memorandum...memorandum to: from: date: boyd-graves conference committee to study code i 1-4.1...

MEMORANDUM

TO:

FROM:

DATE:

Boyd-Graves Conference

Committee to Study Code § I 1-4.1

September 8, 2011

Our committee was asked to study whether Virginia Code § 11-4.1 (Attachment 1) should beamended in the wake of Uniwest Construction, Inc. v. Amtech Elevator Services, Inc., 280 Va.428, 699 S.E.2d 223 (2010) (Attachment 2). We concluded that the statute does not need fixing.

BACKGROUND

Section 11-4.1 invalidates, as against public policy, any provision in a construction contract bywhich the contractor purports to indemnify another party to the contract for damages "caused byor resulting solely from the negligence of such other party." (Emphasis added).

In Uniwest, one employee of the subcontractor died and another was injured when they fell fromscaffolding at a construction project. Lawsuits on their behalf were filed against the contractorbased on the contractor’s negligence in maintaining the scaffolding. The contractor argued thatthe subcontractor was required to defend and indemnify based on two separate provisions of thesubcontract. The Court invalidated one provision- paragraph 10 -as void under Code § 11-4.1.But the Court required partial indemnification under another provision, paragraph 3.18.1, whichwas borrowed from the standard form General Conditions published by the American institute ofArchitects and incorporated by reference into the subcontract.

The invalid Paragraph 10 required the subcontractor to defend and indemnify the contractor"whether or not such claim(s) are based upon the negligence of [the Contractor] or [the Owner]."Id. at 434, 699 S.E.2d at 225. The contractor argued that this provision survived Code § 11-4.1because it permitted indemnification in situations where the indemnitee was only partiallyresponsible for the loss. Because the contractor claimed that others were also at fault for theinjury, the injuries did not "result[] solely from" the contractor’s negligence.

Writing for a unanimous Court, Justice Mims rejected this argument. He wrote that § 11-4.1invalidates an indemnification provision if it purports to protect the indemnitee from his ownnegligence, even if that negligence only partially contributes to the injury:

Because the phrases "caused by" and "resulting solely from" aredisjunctive in the statute, it voids any indemnification provisionthat reaches damage caused by the negligence of the indemnitee,even if the damage does not result solely from the negligence ofthe indemnitee. Thus, the issue is not whether an indemnification

provision is written so broadly that it encompasses the negligenceof parties in addition to the indemnitee. Rather, the issue iswhether the provision is so broad that it indemnifies the indemniteefrom its own negligence.

ld. at 442,669 S.E.2d at 230.

Moreover, in determining whether a contract provision violates § 11-4.1, Justice Mims explainedthat the trial court should simply compare the provision to the statute, not examine theunderlying facts of the case to determine whether others were at fault too: "the unambiguouslanguage of Code § 11-4.1 requires us to look to the contract containing the provision, not thecircumstances from which the claim for indemnification arose, to determine whether anindemnification provision violates Code § 11-4.1 ." Id. at 442, 699 S.E.2d at 230.

Turning to the other indemnification provision incorporated by reference into the subcontract,the Court held that AIA standard form paragraph 3.18.1 properly required the subcontractor toindemnify the general contractor, "but only to the extent caused in whole or in part by negligentacts or omissions of[the Subcontractor]... regardless of whether or not such claim, damage,loss or expense is caused in part by a party indemnified hereunder." ld. at 433,699 S.E.2d at225 (emphasis added). This provision did not require the subcontractor to indemnify the generalcontractor for the latter’s negligence. So it did not run afoul of § 11-4.1. The Court remandedthe case for trial to determine the relative liability of the subcontractor under this provision. Id.at 446, 699 S.E.2d at 232.

ANALYSIS AND CONCLUSION

The Committee agrees with Uniwest’s interpretation of Code § 11-4.1 and with the Court’srationale. We do not think that § 11-4.1 is broken or needs fixing.

