If you have ever been involved in a construction defect lawsuit, you know the word indemnification appears at every turn and can be an important tool in litigation. But what exactly does it mean to indemnify someone else? Moreover, why is it important to a construction professional?
In general, indemnity may be defined as a “form of compensation in which a first party is liable to pay a second party for a loss or damage the second party incurs to a third party.” Rock Hill Tel. Co. v. Globe Communs., Inc., 363 S.C. 385, 389 (2005) (quoting First Gen. Servs. of Charleston, Inc. v. Miller, 314 S.C. 439, 442, 445 S.E.2d 446, 449 (1994)). The right to indemnity arises by operation of law in cases of imputed fault or where some special relationship exists between the first and second parties. Id. In other words, a right of indemnity exists whenever the relation between the parties is such that either in law or in equity there is an obligation on one party to indemnify the other, as where one person is exposed to liability by the wrongful act of another in which he does not join. Id. (citing Stuck v. Pioneer Logging Mach., Inc., 279 S.C. 22, 24, 301 S.E.2d 552, 553 (1983) (citations omitted)).
A construction professional may never care about the word indemnification…until they are sued. Suppose you are a general contractor. You have just completed a job, you’ve been paid, and you’ve moved on to your next project when you suddenly receive a summons and complaint. It seems that the owner of the completed project alleges that their air conditioning unit in the attic was not installed correctly, has leaked, and caused thousands of dollars in damage. The general contractor knows that he hired an HVAC subcontractor to install that unit and he believes the subcontractor should be held responsible for any damage. However, the owner has only sued the general contractor and not the subcontractor. How is the general contractor going to try and ensure that he doesn’t bear all the liability in the lawsuit? Enter the indemnification cause of action.
In the following series of blog posts, we will explore the law of indemnification, including the different forms of indemnification and their requirements. By the end of this series, it’s my hope that the reader will have a greater grasp on indemnification law in South Carolina and how it may be used in litigation.