Virginia is in the minority of states that generally permit parties to be contractually indemnified for their own negligence, as long as the provision is clear and explicit. In 2007, the Virginia Supreme Court upheld contractual indemnification clauses which shift the burden of liability to the indemnitor, even though the injury was the fault of the indemnitee. Estes Exp. Lines, Inc. v. Chopper Exp., Inc., 273 Va. 358, 641 S.E.2d 476 (2007); W.R. Hall, Inc. v. Hampton Roads Sanitation Dist., 273 Va. 350, 641 S.E.2d 472 (2007).
In Estes Exp. Lines, Inc. v. Chopper Exp., Inc., a Chopper employee was injured while operating a truck leased from Estes. The employee filed a personal injury action against Estes and a repair company on the basis that their negligence was the proximate cause of his injuries. The parties settled their claims and, Estes then requested that Chopper reimburse it for the settlement amount and attorneys' fees in reaching settlement pursuant to the indemnification clause in the lease agreement. Chopper had agreed to indemnify Estes for:
C. Any and all loss, cost, claim, expense, cause of action, loss of use and liability by reason of injury (including death) to persons or damage to property arising out of the use, operation, ownership, maintenance or control of a [leased] Vehicle whether covered by insurance or not, including claims in excess of insurance limits and all claims determined not to be covered by insurance irrespective of who, among [Chopper] or its insurance carrier or others, may be the cause for such failure of coverage or recovery in excess of coverage.
D. Any liability by reason of any claim asserted by an agent or employee of [Chopper].
Chopper refused, and Estes filed suit.
The Virginia Supreme Court stated that indemnity provisions, including those indemnifying a party against future liability for personal injury caused by its own negligence, do not invoke the same public policy concerns as pre-injury release agreements. The primary reason for this distinction is that, unlike pre-injury release provisions, indemnity provisions do not bar or even diminish an injury party's ability to recover from a tortfeasor. The Court found that the indemnification was enforceable even to the extent that it would entitle Estes to be reimbursed for its own negligence.
On the same day as it rendered its Estes opinion, the Virginia Supreme Court issued its opinion in W.R. Hall, Inc. v. Hampton Roads Sanitation Dist. In this case, the Hampton Roads Sanitation District (“HRSD”) hired W. R. Hall, Inc. to replace sewer lines. W. R. Hall’s employee was injured when a train hit him. The employee sued Belt Lines. HRSD assumed Belt Line’s defense pursuant to the utility line agreement between them. HRSD then sought indemnity from W. R. Hall for its expenses incurred in defending Belt Line under two indemnity provisions in favor of HRSD.
Article 6.16 specified that W. R. Hall
Shall assume full responsibility for any damage to any such land or area [on which the work is to be done], or to the owner or occupant thereof. [W.R. Hall] shall indemnify and hold harmless [HRSD] from and against all claims . . . brought by any such owner or occupant against [district] to the extent caused by or based upon [W. R. Hall’s] performance of the Work.
Article 6.31 required W. R. Hall to indemnify and hold harmless HRSD against any claim or loss for bodily injury "arising out of or resulting from the performance of the Work," provided that the claim or loss was caused in whole or in part by any negligent act or omission of W. R. Hall regardless of whether or not caused in part by any negligence or omission of a person or entity indemnified. The Court noted that this provision operates to place the ultimate burden for personal injury upon the negligent party causing said injury.
The Virginia Supreme Court found both Articles enforceable. The Court found that HRSD held harmless Belt Line against the consequences of its operations. HRSD then sought to transfer that risk to the entity actually performing the operations (i.e. W. R. Hall) using Article 6.16. The Court held that this transfer of risk to the active party is not repugnant to public policy. Similarly, Article 6.31 sought to place the ultimate burden for a personal injury upon the negligent party causing that injury, but only if the indemnitor was at least in part responsible for the injury. Consistent with Estes, the Court held that a contractual provision whereby a party is indemnified against losses incurred as a result of personal injury caused by its own future negligence is enforceable and does not violate public policy.
It is important to ensure that clients doing business in the Commonwealth of Virginia are clear about the language of the agreements in these cases and indemnification agreements in their own contracts. While the indemnification language in these cases may not be suitable for the needs of all clients, it provides an important foundation for creating indemnification language in other contracts. Moreover, when a client is faced with potential liability, an understanding of the language in these cases proves important in recognizing whether a clients’ current contract will exempt them from (or expose them to) liability.
I find it important to note, however, that Virginia does have a statutory limitation on indemnification of one's own negligence specifically for construction contracts. VA. CODE. ANN. § 11 4.1. Otherwise, pursuant to Estes and W.R. Hall, there is no public policy in Virginia that prohibits a party from negotiating away its own negligence in indemnity agreements.
Kevin M. Cox
Semmes Bowen & Semmes