First, the statute properly invalidates a provision in a construction contract that pui’ports torequire indemnification for the indemnitee’s own negligence, even if that negligence is only oneof several causes of the injury for which indemnification is sought. Such indemnificationprovisions are void whether the damages are "caused by" the indemnitee’s negligence togetherwith the negligence of others, or "result[]solely from" the indemnitee’s own negligence. JusticeMires correctly concluded that these phrases "are disjunctive in the statute."

Second, in deciding whether the contract provision was void under § 11-4. l, we think thatUniwest was correct to focus solely on the text of the contract, rather than looking to theunderlying facts of the case to determine the degree of the indemnitee’s fault. This approachreduces litigation costs. It allows the validity of the indemnification provision to be determinedat the outset of the case, avoiding the need for an evidentiary hearing.

Third, the decision in Uniwest provides the proper incentive for owners and contractors not tooverreach in drafting their contracts and subcontracts. Construction contracts sometimes operateas contracts of adhesion. Contractors and subcontractors often have little bargaining power,particularly where the prime contract (as in Uniwest) requires all of the subcontracts toincorporate its provisions. By voiding at the outset indemnification provisions that protect the

2

indemnitee from its own negligence, § 11-4. l discourages overreaching by owners, generalcontractors, and other upstream contracting parties.

And finally, as Uniwest shows, the parties are free to include in construction contracts aprovision - like paragraph 3.18.1 of the AIA General Conditions - that requires indemnificationto the extent of the indemnitor’s negligent conduct. This approach seems fair and balanced to us.

Accordingly, the Committee believes that the decision in Uniwest was correct and that noamendment to Code § 11-4.1 is necessary.

Respectfully submitted,

Stuart A. Raphael, ChairThe Hon. Wilford Taylor, Jr.George E. Allen, IIIWiley F. Mitchel, Jr.Sandra M. RohrstaffStephen M. SayersLucia Anna Trigiani

Attachments:

1. Va. Code Ann. § 11-4.1 (2011).

2. Uniwest Constr., Inc. v. Amtech Elevator Servs., Inc., 280 Va. 428, 699 S.E.2d 223(2010).

§ 11-4.1 CONTRA~*rS § 11-4.3

§ 11-4.1. Certain indemnification provisions in construction contractsdeclared void.

Any provision contained in any contract relating to the construction,alteration, repair or maintenance of a building, structure or appurtenancethereto, including moving, demolition and excavation connected therewith, orany provision contained in any contract relating to the construction of projectsother than buildings by which the contractor performing such work purports toindemnify or hold harmless, another party to the contract against liability fordamage arising out of bodily injury to persons or damage to property sufferedin the course of performance of the contract, caused by or resulting solely fromthe negligence of such other party or his agents or employees, is against publicpolicy and is void and unenforceable. This section applies to such contractsbetween contractors and any public body, as defined in § 2.2-4301.

This section shall not affect the validity of any insurance contract, workers’compensation, or any agreement issued by an admitted insurer.

The provisions of this section shall not apply to any provision of any contractentered into prior to July 1, 1973.

History.1973, c. 273; 1974, c. 430; 1991, c. 363.

CASE NOTES

Construction. -- Unambiguous language of§ 11-4.1 requires courts to look to the contractcontaining the provision, not the circumstances~rem which the claim for indemnification arose,to determine whether an indemnification pro-~ision violates § 11-4,1. Uniwest Constr., Inc. v.Amtech Elevator Servs., 280 Va. 428, 699S.E.2d 223, 2010 Va. LEXIS 234 (2010).

Indemnification requirement void forviolation of public policy. -- Operative lan-~mage of paragraph 10 of the subcontract stated"if any claims be made or asserted, whether ornot such claims were based upon the negligenceof the corporation, the company agreed to inodemnify and save harmless the corporationfrom any and all such claims~; the plain mean-

ing of that language clearly obligated the com-pany to indemnify the corporation whether ornot the claim was based upon the negligence ofthe corporation. Those words irreconcilablyconflicted with the public policy expressed in§ 11-4.1, which voided any contractual provi-sion that purported to indemnify or hold harm-less the corporation against liability for dam-age caused by or resulting solely from thenegligence of the corporation; therefore, be-cause paragraph 10 clearly reached beyond thenegligence of other parties and indemnified thecorporation, it violated § 11-4.1 and was void.Uniwest Constr., Inc. v. Amtech ElevatorServs., 280 Va. 428, 699 S.E.2d 223, 2010 Va.LEXIS 234 (2010).

