Magistrate thwarts Landlord’s attempt to pass through liability for own negligence; ambiguity renders indemnification agreement unenforceable

James Shea v. Royal Enterprises, Inc. and 9th Street Ventures, Ltd., United States District Court, Southern District of New York, January 6, 2011

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In a personal injury action raising issues of contractual and statutory interpretation, AGF&J member Michael Gorelick and associate Jessica Napoli recently defeated the motion for summary judgment made by a co-defendant Landlord, which was seeking contractual and common law indemnification from its Tenant.

The Court agreed, in its 18-page Memorandum Opinion and Order, that the contractual indemnity provision that Landlord was relying upon was ambiguous, employing two contradictory indemnification obligations. United States Magistrate Judge Theodore H. Katz wrote that the provision “does not make clear whether each party is required to indemnify the other only to the extent of its own negligence, or for the other’s negligence as well. If anything, it suggests that the Landlord and Tenant intended to indemnify each other for their own negligence, rather than for the negligence of the other party.”

The personal injury action was commenced by a patron of a bar against both the Landlord and the commercial Tenant who operated the bar where the plaintiff was injured. The plaintiff had fallen on stairs in the defendants’ building when he unsuccessfully navigated a path from the bar to the restroom. This misadventure had serious consequences, with the plaintiff claiming to have suffered multiple skull fractures, subarachnoid hemorrhage, damage to brain tissue and traumatic brain injury.

Seeking to pass all liability through to the Tenant, Landlord argued that the Tenant owed it indemnification, even for liability arising from the Landlord’s own negligence. The Tenant, contended that such a provision was ambiguous, or, alternatively, unenforceable under New York General Obligations Law § 5-321. (An insurance procurement requirement can sometimes render such a provision enforceable. Here, although the Tenant had agreed to obtain liability insurance naming the Landlord as an additional insured, it had not in fact done so.)

The Court also denied the Landlord’s claims for common law indemnification, finding issues of fact as to the Landlord’s own potential negligence for structural conditions of the premises that violated building codes. These conditions had not been created by the Tenant and raised the possibility of a finding of negligence against the Landlord, which would bar recovery under common law indemnification doctrines.