New Arizona Case: Indemnity Agreement Raises Fact Questions

Torts – Indemnity Agreement Construction Defect

MT Builders, LLC v. Fisher Roofing, Inc., 543 Ariz. Adv. Rep. 21 (Az Ct. App., Div. 1, November 13, 2008) (Judge Norris). SUB-CONTRACTORS INDEMNITY AGREEMENT LIMITED TO PROOF OF ACTUAL NEGLIGENCE BY SUB AND PROOF SETTLEMENT WAS REASONABLE.

A condominium association brought a construction defect lawsuit against a general contractor for defective workmanship. The general sought indemnity from the sub who actually did the work. The sub rejected a tender of the defense and the contractor settled with the condominium association and then sought indemnification from the sub pursuant to its “narrow form” agreement with the sub. Specifically this indemnity contract only requires the sub to indemnity the general “to the extent of the sub-contractor's negligence.”

The sub-contractor's refusal to accept the tender of the defense did not preclude the sub from contesting its fault. The sub was also entitled to challenge whether the indemnity provision was applicable to the action and whether the indemnity's decision to settle was reasonable and prudent under the circumstances. All of this the court found to be fact questions that would have to be determined below. The burden would be on the indemnitee to show its settlement was reasonable and prudent.