35

Committee to Study Code § 11-4.1 -- Attachment 1

UNIWEST CONSTRUCTION, INC., ET AL. v. AMTECH ELEVATOR SERVICES, INC., NIK/A ABMAMTECH, INC., ET AL. AMTECH ELEVATOR SERVICES, INC., N/K/A ABM AMTECH, INC., ET AL. v.

UNIWEST CONSTRUCTION, INC., ET AL FEDERAL INSURANCE COMPANY v. AMTECHELEVATOR SERVICES, INC., N/K/A ABM AMTECH, INC., ET AL.

SUPREME COURT OF VIRGINIA280 Va. 428;699 S.E.2d 223;2010 Va. LEXIS 234

Record No. 091495, Record No. 091496, Record No. 091521September 16, 2010, Decided

Editorial Information: Subsequent History

Opinion withdrawn by, in part, Remanded by Uniwest Constr., Inc v. Amtech Elevator Sews., 2011 Va.LEXlS 107 (Va., Apr. 21, 2011)

Editorial Information: Prior History

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY. Marcus D. Williams, Judge.Amtech ElevatorSews. v. Uniwest Constr., Inc., 2010 Va. LEXlS 87 (Va., Jan. 15, 2010)Fed. Ins. Co. v. Amtech ElevatorSews., 2010 Va. LEXIS 108 (Va., Jan. 15, 2010)Uniwest Constr., Inc. v. ABM Amtech, Inc., 2010 Va.LEXIS 91 (Va., Jan. 15, 2010)

Disposition:Affirmed in part, reversed in part, and remanded.

Counsel Edward W. Cameron (Christopher R. Carroll; Matthew J. Lodge;Geoffrey S. Gavett; Cameron/McEvoy; Carroll, McNulty & Kull; Gavett & Datt, on briefs), forUniwest Construction, Inc., United States Fire Insurance Company, and PennsylvaniaManufacturers’ Association Insurance Company.

Barbara I. Michaelides (Agelo L. Reppas; John D. McGavin;John C. Bonnie; Howard J. Russell; Bates & Carey; Trichilo, Bancroft, McGavin, Horvath &Judkins; Weinberg, Wheeler, Hudgins, Gunn & Dial, on briefs), for Amtech Elevator Services,Inc., n/k/a ABM Amtech, Inc., ABM Industries Incorporated, and AIU Insurance Company.

Jeffrey R. Schmieler (Alan B. Neurick; Lisa N. Waiters; Saunders& Schmieler, on briefs), for Federal Insurance Company.

Judges: PRESENT: Hassell, C.J., Koontz, Kinser, Goodwyn, Millette, and Mims, JJ., and Lacy, S.J.OPINION BY JUSTICE WILLIAM C. MIMS.

CASE SUMMARY

PROCEDURAL POSTURE: In companion appeals from the Circuit Court of Fairfax County, Virginia, thecourt considered whether defendant elevator services company had a contractual duty to defend andindemnify plaintiffs, corporation and its insurers, in an action against the corporation by an injuredcompany employee and the estate of a deceased company employee. The court also considered whetherthe corporation was insured under the company’s insurance policies.Paragraph 3.18.1 of the generalconditions, which the subcontract incorporated, obligated the company to indemnify the corporationbecause the plain meaning of the paragraph was that the corporation’s duty to defend and indemnifyunder the prime contract became the company’s duty to defend and indemnify the corporation.

© 2011 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. Use of this product is subject tothe restrictions and terms and conditions of the Matthew Bender Master Agreement.


