From the desk of Smith Freed Eberhard: This case represents a significant departure from well-established indemnity law for “construction agreements” governed by ORS 30.140. The case holds that subcontractors are not required to defend general contractors to the extent the general contractor is at fault for the damages being claimed.
Claims Pointer: ORS 30.140 limits a subcontractor’s duty to defend a general contractor to only those allegations that are within the sub’s scope of work. Even when the sub’s duty to defend is triggered, the general has the burden of proving what, if any, portion of defense fees the sub owes.
Sunset Presbyterian Church v. Brockamp & Jaeger, Inc., 355 Or. 286 (2014)
After construction of Sunset Presbyterian Church, the church filed a claim against Andersen Construction Company for various construction defects. Andersen’s contract with all its subcontractors contained an indemnity provision which said: “…the Subcontractor shall indemnify and hold harmless…the Contractor…from all claims, damages, loss and expenses, including but not limited to attorney’s fees, arising out of or resulting from the performance of the Subcontractor’s Work.” Andersen sent letters to its subs demanding they defend Andersen in the suit. The subs, including B&B Title and Masonry, refused to step in and defend Andersen, so Andersen filed third-party complaints against them for breach of the indemnity agreement. B&B performed masonry work on the project and one of the allegations in the church’s complaint involved B&B’s masonry work.
Andersen settled with the church and assigned its claims against the subs to the church. The church moved for summary judgment against the subs. All the subs but B&B settled with the church prior to the court’s decision. As to B&B, the trial court concluded that under ORS 30.140, B&B had a duty to defend Andersen, but only to the extent that B&B’s work was implicated in the church’s allegations. The court further stated that the church had the burden to show what costs were incurred by the defense of the claim, and that the church had failed to provide any proof of what B&B owed. The trial court awarded the church $0 in damages and found B&B to be the prevailing party. The church appealed.
On appeal, the church argued that the trial court incorrectly ruled that ORS 30.140 applies not only indemnity, but also the duty to defend. The church maintained that the duty to defend is separate from the duty to indemnify because the duty to defend arises sooner than the duty to indemnify and it has a broader scope than indemnity. The church further argued that because the subs owed a duty to defend, they were obligated to pay all of Andersen’s defense costs based on the language of the indemnity provision. In reaching its decision, the court looked to legislative history to find that in the context of ORS 30.140, the legislature used the word “indemnify” to include the duty to defend. The court reasoned that because the intent behind ORS 30.140 was to prevent general contractors from shifting liability for their own negligence to subcontractors, it follows that subcontractors should not have to pay for a general contractor’s defense either. The court of appeals concluded that ORS 30.140 applies to both the duty to defend and the duty to indemnify.
Applying its rule, the court affirmed the trial court ruling that B&B’s duty to defend was triggered when the church alleged negligence against B&B. However, the court held that the church, standing in the place of Andersen, had the burden to show what fees B&B owed under its duty to defend. The church only proved the total amount of fees and costs but did not set out what portion of those costs applied to B&B. Because Sunset failed to attribute specific fees to B&B, the court affirmed the trial court’s award of $0.
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