Reps. Driscoll, Stephens introduce legislation for anti-indemnity statute in construction contracts

State Reps. Michael Driscoll (D-Philadelphia) and Todd Stephens (R-Montgomery) introduced this week unprecedented legislation to establish an anti-indemnity statute regarding construction contracts.

Indemnity clauses transfer the responsibility to pay damages, including attorney and court fees, from one party to another party.

“This is about fairness,” Stephens said. “Without this legislation, many Pennsylvania construction contractors must accept liability for another party’s negligence. That can unfairly and unnecessarily add to the cost of a construction project.”

In construction law, there are three forms of indemnity agreements: limited, intermediate, and broad. H.B.1737 draws from limited indemnity, in which a subcontractor, if solely at fault, assumes responsibility for its own negligence.

“This legislation would mandate a limited form of indemnification to protect subcontractors, who are oftentimes the inferior bargaining power, from the superior bargaining power leveraged by owners and general contractors,” Driscoll said. “It’s a matter of protecting construction contractors’ rights by equalizing the current liability power structure commonly seen in construction work.”

Driscoll noted that language for H.B. 1737 derives from anti-indemnity clauses in Delaware, New York, and Ohio, which are among the 45 states that have enacted anti-indemnification statutes limiting the enforceability of various forms of indemnity clauses, particularly in construction contracts.