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By: Bart Gary
Georgia recently adopted legislation that declares an indemnity or hold harmless agreement in connection with or collateral to a contract or agreement for engineering, architectural, or land surveying services against public policy and void and unenforceable. The legislation excepts, and therefore permits, indemnification for losses and damages, “to the extent caused by or resulting from the negligence, recklessness, or intentionally wrongful conduct of the indemnitor” (the party obligated to indemnify the other) or his or her employee or agent.
In the convoluted way statutes are written, this new law voids indemnity clauses in agreements for services by an architect, engineer or land surveyor, unless the clause is confined to instances, or “to the extent,” caused by the negligence, recklessness, or misconduct of a party. The important language is the phrase “to the extent of,” which is already used in many form indemnity clauses, and has been interpreted to call for a comparison of the negligence or fault of an indemnitor with that of the party to receive indemnity protection or third parties . In other words, the indemnitor is only responsible for that portion of the loss it caused. The new law is written to apply to any party to the design contract, but is mainly for the benefit of the designer.
Georgia still outlaws indemnity clauses in construction-related agreements that purport to indemnify one for his or her own sole negligence, and care needs to be used in drafting contracts in light of that law. Now in contracts for design services prudent drafting dictates that the indemnity clause should expressly adopt the exception in the new law with inclusion of the “to the extent of” language for the actual fault of the designer.
One question that the new law does not address is the status of design/build contracts where a single party, usually a general contractor or construction manager, is responsible for both the design and construction of a building or structure. Since design/build contracts include architectural and engineering services, the indemnity agreement in the contract could be made unenforceable even if the loss was unrelated to the design services. In any event, the extent of the indemnity coverage for the project owner in a design/build contract may be less that under current law.
The new legislation is codified in Section 13-8-2 (c) of the Georgia Code and goes into effect on July 1, 2016. The new law does not affect existing agreements, but would apply to those coming into existence after July 1, 2016.