Legal Alerts

Amendment to Minn. Stat. § 337.05 Regarding Agreements to Indemnify and Provide Insurance in Building and Construction Contracts

07.24.13

Minnesota, like many other states, has long had a statutorily-enacted policy against provisions requiring one party to a construction contract to indemnify others for anything but the indemnifying party's own negligence. See Minn. Stat. § 337.01 (2012). In other words, as a matter of policy, it has been prohibited to require a subcontractor to indemnify a general contractor for the general contractor's own negligence. However, the Minnesota legislature had also enacted a broad exception to this prohibition, allowing provisions that require one party, typically subcontractors, to procure insurance covering the negligence of other persons or entities involved in the construction project, including the general contractor. See Minn. Stat. § 337.05 (2012). Over time, Minnesota courts had interpreted this "insurance" exception so that it had effectively swallowed the prohibition against broad indemnification provisions.

After lobbying by subcontractor trade groups, the 2013 Minnesota legislature enacted an amendment to Minn. Stat. § 337.05 to now specifically prohibit "a provision that requires a party to provide insurance coverage to one or more other parties, including third parties, for the negligence or intentional acts or omissions of any of those other parties, including third parties." Minn. Stat. § 337.05, subd. 1 (2013). This change in the law is effective August 1, 2013, and will require most general contractors to modify the language they  are currently using with respect to indemnification and insurance. One approach a general contractor could take would be to replace broad indemnification and insurance language with language imposing on subcontractors a broad obligation to defend the general contractor in any litigation with respect to claims arising from a construction project, regardless of who is or may be claimed to be at fault. Because such a provision does not impose an insurance obligation, it does not appear to be prohibited by the amended anti-indemnity statute and would have the effect of maintaining subcontractors' current incentive to participate in the resolution of construction defect claims to avoid the payment of general contractor defense costs.

If you would like your existing construction contract forms reviewed with respect to this or any other issues, please contact Jim Lockhart.

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LaFromboise, Antoine J.
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T 612.371.3269

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