Section 4.25 Insurance Cap on Indemnity Exception

• Library: Construction Law 2016 Supp

D. (§4.25) Insurance Cap on Indemnity Exception

(8) An agreement containing a party’s promise to indemnify, defend or hold harmless another person, if the agreement also requires the party to obtain specified limits of insurance to insure the indemnity obligation and the party had the opportunity to recover the cost of the required insurance in its contract price; provided, however, that in such case the party’s liability under the indemnity obligation shall be limited to the coverage and limits of the required insurance.

Section 434.100.2(8), RSMo 2000.

Including this exception in the statute resolved the deadlock between the opposing parties to this legislation, according to Richard A. Stockenberg, a principal of the law firm of Gallop, Johnson & Neuman, L.C., located in Clayton, Missouri. He represented and assisted the American Subcontractors Association in its pursuit to pass this legislation.

Before the enactment of § 434.100, the author is not aware of any comparable statutory exception that has been used in contracts for construction work except in the context of a limitation of liability provison. This exception creates a limitation of liability of sorts on a broad indemnity provision that will be enforced in Missouri provided this exception is followed. But it is not clear whether the old Missouri caselaw on indemnities will have any bearing on any question (e.g., Are its terms “clear and unequivocal”?) that may be raised regarding its enforceability.

Note: In any event, Missouri’s existing caselaw on indemnities merits some discussion. Construction contracts generally include one of three different levels of hold-harmless or indemnity agreements. In a limited hold-harmless agreement, the contractor agrees only to indemnify or hold harmless or defend others if they are sued or suffer damages because of the contractor’s own tortious action or omission. These agreements are readily enforced. See Lake Ctr. Boatworks, Inc. v. Martin, 804 S.W.2d 842 (Mo. App. E.D. 1991); Listerman v. Day & Night Plumbing & Heating Serv., Inc., 384 S.W.2d 111, 116 (Mo. App. S.D. 1964). Because the contractor is already liable as a matter of law for the results of its own tortious actions, the limited hold-harmless agreement essentially adds only the duty to defend. Generally speaking, all of these obligations can be supported with insurance.

Intermediate indemnity agreements arise when the contractor agrees to indemnify or hold harmless or defend the owner in situations in which both parties are jointly liable—even in situations in which the contractor is 1% and the owner 99% at fault. By agreeing to this type of hold-harmless clause, a contractor waives any defense or comparative fault from the other party and pays as if it is the only one responsible. In Missouri, these agreements will only be enforced if these obligations are expressed in clear and unequivocal terms. Uelk v. Directory Distrib. Assocs., Inc., 803 S.W.2d 632, 635 (Mo. App. E.D. 1991); Pilla v. Tom-Boy,...