Tuesday, May 17, 2011

INDEMNIFYING YOUR LANDLORD FOR ITS OWN NEGLIGENCE

A recent Colorado Supreme Court case, Constable v. Northglenn, LLC, Case No. 09CS1063 (March 21, 2011), is instructive on why it is important for a tenant to fully understand the indemnification provisions in his or her lease.

In the Constable case, a woman who slipped and fell on ice in a shopping center parking lot sued the owner of the shopping center, Northglenn, LLC, for negligence. Northglenn, LLC in turn filed an indemnity claim against Constable, a tenant in the shopping center, under Constable's lease.

The indemnity provision in Constable's lease required Constable to indemnify Northglenn, LLC for injuries sustained in Constable's space or elsewhere in the shopping center if the person was present in the shopping center for the purpose of visiting Constable's space. The indemnity provision also provided that Constable had no indemnification obligation if the harm resulted from Northglenn, LLC's own gross negligence or intentional torts.

The trial court held that indemnity was unenforceable because it purported to make Constable responsible for the parking lot, which was in the exclusive control of Northglenn, LLC, and that it did not clearly define the injuries that would trigger the indemnification obligations of Constable.

The Court of Appeals reversed, concluding that the indemnity provision made it clear that the parties intended that Constable indemnify Northglenn, LLC for injuries sustained in the parking lot by Constable's customers, whether or not the injuries resulted from Northglenn, LLC's own negligence.

The Supreme Court upheld the Court of Appeals ruling, finding that the indemnity provision was not void as against public policy by requiring Constable to indemnify Northglenn, LLC for its own negligence. The Supreme Court recognized that it is against public policy to enforce an agreement indemnifying an actor for his or her own "intentional or willful wrongful acts," but that an agreement indemnifying a party against liability for his or her own negligence is enforceable if the agreement contains "a clear and unequivocal expression that the parties intended that result."

The indemnity language in Constable did not specifically state that the indemnity applied to claims resulting from Northglenn, LLC's own negligence. The Supreme Court found that the language in the indemnity covering "any and all"claims, and the specific exclusion of gross negligence and intentional torts, was a sufficiently clear expression of the parties' intent that Constable would indemnify Northglenn, LLC for its own negligence.

It is not uncommon for a landlord to require indemnity for claims arising out of the use of the premises, even where the claims arise out of landlord's own negligence. It is less common for the provision to require indemnification for causes of action arising outside of the premises where the plaintiff is not an agent, employee or contractor of the tenant.

From a tenant's perspective, because of the lack of control over customers and over common areas of the shopping center, an indemnity provision like that in the Constable case should be carefully considered and negotiated out of the less if possible.

From a landlord's perspective, if the tenant agrees on a provision like that in the Constable case it would be advisable to specifically state in the indemnity provision that it applies to "any and all" claims, whether or not based on the landlord's negligence.

Posted By: Brent W. Houston, Esq.