Language Must Be Crystal Clear To Get Indemnity (NJ)
The New Jersey courts have long emphasized the need for precision when drafting indemnification agreements. The principals of indemnification clause construction were recently re-visited in the unreported decision of Grandview At Riverwalk v. K. Hovnanian At Port. In that case, the defendant K. Hovnanian appealed the trial court’s denial of their motion seeking contractual indemnification from a third-party defendant architect for a $3 million jury verdict awarded to the plaintiff in a construction defect case.
The Appellate Court emphasized that, under New Jersey case law, the first and foremost rule of interpretation of an indemnity provision is to determine the parties’ intent. Additionally, any ambiguities are to be strictly construed against the indemnitee. Lastly, an indemnity clause purporting to shift liability for one’s own negligence to an indemnitor is especially narrowly construed and requires “explicit language” to include losses within the scope of the indemnity if they arose from the proposed indemnitee’s own negligence.
In this particular case, the plain language of the indemnification clause made clear beyond any doubt that the third-party defendant architects only agreed to assume responsibility and liability for losses caused by the architects’ own negligence. Accordingly, the architects were not responsible for indemnifying Hovnanian for Hovnanian’s own negligence, and the trial court’s decision was affirmed. This case highlights the importance of provision in indemnification clauses.
Thanks to Heather Aquino for her contribution to this post. Please contact Georgia Coats with any questions.