bolstered by the overlooked guidance near the end of the Uniwest opinion. The Supreme Court of Virginia remanded the case to the trial court for a determination of the subcontractor’s relative fault and entry of a judgment against the subcontractor based upon the same. This is in line with numerous courts from other jurisdictions which have found that the phrase “to the extent caused” expresses the intent to limit the indemnitor’s liability to that portion of fault attributed to the indemnitor. E.g., Nusbaum v. City of Kansas City, 100 S.W.3d 101, 106 (Mo. 2003). Finally, at least two Virginia courts since Uniwest have either found or strongly suggested that the addition of a savings clause limited the scope of the indemnity sought to make the provision compliant with Code § 11–4.1. See Snyder v. Waterford Falls Church II, LLC (2012) (Fairfax), Wasa Properties, LLC v. Chesapeake Bay Contractors, Inc. (2019) (Chesapeake).

Indemnity provisions that contain savings clauses or other limiting language should be considered enforceable under a full and complete reading of the Uniwest opinion. Interpreted properly, Uniwest does not make carefully crafted indemnification agreements in construction contracts difficult to enforce in Virginia. That being said, an indemnity provision is one of the most critical components of a construction contract. All parties involved in a construction project deserve much-needed clarity in this area. Hopefully, the Supreme Court of Virginia or the newly vitalized Court of Appeals will soon issue an opinion clarifying Uniwest and the scope of Code § 11–4.1.

[1] The Supchak court also voided another indemnification provision that was substantially similar to the cited provision.

For more information contact Stephen J. Marshall.