OVERVIEW: The corporation and its insurers asserted that the circuit court erred when it ruled that thedefense and indemnification requirement in paragraph 10 of the subcontract violated public policypursuant to Va. Code Ann. § 11-4.1. Va. Code Ann. § 11-4.1 required the courts to look to the contractcontaining the provision, not the circumstances from which the claim for indemnification arose, todetermine whether an indemnification provision violated § 11-4.1. The operative language of paragraph10 stated "If any claims be made or asserted, whether or not such claims were based upon thenegligence of the corporation, the company agreed to indemnify and save harmless the corporation fromany and all such claims." The plain meaning of that language obligated the company to indemnify thecorporation whether or not the claim was based upon the negligence of the corporation. Those wordsirreconcilably conflicted with the public policy in Va. Code Ann. § 11-4.1, which voided any contractualprovision which purported to indemnify or hold harmless the corporation against liability for damagecaused by or resulting solely from the negligence of the corporation. Therefore paragraph 10 was void.

OUTCOME: The circuit court’s holding that Paragraph 10 of the subcontract was void against the publicpolicy was affirmed. The contrary rulings of the circuit court were reversed and remanded for furtherproceedings consistent with the opinion.

LexisNexis Headnotes

Civil Procedure > Appeals > Standards of Review > De Novo ReviewContracts Law ¯ Contract Interpretation ¯ General OverviewContracts Law ¯ Contract Interpretation ¯ Ambiguities & Contra Proferentem ¯ General Overview

An appellate court reviews the interpretation of a contract de novo. Thus, the court has an equalopportunity to consider the words of the contract within the four corners of the instrument itself. However,it is the function of the court to construe the contract made by the parties, not to make a contract for them.The contract is construed as written, without adding terms that were not included by the parties. Whenthe terms in a contract are clear and unambiguous, the contract is construed according to its plainmeaning. Words that the parties used are normally given their usual, ordinary, and popular meaning. Noword or clause in the contract will be treated as meaningless if a reasonable meaning can be given to it,and there is a presumption that the parties have not used words needlessly, the contract is construed asa whole. Its provisions are to be harmonized when possible, and effect is to be given to every stipulationwhen it can reasonably be done. Nevertheless, a provision that violates public policy is void and has nolegal effect. The public policy of the Commonwealth is determined by the General Assembly, for it is theresponsibility of the legislature to strike the appropriate balance between competing interests. Once thelegislature has acted, the role of the judiciary is the narrow one of determining what it meant by the wordsit used in the statute.

Contracts Law ¯ Defenses ¯ Public Policy Violations

See Va. Code Ann. § 11-4.1.


The unambiguous language of Va. Code Ann. § 11-4.1 requires the courts to look to the contractcontaining the provision, not the circumstances from which the claim for indemnification arose, todetermine whether an indemnification provision violates Va. Code Ann. § 11-4.1.


The public policy expressed in Va. Code Ann. § 1 1-4.1, which voids any contractual provision which



purports to indemnify or hold harmless another party to the contract against liability for damage causedby or resulting solely from the negligence of the other party to the contract.

Contracts Law > Contract Interpretation ¯ Ambiguities & Contra Proferentem ¯ General Overview

Courts interpret the unambiguous terms of a contract according to their plain meaning. In addition, thecourts read the contract as a whole and give effect to every provision when possible.

Opinion

Opinion by: WILLIAM C. MIMS

Opinion

{699 S.E.2d 225} {280 Va. 433} OPINION BY JUSTICE WILLIAM C. MIMS

In these companion appeals we consider whether Amtech Elevator Services, Inc., now known asABM Amtech, Inc., ("Amtech") had a contractual duty to defend and indemnify Uniwest Construction,Inc. ("Uniwest") in an action brought against Uniwest by an injured Amtech employee and the estateof a deceased Amtech employee. We also consider whether Uniwest was insured under Amtech’sinsurance policies.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

A. THE CONTRACT DOCUMENTS

The Fountains at Logan Square, L.L.C. ("Fountains") executed a written agreement ((he "PrimeContract") with Uniwest in August 1999 to renovate a building Fountains owned in Philadelphia,Pennsylvania. The Prime Contract was drafted using a form American Institute of Architects ("AIA")document that included AIA’s General Conditions of the Contract for Construction (the "GeneralConditions"). Paragraph 3.18.1 of the General Conditions obligated Uniwest to defend and indemnifyFountains

