By: Josh A. Allison
Picture yourself as the owner of a grocery store in Gallup. You know that people who shop for groceries sometimes have children, and you also know that some children wear diapers. You are a conscientious grocery store owner who wants to make it easy for your customers’ diaper-clad babies to have fresh, dry bottoms. You hire someone to install diaper changing tables in your bathrooms. You are very proud.
But you are not just conscientious. You are also smart. You don’t want your store to be on the hook for legal fees and damages arising from injuries caused by your contractor’s failure to correctly install the diaper changing tables. So, in the contractor’s written contract with your store, you require the contractor to defend and indemnify your store from any claims or injuries that might be caused by the contractor’s work.
But you’re not just conscientious and smart, you are also learned in the ways of the law. You know that in 1971 our State Legislature passed a law prohibiting your store from having the contractor indemnify your store for your store’s own negligence. Because of this statute, you specifically provide in your agreement with the contractor that the contractor is not required to defend or indemnify your store for any damages or injuries caused by the “sole negligence” of your store.
You’re covered. You have protected your store. Or so you thought.
Several months later, a child is injured when the diaper changing table falls from the wall while it is being used. The child’s mother sues your store and the contractor, alleging that both are negligent and have caused the child’s injuries. In response, you pull out your agreement with the contractor, point to the indemnity provision, and demand that the contractor pay to defend your store in the lawsuit. The contractor says, “No.” Much to your surprise, the contractor is right.
In Safeway, Inc. v. Rooter 2000 Plumbing and Drain SSS, (2016-NMSC-009), our State Supreme Court ruled that the 1971 version of our anti-indemnity statute (NMSA 1978, Section 56-7-1) voided the indemnity agreement in Safeway’s agreement with Rooter 2000 on the facts generally described above. The reason: the indemnity provision required the contractor to defend Safeway, at least in part, for Safeway’s alleged fault. That, the Court said, is prohibited by the anti-indemnity statute even though Rooter 2000 agreed to defend and indemnify Safeway for Rooter 2000’s alleged negligence. That is because under our anti-indemnity statute, the entire indemnity provision was void.
The anti-indemnity statute has been amended twice since 1971, in 2003 and 2005. The statute now expressly allows Party “A” to a construction contract to defend, indemnify, and insure Party “B” to the contract “to the extent” that the damages are caused by Party “A.” Whether and to what extent the Safeway decision applies to construction contracts executed after 2003 remains to be seen. In the meantime, we suggest you review the standard indemnity provisions of your construction contracts to understand what they require, as well as whether they run afoul of the Safeway decision and our current anti-indemnity statute.