Wisconsin Court of Appeals Rejects Indemnity Claim from General Contractor

March 3, 2010

The Wisconsin Court of Appeals recently issued a decision that narrowly construed an indemnity clause between a general contractor and a subcontractor. Mathy is a general and was awarded a contract to resurface a county road in Scott County, Iowa. Mathy subcontracted with Dan-Ash, a trucking company, to transport materials for the project. Dan-Ash subcontracted with RT&T Trucking, Inc. to haul materials, which, in turn, subcontracted with truck driver William Hartmann. The dispute involved the death of a bicyclist, David Holmes.

Holmes approached the construction zone on a bicycle and was allowed to enter a bottleneck caused by a lane closure. An employee of Mathy led a line of vehicles through the bottleneck, including a semi-truck driven by Hartmann, which was hauling asphalt to the project site. As the row of vehicles passed Holmes on the right, Holmes lost control of his bike and fell under the rear wheels of Hartmann’s truck. Holmes died from injuries sustained in the accident.

Holmes’s heirs sued Mathy and Dan-Ash. The parties settled out of court. Mathy then sought indemnification from Dan-Ash and filed a separate lawsuit. The subcontract between Mathy and Dan-Ash contained a standard indemnification clause.

There are three general types of indemnification clauses in construction contracts:

  1. Broad indemnification clauses provide complete risk transfer by the general to the subcontractor, even if the general is solely at fault
  2. Intermediate clauses provide complete risk transfer by the general to the subcontractor, except for those losses caused solely by the general’s acts
  3. Narrow indemnification clauses provide the general with protection only for those losses caused by the subcontractor’s acts

The Mathy subcontract had an intermediate indemnification clause. Mathy expected that the indemnification would apply, because both Mathy and Dan-Ash (through its agent Hartmann) were allegedly at fault for the death of Holmes. However, the Court of Appeals read the indemnification clause narrowly, and determined that there was no indemnity. The court based its decision on a reading of the complaint in the original lawsuit, which contained similar but not identical negligence claims against Mathy and Dan-Ash/Hartmann. Given that there was one injury, other courts may have viewed the similar but not identical allegations as arising from the same claim. There were also other parts of the indemnification language that could have provided a basis for indemnification. Had the parties gone to trial, it’s likely that there would have been a single set of questions with respect to negligence, and these questions would have apportioned the negligence between Mathy and Dan-Ash/Hartmann. Under such a scenario, the indemnity may have been enforceable.

The Mathy decision will not be published and has no precedential value. This case is a reminder that indemnification clauses are narrowly construed and will be subjected to strict scrutiny. Also, the Wisconsin legislature is currently debating a bill that would limit the scope of indemnity clauses in construction subcontracts. General contractors should take this opportunity to have their subcontracts reviewed by experienced counsel to determine whether their indemnity clauses take into consideration potential changes in the law and this recent court decision. Mathy Construction Company, Inc. v. West Bend Mutual Insurance Company, Case No. 2008AP1326 (February 25, 2010).

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