[t]o the fullest extent permitted by law.., from and against claims, damages, losses andexpenses, including but not limited to attorneys’ fees, adsing out of or resulting from performanceof the Work, provided that such claim, damage, loss or expense is attributable to bodily injury,sickness, disease or death, or injury to or destruction of tangible property, (other than the Workitself) including loss of use resulting therefrom, but only to the extent caused in whole or in part bynegligent acts or omissions of [Uniwest], a Subcontractor, anyone directly or indirectly employedby them or anyone for whose acts they may be liable, regardless of whether or not such claim,damage, loss or expense is caused in part by a party indemnified hereunder.The GeneralConditions also obligated Uniwest to "require each Subcontractor... to be bound to [Uniwest] by[the] terms of the Contract Documents, and to assume toward [Uniwest] all the obligations andresponsibilities which [Uniwest], by these Documents, assumes toward [Fountains]."

{280 Va. 434} The renovations set forth in the Prime Contract included modernization of threeexisting passenger elevators and installation of a new service elevator. Uniwest subcontracted thiselevator work to Amtech in March 2000 by a written agreement (the "Subcontract") governed byVirginia law. The Subcontract expressly incorporated the Prime Contract "to the extent not otherwiseexcluded or modified by the terms of th[e] Subcontract." Paragraph 3 of the Subcontract amplified thisobligation: ,

[Amtech] agrees to be bound to Uniwest by all the terms of the [Pdme Contract] and to assume



towards Uniwest all of the obligations and responsibilities that Uniwest has by the [PrimeContract] assumed toward [Fountains]. All terms and conditions contained in the [Prime Contract]which, by the [Prime Contract] or by operation of law, are required to be placed in [the]Subcontract[] are hereby incorporated herein as if they were specifically written herein.

Additionally, Paragraph 10 of the Subcontract required Amtech to defend and indemnify Uniwest:

[Amtech] hereby assumes entire responsibility for any and all damage or injury of any kind ornature whatever, including death resulting therefrom, to all persons, whether employees of[Amtech], its subcontractors or agents. If any claims for such damage or injury be made orasserted, whether or not such claim(s) are based upon the negligence of Uniwest or [Fountains],[Amtech] agrees to indemnify and {699 S.E.2d 226} save harmless Uniwest from any and allsuch claims, and further from any and all loss, costs, expense, liability, damage or injury,including legal fees and disbursements, that Uniwest may sustain, suffer or incur as a resultthereof.Further [Amtech] agrees to and does hereby assume the defense of any action at law orin equity which may be brought against Uniwest or [Fountains] arising by reason of such claims.

Finally, Exhibit B of the Subcontract required Amtech to "[f]urnish and install elevator work inaccordance with ’Elevator Installation and Modernization Specifications for Logan Square East’ asprepared by Zipf Associates, Inc." (the "Zipf Specifications"). The Zipf Specifications required Amtechto "name [Uniwest] as [an] {280 Va. 435} Additional Insured" to its insurance policies or "submit aseparate... Liability Insurance policy" for Uniwest.

B. THE INSURANCE POLICIES

Amtech had a commercial general liability insurance policy (the "CNA Policy") from ContinentalCasualty Company ("Continental") with a $1,000,000 coverage limit. 1 The CNA Policy included anerrors and omissions endorsement stating:

In the event, you are required to add a person or organization as an additional insured on thispolicy under a written agreement or contract but you inadvertently fail to issue such endorsement,that person or organization is included as an insured. Provided that, the additional insured is aninsured only with respect to liability arising out of... your ongoing operations performed for thatadditional insured if the additional insured is an owner, lessee or contractor for whom you areperforming work .... Provided, further, that: [t]he additional insured is an insured only to theextent that it is required to be indemnified by your written agreement or contract with theadditional insured; and [t]he insurance afforded to the additional insured shall not exceed thecoverage and the limits of insurance required in the written agreement or contract, or thecoverage and limits of insurance of this policy, whichever is less.

