Common law indemnification claims can be confusing. Fortunately, the Appellate Division, Second Department in New York issued a decision earlier this week on March 6, 2019, in a construction context, providing a helpful review and concise analysis of New York law. The case is Board of Managers of Olive Park Condominium v Maspeth Properties, LLC, et al., Appellate Division, Second Department Docket No.: 2017-06140.
The case involved litigation over alleged construction defects at a condominium in Williamsburg, Brooklyn — a very sought after neighborhood in New York City. The Board of Managers of the Condominium, on behalf of the unit owners, sued the general contractor and the sponsor for failing to correct defects. Plaintiffs claimed the Defendants breached their obligations under the Offering Plan and Purchase Agreements — in other words, a breach of contract.
The general contractor and sponsor brought an engineering firm and a security system contractor into the case as third-party defendants. The engineer had been hired to redesign mechanical, electrical and plumbing systems — often referred to simply as the “MEP Engineer” in construction cases.
An MEP Engineer is responsible for the design of systems you don’t think about until they stop working right. Plumbing. Heating. Air Conditioning.
The general contractor and sponsor brought claims against the engineer and security system contractor for common law indemnification. The trial Court below dismissed those claims, and the appellate Court affirmed.
The Court explained the law on common law indemnity in a short paragraph. In essence, the Court held that common-law indemnity allows a party who had to pay for the “wrong of another to recover from the wrongdoer the damages it paid to the injured party.” Importantly, the party seeking indemnity must “not have committed actual wrongdoing itself.” Also, the party seeking to be indemnified “must have delegated exclusive responsibility for the duties giving rise to the loss to the party from whom indemnification is sought.”
Further, the Court noted that “Common-law indemnification is warranted where a defendant’s role in causing the plaintiff’s injury is solely passive, and thus its liability is purely vicarious.” The Court also pointed out that “a party who has itself actually participated to some degree in the wrongdoing cannot receive the benefit of the doctrine.”
In this case, the Plaintiff — the Board of Managers — alleged that the sponsor and general contractor retained contractual responsibilities. The Court found that this was not a situation where a defendant’s liability sounded in tort — e.g., negligence — and the tortious conduct may have been solely the result of the negligence of the engineer or security services contractor.
On that basis, the Appellate Division affirmed the dismissal of the claim for common law indemnification.
When analyzing these types of common law indemnity claims from the perspective of an engineer, look at the claim in the main action. If the main claim arises out of a breach of contract, particularly of the kind seen in a condominium construction case with an offering plan and purchase agreements, there may be a basis to seek dismissal of a common law indemnity claim. In general, third party common-law indemnity claims would more likely be successful where the main Plaintiff’s claim is negligence, and the main Defendant is only liable by statute, i.e., not based on “wrongdoing.”