Construction Contract Indemnity

Heppler v J.M. Peters Co.: Review Your Construction Contract Indemnity Provisions

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The article analyses indemnity issues in construction contracts and offers advice for drafting contractual indemnity provisions. This material is reproduced from the Real Property Law Reporter, copyright by the Regents of the University of California. Reproduced with permission of Continuing Education of the Bar, California. (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit the CEB website.)

When things go wrong on a construction project, the express indemnity provisions of the construction agreements move to center stage and become a major focus of attention. A carefully drafted indemnity provision is a risk-allocation mechanism that can literally save a party from economic ruin. See 2 California Construction Contracts and Disputes, chap 9 (3d ed Cal CEB 1999). On the other hand, a carelessly drafted indemnity clause, or one treated as mere boilerplate, can have catastrophic consequences. In a recent California case, Heppler v J.M. Peters Co. (1999) 73 CA4th 1265, 87 CR2d 497, the court of appeal reexamined the issue of express indemnity clauses, and provided a road map for drafting them. This is an important case for all attorneys representing parties who sign contracts containing indemnity provisions.Heppler involved two appeals arising from construction defect litigation regarding a residential development in San Diego. Plaintiffs were a certified class of homeowners in the development. Plaintiffs alleged that the project contained defective roofs, foundations, and other soil-related conditions. The developer settled the class action suit by paying over $5 million and assigning its indemnity rights against nonsettling subcontractors (the mass grader, the roofer, the landscaper, and the designer-builder of the concrete foundations).

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