JSH Reporter JSH Reporter - Fall 2017 - Page 11

BROAD FORM ARTICLE 011 INDECENT EXPOSURE: NEW DECISION CONFIRMS SUBCONTRACTORS’ LIABILITY TO CD DAMAGES IS EXPANSIVE AUTHOR: Michael Ludwig EMAIL: mludwig@jshfirm.com BIO: jshfirm.com/MichaelALudwig How broad is a “broad-form” indemnity provision in a construction contract? A recent decision by the Arizona Court of Appeals held that such a provision allows a developer great latitude in recovering monies paid for settlement, as well as its attorneys’ fees and costs. Amberwood Development v. Swann’s Grading, 1-CA-CV15-0786, arose from a lawsuit by homeowners against Amberwood alleging, among other things, construction defects from soil movement. Amberwood arbitrated the dispute with some of the homeowners, resulting in a $1.75 million award, and it settled the claims of the remaining homeowners for another $723,000. Swann’s Grading had provided a defense to Amberwood for the arbitration but did not indemnify Amberwood. This suit was Amberwood’s effort to recover indemnity from Swanns for the arbitration award and settlement. Like many construction contracts, Amberwood’s subcontract contained a “broad form” indemnity provision, which required Swanns to defend and indemnify Amberwood “from any and all claims, damages or Attorney’s fees…arising out of the acts or omissions of [Swanns]…with regard to the performance or omission of any of [Swanns] duties and obligations under the contract.” At the bench trial, Amberwood presented expert testimony that because Swanns performed the rough and fine grading, the majority of the damages awarded “arose out of” its work. This evidence was unrebutted by Swanns’ expert who only argued that Swanns’ work did not cause any of the claimed damages. The trial judge agreed with Amberwood and found that 70.6 % of the litigation settlement and 72.7 % of the arbitration award were for issues that “arose out of” Swanns’ work. The trial judge entered an award against Swanns to reimburse Amberwood those amounts. The award was upheld on appeal. Amberwood made clear several important lessons for construction defect litigants and insurers. A broad-form indemnity provision