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North Carolina’s New Law Alters Indemnification Provisions in Construction Contracts Part 2

House Bill 871 has made some dramatic changes to General Statute 22B-1 and the construction contract landscape in North Carolina. In part one of this two-part series, we discussed how G.S. 22B-1 now prohibits cross-indemnification. Below, we will discuss how it now also prohibits duty-to-defend provisions. However, as you will see, contractors and design professionals are not off the hook when it comes to liability. Consult a Charlotte contractor attorney from Cotney Construction Law with any questions regarding G.S. 22B-1 and its effect on your contracts.  

Prohibiting Duty-To-Defend Provisions 

Subsection (c) prohibits duty-to-defend provisions. Duty-to-defend provisions stipulate that one party must defend another if a third party brings legal action against them, whether it be litigation, arbitration, or mediation. With the passing of House Bill 871, a design professional would not be required to defend a government entity in the event that a lawsuit is brought against it. Subsection (c) applies to design professionals and construction contracts that include design professional services. 

Preserving Indemnity Obligations 

Despite the previous subsection, subsection (d) preserves indemnity obligations in instances where there is fault. Essentially, if a design professional, contractor, or derivative party is found to be a proximate cause of damages, then the promisee (contractor or design professional) is responsible for both those damages and any legal expenses, including attorney’s fees, litigation or arbitration expenses, and court costs. 

Simply put, a government entity can’t force a contractor to defend it in court. However, the contractor is on the hook for legal expenses if they were the proximate cause for damages and the contract stipulates this. 

Exemptions

Subsection (e) provides exemptions from G.S. 22B-1 for the following contracts: “insurance contract, workers’ compensation, or any other agreement issued by an insurer.” Lien or bond claims affirmed under Chapter 44A of the General Statutes are also exempt. 

Consult an Attorney 

As mentioned in part one, these provisions are currently in effect. While the laws regarding indemnification are complex, the implications of House Bill 871 are clear: contractors and design professionals are responsible for the damages they cause. Contractors and design professionals alike should consult with an attorney when drafting, reviewing, and amending contracts to ensure they remain compliant with G.S. 22B-1. And if you are ever faced with a legal dispute stemming from injury or property damage, partner with a Charlotte construction litigation attorney from Cotney Construction Law. 

If you would like to speak with a Charlotte contractor lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.