Business and Legal Insights

Introduction

Indemnification is a risk-allocation tool that shifts responsibility for a loss from one party to another. In Florida, indemnification may arise either through an express contractual provision or under the doctrine of common law indemnity. Understanding the distinction is critical because different legal principles and requirements govern each form of indemnification. This article provides a practical overview of contractual and common law indemnity under Florida law and highlights several considerations practitioners should keep in mind when evaluating potential indemnity claims.

Contractual Indemnification

Contractual indemnification arises from the express terms of an agreement. In these situations, one party agrees to indemnify, defend, or hold another party harmless from specified claims, damages, or liabilities. Because the parties’ agreement governs contractual indemnity, courts considering contractual indemnity obligations begin with the language of the contract itself. The scope of the indemnity obligation depends upon the precise terms chosen by the parties.

Notably, under Florida law, contracts purporting to indemnify a party against its own negligence will be enforced only if the parties clearly express such intent. See Camp, Dresser & McKee, Inc. v. Paul N. Howard Co., 853 So. 2d 1072 (Fla. 5th DCA 2003). A general provision indemnifying the indemnitee against all claims, standing alone, is insufficient to indemnify a party against its own negligence. See Univ. Plaza Shopping Ctr. v. Stewart, 272 So.2d 507, 510–11 (Fla.1973); see also Ivey Plants, Inc. v. FMC Corp., 282 So. 2d 205 (Fla. 4th DCA 1973); Cox Cable Corp. v. Gulf Power Co., 591 So. 2d 627 (Fla. 1992).

Practitioners should be mindful of statutory limitations applicable to certain indemnification provisions in private construction contracts and public agency construction contracts. Section 725.06, Florida Statutes, governs indemnification provisions in these types of construction contracts and limits the enforceability of agreements requiring one party to indemnify another for the indemnitee’s own negligence unless the statute’s requirements are satisfied. See Florida Statute § 725.06 (generally rendering void and unenforceable construction-contract indemnity provisions that purport to indemnify an indemnitee for its own negligence unless the agreement strictly complies with statutory requirements, including clear and unequivocal language and a monetary limitation on indemnity that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents); see also id. (providing that public-agency construction contracts are subject to distinct, more restrictive limitations that confine indemnification to losses caused by the indemnitor’s own negligence, recklessness, or intentional misconduct). Accordingly, practitioners should pay special attention to indemnification provisions in construction-related agreements to ensure compliance with section 725.06.

Common Law Indemnification

Unlike contractual indemnification, common law indemnification is an equitable remedy that arises from obligations imposed through special relationships.

A claim for common law indemnity seeks to “shift[] the entire loss from one who, although without active negligence or fault, has been obligated to pay, because of some vicarious, constructive, derivative, or technical liability, to another who should bear the costs because it was the latter’s wrongdoing for which the former is held liable.” Houdaille Indus., Inc. v. Edwards, 374 So. 2d 490, 493 (Fla. 1979) (citing Mims Crane Serv., Inc. v. Insley Mfg. Corp., 226 So. 2d 836 (Fla. 2d DCA 1969).

A party pleading a cause of action for common law indemnity must allege three elements: 1) he/she is wholly without fault; 2) party from whom he/she is seeking indemnity is at fault; and 3) he/she is liable to the injured party only because he/she is vicariously, constructively, derivatively, or technically liable for the wrongful acts of the party from whom he/she is seeking indemnity. Fla. Peninsula Ins. Co. v. Ken Mullen Plumbing, Inc., 171 So. 3d 194 (Fla. 5th DCA 2015).

Some Florida courts have required that a party seeking indemnification be in a “special relationship” with the party from which it is seeking indemnification. See, e.g., Dade Cnty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638 (Fla. 1999) (holding that parade sponsors could not recover from advertiser, who “sponsored” marching band that was cause of injuries, on claim of common law indemnity, in light of jury’s finding that there was no special relationship between parade sponsors and advertiser); but see Camp, Dresser & McKee, Inc. v. Paul N. Howard Co., 721 So. 2d 1254 (Fla. 5th DCA 1998) (holding that engineering firm seeking to recover from contractor under contractual indemnity clause for damages firm had paid to injured employee of subcontractor was not required to establish that there was a special relationship between the parties).

There has been some erosion of the “special relationship” requirement. Florida’s Fourth District Court of Appeal held that a party does not need to specifically plead the existence of a “special relationship” because the term “merely describes a relationship which makes a faultless party ‘only vicariously, constructively, derivatively, or technically liable for the wrongful acts’ of the party at fault.” Diplomat Props. Ltd. P'ship v. Tecnoglass, LLC, 114 So. 3d 357, 362 (Fla. 4th DCA 2013) (citing Houdaille Industries, Inc., 374 So. 2d at 492).

Common law indemnification claims can be challenging to prove because a party seeking indemnification must establish that it is wholly without fault. If the party seeking indemnity bears any degree of negligence, the common law indemnification claim generally fails. See Winn-Dixie Stores, Inc. v. Fellows, 153 So. 2d 45, 51 (Fla. 1st DCA 1963).

Follow the below Indemnification Claim Evaluation Flowchart to help determine the correct path:

Download a printable version here: Indemnification Claim Evaluation Flowchart

Drafting Effective Indemnification Provisions

Because indemnification rights are often determined by contract language, careful drafting is essential. Practitioners should avoid using boilerplate indemnification provisions and consider tailoring them to the risks associated with the transaction.

When drafting or reviewing indemnification provisions, attorneys should clearly define the covered claims, losses, damages, and liabilities; address whether attorneys’ fees, costs, and expenses are recoverable; and establish notice requirements and procedures for tendering a claim. Thoughtful drafting at the outset of a transaction can significantly reduce the risk of future litigation over the scope and enforceability of an indemnity obligation.

Practical Considerations for Litigators

When evaluating a new case, practitioners should ask several key questions:

• Is there a contract?
• Does the contract contain an indemnification provision?
• Are there notice requirements that must be satisfied?
• Is the client facing liability solely because of another party’s conduct?
• Should a third-party claim, or crossclaim, for indemnification be asserted or should an affirmative claim for indemnification be pursued after a judgment is entered?

If no contractual indemnity provision exists, practitioners should not end the inquiry there. Instead, they should evaluate whether a viable claim for common law indemnity may exist and ask the following key questions:

• Is there a special relationship between the parties that could give rise to vicarious or derivative liability?
• Has the plaintiff alleged any independent negligence against the party?
• Do the known facts support a finding that the party is entirely without fault?
• Should a third-party claim for indemnification be asserted or should an affirmative claim for indemnification be pursued after a judgment is entered?

Asking these questions early in litigation can significantly impact strategy, exposure, and settlement leverage.

Conclusion

Indemnification is a powerful risk-shifting tool available to litigants. Whether arising under contract or common law, indemnity claims can alter the course of a case by shifting liability among the parties. Practitioners should identify potential indemnity rights early and carefully draft or review indemnification provisions. A carefully drafted indemnification provision can provide substantial protection when a dispute arises. In contrast, a poorly drafted provision can create uncertainty and expand the scope of litigation to include indemnification itself. Understanding both contractual and common law indemnification allows practitioners to better protect their clients, allocate risk, and effectively shift liability when circumstances warrant.

As part of their mentorship plan for the year, Eric and Melodie will be authoring 10 articles throughout the year on the 10 most impactful contractual provisions in commercial litigation. The blog post above serves as Article 3 in their 10-part blog post series.