Insight

Construction Law: The Limits of Anti-Indemnity in Louisiana

Published on: May 1, 2018

Louisiana’s anti-indemnity statute applicable to construction contracts, R.S. 9:2780.1, became law in 2011. The statute renders unenforceable any provision in, or collateral to, a construction contract that purports to indemnify or hold harmless a person from liability for its own negligence, or has the effect of doing so. Since the law's passage, few court decisions have interpreted its seemingly broad language and many questions remain as to the law's full impact.

The obvious intent of the anti-indemnity law is to avoid shifting liability away from a party at fault to another person. To this end, the language in the statute nullifies any agreement that has "the effect of holding the person at fault harmless.” But what about "limit of liability" provisions? Arguably, such provisions have the effect of holding harmless the party at fault. Does a limit of liability provision, otherwise valid and enforceable under Louisiana law, run afoul of the anti-indemnity statute? After all, those parties with superior bargaining power in construction contracts will seek to insulate themselves from liability to the fullest extent allowed by law, and will look for alternatives to the indemnity provisions that now expressly violate public policy.

One court recently held that R.S. 9:2780.1 does not prohibit a limit of liability provision in a construction contract. In Patriot Contracting, LLC v. Star Insurance Company, (E.D. La. 3/01/2018), the construction contract contained a provision that excluded liability of the architect for good faith decisions made during contract administration. The plaintiff/contractor alleged that the architect was negligent in its contract administration duties and caused it to suffer economic loss. The court dismissed the claim, rejecting the contractor’s argument that the provision violated the anti-indemnity law.

The Patriot court explained that the statute prohibits an indemnity agreement, i.e., where one party agrees to reimburse a second party for damages for which the second party becomes liable to a third party. However, the anti-indemnity law did not impact the provision that excluded the contractor’s right to recover from the architect. Thus, at at least according to one court, parties in construction contracts are still free to include limit of liability provisions.

Mary Anne Wolf is an engineer/attorney with a construction background who represents design professionals, contractors, and others in construction litigation. She also gives seminars on the subject. She enjoys travel, yoga, and encouraging her husband in his gardening and cooking endeavors.

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Fraud or Mistake? And How It Can Effect a Claim Against a Professional Designer.

All claims against professional designers are perempted (extinguished) under La. R.S. 9:5607 five years after the project is completed with an exception for fraud. In cases of fraud, an otherwise untimely lawsuit can go forward. For this reason, plaintiffs often allege fraud when the claim may be perempted. This scenario was present in the recent First Circuit decision in Markiewicz v. Sun Constr., L.L.C, 2019-1590 (La. App. 1 Cir. 9/18/20), 2020 WL 5587265. The decision helps to explain when a designer’s alleged conduct falls outside of ordinary negligence based upon the standard of care and becomes fraudulent.

Broadly, fraud is designed as “a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other.” La. C.C. art. 1953. Fraudulent intent or intent to deceive is a necessary element of a fraudulent misrepresentation. Therefore, fraud cannot be predicated on a mere mistake or negligence, however gross.

In Markiewicz, the plaintiff homeowners filed a class action lawsuit in 2006 arising from flooding of their neighborhood. Ten years later, plaintiffs added as defendants the engineers involved in the design of the drainage system, including the engineers who prepared the surveys for the development. Absent fraud, the newly added claims would be untimely. Plaintiffs alleged that the engineers fraudulently provided incorrect or misleading survey certificates, despite their knowledge that the certificates were incorrect.

The engineers filed a motion for summary judgment on peremption because more than five years had passed from the completion of their services. The engineers argued that plaintiffs could not prove fraud under facts of the case such that the fraud exception would not apply.

The Markiewicz court ruled for defendants. Although there was a dispute as to whether the engineers’ measurements were erroneous, the court found that plaintiffs failed to prove that the services were fraudulent. The plaintiffs provided no evidence that the engineers were aware of any discrepancy in preparing the surveys or that they knowingly misrepresented the surveys. As such, the court found that the fraud exception did not apply, and plaintiffs’ claims against the engineers were perempted. Through its analysis, the Markiewicz court made clear that labelling allegedly negligent conduct as fraudulent is insufficient to defeat a supported motion. While fraud may be established by circumstantial evidence, including highly suspicious facts and circumstances, the court found the record devoid of such facts.

