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  • NEW JERSEY APPELLATE DIVISION: WHERE A CONSTRUCTION MANAGER SEEKS CONTRACTUAL INDEMNIFICATION FOR ITS OWN NEGLIGENCE, THE INDEMNIFICATION PROVISION MUST BE EXPLICIT, UNEQUIVOCAL, AND UNAMBIGUOUS.

    In a recent unpublished opinion, Grandview at Riverwalk Port Imperial Condominium Association, Inc. v. K. Hovnanian at Port Imperial Urban Renewal II, et. al., (Docket No.: A-2308-17T2, Decided August 13, 2019) the New Jersey Appellate Division reaffirmed that where construction managers seek contractual indemnification for their own negligence, the contractual language imposing an indemnity obligation must be explicit and unambiguous.

    The facts of the underlying suit are straightforward and relate to a construction defect claim for residential property located in West New York, New Jersey. The plaintiff condominium association commenced an action against the developer/construction manager of the project and the architect after it was discovered that certain building elements did not meet the intended use as per the initial public offering statement. A jury returned verdict in favor the plaintiff on its claims against the developer for breach of express warranty and violations of the consumer fraud act. The jury also found that $1 million in the plaintiff’s damages were attributable to the architect’s negligence. The developer filed a post-trial motion for contractual indemnification by the architect. The trial court denied this motion on the basis that, among other things, there was no contractual requirement for the architect to indemnify the construction manager for the construction manager’s own negligence.

    The Appellate Division agreed, finding that the contractual provision at issue did not meet the standard set forth under controlling precedent. Specifically, the provision did not unequivocally and unambiguously call for the architect to indemnify the developer for its (the developer’s) own negligence. The Appellate Division affirmed the decision of the Trial Court on this basis. One additional interesting note from Grandview is the Appellate Division’s explicit disagreement with the Trial Court’s determination that a claim for negligence against an indemnitee is necessary to invoke contractual indemnification. The Trial Court determined that contractual indemnification was unwarranted because the claims against the developer sounded in breach of contract and fraud. The Appellate Division disagreed with this determination and held that “the nature of the claim is not dispositive.”

    The Grandview decision affirms New Jersey’s position regarding indemnification provisions in construction contracts:  Under N.J.S.A. 2A:40A-1, an indemnification agreement in a ‘maintenance’ or ‘construction’ contract purporting to hold harmless the indemnitee for losses or damages resulting from its sole negligence is a violation of public policy. However, the parties to a contract may enter into an agreement whereby the indemnitor may be required to indemnify the indemnitee for its (the indemnitor’s) own negligence. See Leitao v. Damon G. Douglas Co., 301 N.J. Super. 187 (App. Div. 1997). In order to effectuate this type of contractual indemnity, the contract language must be clear, express, and unequivocal. See Mantilla v. NC Mall Assocs., 167 N.J. 262 (2001); see also, Azurak v. Corporate Prop. Investors, 175 N.J. 110 (2003). Grandview reaffirms New Jersey’s position on indemnification provisions in the context of construction contracts. General contractors and construction managers should be diligent and meticulous in their contract drafting if they intend to invoke these types of indemnification provisions. A copy of the Grandview decision can be found here.

    Cullen and Dykman’s Construction Litigation Group has a complete working knowledge of the fundamentals of construction law and litigation. We strive to remain current with regard to significant new developments in the law, such as multiple prime contracting, architect’s and construction manager’s liabilities, and those developments posed by the Grandview case.

    If you have any questions regarding any other matter involving construction litigation in general, please contact the group using the link here.