Amtech also had a commercial umbrella insurance policy (the "AIU Policy") from AIU InsuranceCompany ("AIU") with a $ 25,000,000 coverage limit. This policy insured any entities covered by theCNA Policy by including as an insured "[a]ny person.., included as an additional insured in thepolicies listed in the Schedule of Underlying Insurance." 2 The Schedule of Underlying Insuranceincluded the CNA Policy.

The AIU Policy also included as an insured "[a]ny person.., to whom you are obligated by a writtenInsured Contract to provide insurance such as is afforded by this policy but only with respect to...{280 Va. 436} liability arising out of operations conducted by you or on your behalf .... "3 The AIUPolicy defined "Insured Contract" to mean "any oral or written contract or agreement entered into byyou and pertaining to your business under which you assume the tort liability of another party."

Uniwest had a general liability insurance policy from Pennsylvania Manufacturers’ AssociationInsurance Company ("PMA") with a $1,000,000 coverage limit. Uniwest also had a commercialumbrella insurance policy from United States Fire Insurance Company ("U.S. Fire") and a second tier



excess policy from Federal Insurance Company ("Federal"), each with a $ 5,000,000 coverage limit.

C. THE ACCIDENT AND RESULTING LAWSUIT

Thomas Stinson and Robert Bruce were employees of Amtech assigned to the elevator project.Stinson and Bruce were working on a scaffold in an elevator shaft on January 15, 2001, when thescaffold collapsed and they plummeted to the bottom of the {699 S.E.2d 227} shaft. Stinson died andBruce sustained serious injury. Stinson’s estate and Bruce sued Uniwest and others in Pennsylvania.4 ’

PMA, Uniwest’s principal insurer, notified Amtech that Uniwest and PMA expected it to defend andindemnify Uniwest against the Employees’ lawsuit. ABM retained a Pennsylvania attorney, RichardHohn, to determine whether the Subcontract required it to defend and indemnify Uniwest. Hohndetermined that Paragraph 10 of the Subcontract was valid under Pennsylvania law but noted thatthe Subcontract was governed by Virginia law. He opined that the provision was valid under Virginialaw as well.

Based on Hohn’s opinion that Amtech had a duty to defend and indemnify Uniwest, ABM directed himto negotiate the terms of Uniwest’s defense with PMA. PMA retained its own counsel, Joseph Gibley,for the negotiation. Thereafter ABM agreed to defend and indemnify Uniwest "pursuant to the termsand conditions" of the Subcontract. PMA accepted the offer and ABM retained James Lynn to beUniwest’s counsel with day-to-day control of Uniwest’s defense. 5

{280 Va. 437} In July 2005, ABM notified Continental and AIU that Lynn and Hohn expected theEmployees to demand damages exceeding $ 20,000,000. AIU subsequently informed Lynn that ithad not joined in ABM’s agreement to defend and indemnify Uniwest. ABM objected, contending thatAIU had been informed of the accident as eady as 2001 and was aware that ABM had agreed todefend and indemnify Uniwest for more than a year.

In November 2005, Continental informed AIU that litigation expenses already had exhaustedAmtech’s self-insured retention and were eroding coverage under the CNA Policy. Continentaldetermined that the AIU Policy umbrella coverage was exposed and tendered the remainingcoverage under the CNA Policy to AIU. Soon thereafter, AIU notified ABM, Lynn, and Gibley that itconsidered Paragraph 10 of the Subcontract void under Virginia law and reserved its rights under theAIU Policy, asserting that there was no Insured Contract which required it to cover th~ defense andindemnification of Uniwest. 6 Nevertheless, AIU retained Robert Devine as counsel to participate inthe defense of the Employees’ lawsuit. Although Devine undertook some defense responsibilities inpreparation for trial, Lynn remained lead counsel for Uniwest. Lynn also participated with Gibley insettlement conferences; Devine did not.

By February 2006, AIU had ignored repeated demands from ABM, Uniwest, and Uniwest’s insurers toparticipate in settlement discussions and fulfill what they asserted to be its contractual obligation todefend and indemnify Uniwest. At that time Uniwest and its insurers settled the Employees’ claimsagainst Uniwest for $ 9,500,000.