Insight

RENTER BEWARE: Hidden Risks in Lease Agreements

With home prices soaring in today’s housing market, many people choose to rent rather than buy. Factored into their decision is the style, the square footage, the location, and other criteria, but few renters consider one risk that comes with many, if not most, leases. Many renters are exposed to personal liability for accidents occurring on the premises, and they don’t even know it.A lease is executed between the renter/tenant (the “lessee”) and the property owner (the “lessor”). By law, the lease imposes general obligations on both parties.The lessee (renter) is bound:

1. to pay the rent in accordance with the agreed terms;

2. to use the thing as a prudent administrator and in accordance with the purpose of which it was leased; and,

3. to return the thing at the end of the lease in a condition that is the same as it was when the thing was delivered to him, except for normal wear and tear. LSA C.C. Art. 2683

The lessor (property owner) is bound:

1. to deliver the thing to the lessee;

2. to maintain the thing in a condition suitable for the purpose of which is was leased; and,

3. to protect the lessee’s peaceful possession for the duration of the lease.” LSA C.C. Art. 2682.

These general obligations are typically expanded by terms in the lease because the lessee and lessor are “free to contract for any object that is lawful, possible and determined or determinable.” Family Care Services, Inc. v. Owens, 46 So.3d 234 (La. App. 2 Cir. 8/11/10). This “freedom of contract” allows the parties to construct their own bargains, shifting certain rights and obligations. In many commercial and residential lease agreements, this shifting includes a transfer of the liability for vices or defects on or in the leased premises.Although the lessor warrants that the leased premises is free of vices or defects, Louisiana law allows the lessee to assume responsibility for the condition of the leased premises under LA. R.S. 9:3221. Often, lessees assume that the lessor, as the owner of the premises, will be responsible if there is an accident. However, cases such as Jamison v. D’Amico, 955 So.2d 161 (La. App. 4^th Cir. 3/14/07) demonstrate that the owner may be entirely free of fault even though they owned a defective premises which caused an accident. In Jamison, a worker was injured when a floor collapsed beneath her. There was insufficient evidence that the owner was aware of the defective floor. Because the lease contained a clause shifting responsibility, the owner was under no duty to inspect the premises and was dismissed from the case.A lesson to all renters: read and understand the provisions in your lease. Even if you like the colors and the location, you should also like the lease contract before you sign it.

Insight

What is a Design Professional’s Tort Duty?

A design professional’s duties and responsibilities on a construction project generally are outlined in its contract with the owner. Does a design professional’s duty extend to third parties? The Supreme Court recently addressed this issue and held that the design professional’s duty to third parties is limited to the terms of the contract documents.

In Bonilla, a construction worker was injured while performing demolition work on a construction project. The worker, who was a subcontractor on the project, filed suit against the architect and the engineer on the project alleging that these design professionals failed to monitor and supervise the execution of the plans to ensure safety on the job site.

The engineer and the architect filed summary judgment motions arguing that they owed no duty to oversee, supervise, or maintain the construction site. The trial court granted their motions. However, the appellate court found the contract between the architect and the owner may have inferred a duty was owed to the worker.

The appellate court referenced contract provisions that required the architect to make weekly site visits and to report to the owner any deviations from the plans. The court noted that the architect was on site the day of the accident and photographed potential unsafe conditions, which would have deviated from the plans. The appeal court reversed the trial court’s ruling granting summary judgment.

The architect filed a writ with the Louisiana Supreme Court, which reversed the appellate court’s ruling and reinstated summary judgment in favor of the design professionals. The Supreme Court emphasized “the duty owed to an employee of a contractor by an engineer or architect is determined by the express provisions of the contract between the parties.”

While the contract documents required the architect to make weekly visits to the jobsite, the purpose of this duty was to ensure that the owner received the building it paid for and that the progress and quality of the work met the plans. More importantly, the contract also provided that these site visits did not create a duty to supervise construction. In contrast, under the terms of the contract, the contractor had control over construction means and methods and responsibility for site safety, specifically including site safety for all employees.

The clear and unambiguous language of the contract dictated that the design professions owed the worker no duty. Therefore, the Supreme Court held that the architect could not be held liable for failing to perform a duty that it had no responsibility to undertake.

Reference:

Bonilla v. Verges Rome Architects, 2023-00928 (La. 3/22/24), 382 So. 3d 62.