Florida’s Fifth District Court of Appeal recently offered some clarity on two oft-argued defenses in construction defect matters. In CB Contractors, LLC v. Allens Steel Products, Inc., the 5th DCA reviewed both 1) indemnity provisions challenged under Fla. Stat. 725.06; and 2) common law indemnity claims brought by general contractors against their subcontractors. 2018 WL 6579215 (Fla. 5th DCA 2018). Typically, construction defect defense litigators will argue either via Motion to Dismiss or in affirmative defenses that an indemnity provision that does not comply with the mandates of Fla. Stat. 725.06 is void and unenforceable. Likewise, citing to Paul N. Howard Co. v. Affholder, Inc., 701 So. 2d 402 (Fla. 5th DCA 1997), defense counsel regularly argue subcontractors do not, as a matter of law, share a common obligation with the general contractor that may give rise to a common law indemnity claim. In CB Contractors, the 5th DCA virtually eliminated these two defenses. However, the court may have also provided significant insight on how to address multi-count claims that are, at their core, indemnity by another name.
First, the court reviewed the matter of whether an indemnity provision that fails to comply with Fla. Stat. 725.06 is void and unenforceable, or whether just the portion of the indemnity provision that fails to comply is void. In analyzing the indemnity provision at issue, the trial court found the requirements of Fla. Stat. 725.06 were not met and the clause was deemed void and unenforceable in whole. The 5th DCA overturned this decision, finding support in prior case law that only the non-compliant portion of the indemnity provision should be unenforceable while the remainder of the provision should remain in force.
The Court’s decision is curious. First, the decision is not supported by a plain reading of the statute. Fla. Stat. 725.06 states that any portion of any agreement or contract shall be void and unenforceable unless the statutory requirements are met. The language “any portion” of the agreement, at least to the author, refers to the indemnity provision of the overall construction contract, which indemnity provision shall be void and unenforceable unless the requirements are met. In other words, a plain reading of the statute suggests the offending indemnity provision may be void, but the non-indemnity provisions within the balance of the contract are not.
Moreover, the 5th DCA’s holding effectively moots the entire statute, where any violation can simply be stricken by a sort of line-item redaction if and when a party seeks indemnity under an offending provision. A party attempting to enforce an offending provision no longer faces the prospect of losing all of its indemnity rights. Rather, that party can take a second bite of the apple, amend the contract in the course of litigation to eliminate the offending portion, and then carry on with its indemnity claim minus the offending portion of the provision. The penal effect of Fla. Stat. 725.06 has been eliminated by the CB Contractors decision and no indemnity provision will likely could ever be found void and unenforceable on the whole going forward.
Next, CB Constructors took on the issue of common law indemnity. In Paul N. Howard, the 5th DCA previously held that a general contractor and subcontractor share a contractual relationship and, therefore, as a matter of law, the relationship could not be defined as special for purposes of a common law indemnity claim. In CB Constructors, the 5th DCA did a complete 180, backed off its prior decision, and agreed with a decision out of the 4th DCA which allowed common law indemnity claims to exist between general contractors and their subcontractors. Therefore, there is little argument now that a common law indemnity claim is a viable cause of action between general contractors and subcontractors, assuming all other elements of such a claim are established.
While CB Constructors dealt a significant blow to two typical defenses in construction defect claims, the last paragraph of the opinion remains significant for the defense and the significance of the paragraph may go unnoticed by many. In that last paragraph, the 5th DCA affirmed summary judgment granted in favor of the subcontractor on all other counts “in part, based on our conclusion that any distinct claims for damages alleged by Appellant here … are subsumed in its claims for indemnity.” In other words, the court is stating all other causes of action which seek the same damages that an indemnity count covers are “subsumed” by the indemnity count and ripe for summary judgment. For example, if a general contractor files a several-count third party claim that includes either contractual or common law indemnity counts, but also includes other claims that are, in essence, other “pass through” claims for the same damages, then the 5th DCA is signaling such claims are redundant and subject to summary judgment. Therefore, while the 5th DCA certainly “taketh away” in CB Constructors, it may have ultimately “giveth” as well.