D. THE LITIGATION PRECEDING THESE APPEALS

Uniwest and its insurers filed a complaint against Amtech and its insurers in the Circuit Court forFairfax County in October 2006. Uniwest and its insurers alleged, among other things, that Amtechbreached its contractual duty to defend and indemnify Uniwest in the Employees’ lawsuit. The circuitcourt determined that the defense and indemnification provision in Paragraph 10 of the Subcontractwas void pursuant to Code § 11-4.1 because it indemnified Uniwest {280 Va. 438} for its ownnegligence. Uniwest and its insurers then non-suited their action.

Thereafter, Amtech, ABM, and AIU filed a complaint in the circuit court in May 2008 seekingdeclaratory judgment that they were not liable to Uniwest or its insurers "in any amount or on any



basis." Uniwest and its insurers responded by filing counterclaims in which they again allegedAmtech had a duty{699 S.E.2d 228} to defend and indemnify Uniwest under the Subcontract, undereither Paragraph 10 or Paragraph 3.18.1 of the General Conditions incorporated through the PrimeContract. They further alleged that the negotiation between Hohn and Gibley formed an independentagreement to defend and indemnify. They also claimed AIU had a duty to defend and indemnifyUniwest under Subdivisions E-4 and E-7 of the AIU Policy, that AIU had acquiesced to defending andindemnifying Uniwest by not timely reserving its rights, and that AIU was estopped from denying itsobligation to defend and indemnify because it retained Devine and he participated in the Employees’lawsuit. Uniwest and its insurers also filed third-party complaints bringing similar claims againstContinental.

By agreement of all parties, the circuit court entered an order expressly incorporating,its earlier rulingin the non-suited action that Paragraph 10 was void pursuant to Code § 11-4.1. The circuit courtentered a separate order by agreement of the parties, expressly limited to Continental, finding thatUniwest was an additional insured under the CNA Policy. 7 It stated that "[f]or [the] purposes of allclaims asserted in this action against [Continental] only, the [c]ourt finds that Continental hasadmitted that [Uniwest] is an additional insured under [the CNA Policy] ....This order is withoutprejudice to any claims or defenses of any other party to this action."

After a five-day bench trial, the circuit court determined that Amtech did not have a duty to defendand indemnify Uniwest based on Paragraph 3.18.1 of the General Conditions. To the extent theSubcontract incorporated Paragraph 3.18.1, it did so only to place Amtech in Uniwest’s shoes withregard to Uniwest’s duty to defend {280 Va. 439} and indemnify Fountains. The court alsodetermined that communications between Hohn and Gibley negotiating the terms for Amtech’sdefense and indemnification of Uniwest did not create an independent agreement by Amtech todefend and indemnify Uniwest. Rather, those communications arose solely from Amtech’s belief atthe time that it owed such a duty based on Paragraph 10 of the Subcontract, although that provisionwas in fact void pursuant to Code § 11-4.1. Consequently, Amtech had no duty to defend orindemnify Uniwest.

The circuit court also determined that AIU had no duty to defend and indemnify Uniwest under eitherSubdivision E-4 or Subdivision E-7 of the AIU Policy. Because there was no valid provision requiringAmtech to defend and indemnify Uniwest, Uniwest was not an additional insured under the CNAPolicy and Subdivision E-4 was not implicated. Likewise, in the absence of a valid defense andindemnification provision, there was no "Insured Contract" as defined by the AIU Policy to imposesuch a duty on AIU under Subdivision E-7.

The circuit court further determined that AIU had not acquiesced to or become estoPl~ed fromdenying a duty to defend and indemnify Uniwest. Although AIU retained Devine and he participated inthe Employees’ lawsuit, there was no acquiescence or estoppel because he merely supplementedand did not replace Lynn as lead counsel for Uniwest. Likewise the court held that AIU had notwaived its ability to reserve its rights. Because Uniwest never demanded that AIU defend andindemnify it, the timing of AIU’s reservation of rights did not constitute a waiver under California law,which governed the AIU Policy.

