The 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: [email protected]
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