When people think about contractual risk transfer, they usually think about construction accidents. After all, construction litigation is where indemnification provisions are litigated most frequently, and where General Obligations Law § 5-322.1 often dictates the outcome. That assumption, however, overlooks an important reality.
Risk transfer is not a construction concept. It is a contract concept.
A recent decision from the Second Department, Selis v. Town of North Hempstead, is an excellent reminder that contractual indemnification can shift millions of dollars in exposure in an ordinary premises liability case.
The Facts
The plaintiff, an employee of the Jewish Association for Services for the Aged (JASA), was providing social work services to senior residents pursuant to a contract between JASA and the Town of North Hempstead. While working in a Town-owned building, she tripped and fell on torn carpeting and sustained injuries. The Town owned and maintained the premises. After a liability trial, the jury found the Town 100% responsible for the accident. Ordinarily, that would seem to end the story. It didn't.
The Contract Controlled
The agreement between the Town and JASA required JASA to indemnify the Town "to the fullest extent permitted by law" for liabilities, losses, costs, and expenses "arising out of or in connection with" the agreement. The Second Department held that this language was broad enough to require JASA to indemnify the Town—even though the Town had been found entirely negligent by a jury.
Why?
Because the plaintiff's injuries arose out of her employment with JASA while performing the very services contemplated by the contract. The necessary causal connection existed because her work brought her to the premises where the accident occurred.
Why GOL § 5-322.1 Didn't Matter
Many practitioners instinctively think that a negligent owner cannot obtain contractual indemnification. That is true in many construction cases because General Obligations Law § 5-322.1 prohibits agreements requiring indemnification for a party's own negligence in construction-related contracts. But this wasn't a construction contract. The agreement concerned the provision of social services, not construction, maintenance, alteration, or repair. As a result, the statutory prohibition simply did not apply. The Town's negligence therefore did not invalidate the indemnification provision.
The Practical Lesson
This decision reinforces a point that risk managers, claims professionals, and defense counsel should remember in every liability case:
Never assume indemnification is off the table simply because the case involves a slip-and-fall rather than a construction accident.
Whenever there is:
a service contract,
a vendor agreement,
a management agreement,
or any other contractual relationship,
the indemnification language deserves careful analysis.
A premises owner who appears destined to pay the judgment may ultimately transfer that exposure to its contracting partner if the agreement is drafted broadly enough.
The Bottom Line
The Second Department's decision is another reminder that contractual risk transfer extends far beyond construction litigation.
The first question after any accident should not simply be, Who was negligent?
It should also be:
Who signed the contract?
Because sometimes the contract—not the verdict—determines who ultimately writes the check.
Interested in learning more about contractual risk transfer and how indemnification provisions may impact your organization's exposure? Our team regularly advises clients on risk transfer strategies, contract review, and liability issues across a wide range of industries. If you would like to discuss this topic further or evaluate the risk transfer provisions in your own agreements, please contact us. We would be happy to continue the conversation and help identify opportunities to better protect your organization.
Tags:
