OR Case Update: Good News for Subcontractors: Limited Defense Obligation under Indemnity Clauses

From the desk of Smith Freed Eberhard:  This case represents a significant departure from well-established indemnity law for “construction agreements” governed by ORS 30.140.  The case holds that subcontractors are not required to defend general contractors to the extent the general contractor is at fault for the damages being claimed. 

Claims Pointer:  ORS 30.140 limits a subcontractor’s duty to defend a general contractor to only those allegations that are within the sub’s scope of work.  Even when the sub’s duty to defend is triggered, the general has the burden of proving what, if any, portion of defense fees the sub owes.

Sunset Presbyterian Church v. Brockamp & Jaeger, Inc., 355 Or. 286 (2014)

After construction of Sunset Presbyterian Church, the church filed a claim against Andersen Construction Company for various construction defects. Andersen’s contract with all its subcontractors contained an indemnity provision which said: “…the Subcontractor shall indemnify and hold harmless…the Contractor…from all claims, damages, loss and expenses, including but not limited to attorney’s fees, arising out of or resulting from the performance of the Subcontractor’s Work.” Andersen sent letters to its subs demanding they defend Andersen in the suit. The subs, including B&B Title and Masonry, refused to step in and defend Andersen, so Andersen filed third-party complaints against them for breach of the indemnity agreement. B&B performed masonry work on the project and one of the allegations in the church’s complaint involved B&B’s masonry work.

Andersen settled with the church and assigned its claims against the subs to the church. The church moved for summary judgment against the subs. All the subs but B&B settled with the church prior to the court’s decision. As to B&B, the trial court concluded that under ORS 30.140, B&B had a duty to defend Andersen, but only to the extent that B&B’s work was implicated in the church’s...

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