Driscoll co-sponsors unprecedented legislation for anti-indemnity statute in construction contracts

HARRISBURG, July 23 – State Reps. Michael Driscoll, D-Phila., and Todd Stephens, R-Montgomery, today introduced unprecedented, bi-partisan legislation (H.B. 1887) that would establish an anti-indemnity statute regarding construction contracts.

Indemnity clauses transfer the responsibility to pay damages, including attorney and court fees, from one party to another party, usually without regard to who caused the loss.

“Due to the lack of any anti-indemnity statutes in Pennsylvania, construction contractors, particularly subcontractors, are faced with the unfair practice of having to accept liability for another party’s negligence when entering into construction contracts,” Driscoll said. “This legislation would bar any claim for indemnification for losses caused by the negligence of an owner or a general contractor.”

“This is about fairness,” Stephens said. “Without this legislation, many Pennsylvania construction contractors must accept liability for another party’s negligence. That can unfairly and unnecessarily add to the cost of a construction project.”

In construction law, there are three forms of indemnity agreements: limited, intermediate and broad. Of these three forms of indemnity, H.B.1887 draws from limited indemnity, in which a subcontractor, if it is solely at fault, assumes responsibility for its own negligence.

“This legislation would mandate a limited form of indemnification to protect subcontractors, who are often times the inferior bargaining power, from the superior bargaining power leveraged by owners and general contractors,” Driscoll said. “It’s a matter of protecting construction contractors’ rights by equalizing the current liability power structure commonly seen in construction work.”

Driscoll said language for H.B. 1887 derives from anti-indemnity clauses in neighboring Delaware, New York and Ohio, which are among 45 states that currently have enacted some form of anti-indemnification statute limiting the enforceability of various forms of indemnity clauses, particularly in construction contracts.