S.b. 07-087 and the Enforceability of Indemnification Provisions in Colorado Construction Contracts - September 2007 - Construction Law
| Publication year | 2007 |
| Pages | 59 |
2007, September, Pg. 59. S.B. 07-087 and the Enforceability of Indemnification Provisions in Colorado Construction Contracts - September 2007 - Construction Law
September 2007
Vol. 36, No. 9 [Page 59]
Construction Law
Construction Law articles are sponsored by the CBA Construction Law Section.
Article Editor:
James W. Bain of Benjamin, Bain & Howard, L.L.C., Greenwood Village - (303) 290-6600,jamesbain@bbhlegal.com
About the Author:
This month's article was written by Brian G. Eberle, a member of Sherman & Howard, L.L.C. He has more than twenty-three years of experience in complex litigation, specializing in construction disputes, as well as other areas of law -(303) 299-8470; beberle@shermanhoward.com.
This article discusses the terms and impact of Senate Bill 07-087, which declared void all broad form and most, if not all, intermediate form indemnity provisions in Colorado construction contracts entered into on or after July 1, 2007.
In April 2007, Governor Bill Ritter signed into law Senate Bill 087 (S.B. 07-087), which significantly affects the enforceability of indemnification provisions in Colorado construction contracts.(fn1) As of July 1, 2007, subject to certain qualifications and exceptions discussed below, S.B. 07-087 eliminated all broad form and most, if not all, intermediate form indemnity provisions in Colorado construction contracts by prohibiting businesses and individuals from transferring responsibility for their own negligence to another party.(fn2)
This article begins by discussing the background of indemnity in Colorado construction contracts before S.B. 07-087. It then addresses the purpose and scope of the statute. The article concludes by considering some practical implications of this important legislation for attorneys and their clients involved with construction projects in Colorado.
Pre-S.B. 07-087 Forms of Indemnity
Before S.B. 07-087, the principal statutory constraints on indemnity provisions in Colorado construction contracts were set forth in CRS § 13-50.5-102(8). Enacted in 1988, CRS § 13-50.5-102(8) renders unenforceable any provisions in public construction contracts intended to indemnify public entities from their own negligence. However, the statute affects only "indemnification of public entities for the negligent acts of the public entity."(fn3) The statute therefore does not limit the scope of indemnification agreements in construction contracts between private parties.(fn4)
Generally unrestrained by legislation, owners, architects, contractors, and subcontractors have been free to negotiate the terms of indemnity provisions in Colorado construction contracts.(fn5) At one extreme - known as "broad form" indemnity - Party A (the indemnitor) would agree to be liable for all damages incurred by Party B (the indemnitee), even if those damages were caused solely by Party B's own negligence. At the other end of the spectrum - known as "narrow form" indemnity - Party A would agree to be liable only for Party B's damages actually caused by Party A. Various "intermediate" or "medium" forms of indemnity also are sometimes negotiated for use in Colorado construction contracts. For example, Party A would agree to be liable for all of Party B's damages, even if they were caused at least in part (but not in whole) by Party B's negligence.(fn6)
Legislative Declaration Supporting S.B. 07-087
The Colorado General Assembly passed tort reform legislation in 1986. This legislation, among other things, abolished joint and several liability except in limited circumstances.(fn7) In its place, the legislature implemented a system of comparative negligence, which limited a party's liability to an amount no greater than its proportionate share of negligence or fault.(fn8) The legislature's goal was to improve the affordability and availability of insurance by making liability risks more predictable.(fn9)
Recently, the Colorado legislature has considered whether construction businesses were using broad and intermediate form indemnity provisions to shift financial responsibility for their negligence to others, thereby circumventing the intent of tort reform.(fn10) As a result, general contractors in particular argued that it had become more difficult to obtain liability insurance.(fn11) In enacting S.B. 07-087, the Colorado legislature concluded that:
[i]f all businesses, large and small, are responsible for their own actions, then construction companies will be able to obtain adequate insurance, the quality of construction will be improved, and workplace safety will be enhanced.(fn12)
The legislature therefore declared its intent to prevent any party to a construction agreement from transferring responsibility for its "own" negligence to another party.(fn13)
Scope and General Provisions of S.B. 07-087
S.B. 07-087 amends CRS § 13-21-111.5 by adding a new subsection (6).(fn14) Effective for contracts entered into on and after July 1, 2007, the new statute generally voids provisions in construction agreements that require a party to indemnify, insure, or defend in litigation another person against liability for damage caused by the...
To continue reading
Request your trial