The circuit court then determined that Amtech had a duty to procure insurance for Uniwest becausethe Subcontract incorporated the insurance requirements of the Zipf Specifications. Amtech breachedthis duty by failing to add Uniwest as an additional insured under the CNA and AIU Policies.Accordingly, the court found Amtech liable to Uniwest and its insurers for the $ 9,500,000 {699S.E.2d 229} settlement between Uniwest and the Employees.

The circuit court entered a final order awarding Uniwest and its insurers $ 9,500,000 in compensatorydamages plus prejudgment interest. Uniwest and its insurers filed petitions for appeal assigning errorto the court’s determinations that neither Amtech nor AIU had a duty to defend and indemnify

© 2011 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All dghts reserved. Use of this product is subject tothe restrictions and terms and conditions of the Matthew Bender Master Agreement.

Committee to Study Code § 11-4.1 -- Attachment 2 ,

Uniwest. Amtech, ABM, and AIU filed a separate petition assigning error to the determination that{280 Va. 440} Amtech had a duty to procure insurance for Uniwest and, if it did breach such a duty,to the amount of damages awarded. We awarded these appeals.

II. ANALYSIS

A. STANDARD OF REVIEW

We review the interpretation of a contract de novo. PMA Capital Ins. Co. v. US Airways, Inc., 271 Va.352, 357-58, 626 S.E.2d 369, 372 (2006). Thus, "we have an equal opportunity to consider the wordsof the contract within the four corners of the instrument itself." Eure v. Norfolk Shipbuilding & DrydockCorp., 263 Va. 624,631,561 S.E.2d 663, 667 (2002). However, "[i]t is the function of the court toconstrue the contract made by the parties, not to make a contract for them." Wilson v. Holyfield, 227Va. 184, 187, 313 S.E.2d 396, 398 (1984). Accordingly,

[t]he contract is construed as written, without adding terms that were not included by the parties.When the terms in a contract are clear and unambiguous, the contract is construed according toits plain meaning. Words that the parties used are normally given their usual, ordinary, andpopular meaning. No word or clause in the contract will be treated as meaningless if areasonable meaning can be given to it, and there is a presumption that the parties have not usedwords needlessly.PMA Capital Ins. Co., 271 Va. at 358, 626 S.E.2d at 372-73 (internal quotationmarks and citations omitted). In addition, the contract is "construed as a whole. [Its] provisionsare to be harmonized when possible, [and] effect is to be given to every stipulation when it canreasonably be done." Virginian Ry. Co. v. Hood, 152 Va. 254,258, 146 S.E. 284,285 (1929).

Nevertheless, a provision that violates public policy is void and has no legal effect. Shuttleworth,Ruloff& Giordano, P.C.v. Nutter, 254 Va. 494,497, 493 S.E.2d 364, 366 (1997). The public policy ofthe Commonwealth is determined by the General Assembly, for "it is the responsibility of thelegislature, not the judiciary .... to strike the appropriate balance between competing interests ....Once the legislature has acted, the role of the judiciary is the narrow one of determining what [it]meant by the words it used in the statute." Dionne v. Southeast Foam Converting & Packaging, Inc.,240 Va. 297, 304, {280 Va. 441} 397 S.E.2d 110, 114 (1990) (internal quotation marks and citationsomitted).

B. AMTECH’S DUTY TO DEFEND AND INDEMNIFY UNIWEST

Uniwest and its insurers assert that the circuit court erred when it ruled that the defense andindemnification requirement in Paragraph 10 of the Subcontract violated public policy pursuant toCode § 11-4.1. We disagree.

The statute states, in relevant part, that:

Any provision contained in any contract relating to the construction, alteration, rel~air ormaintenance of a building, structure or appurtenance thereto, including moving, demolition andexcavation connected therewith, or any provision contained in any contract relating to theconstruction of projects other than buildings by which the contractor performing such workpurports to indemnify or hold harmless another party to the contract against liability for damagearising out of bodily injury to persons or damage to property suffered in the course ofperformance of the contract, caused by or resulting solely from the negligence of such other partyor his agents or employees, is against public policy and is void and unenforceable.Code § 11-4.1.

Uniwest and its insurers argue that the statute is not implicated because the accident was not theresult of Uniwest’s sole negligence. Rather, they contend it resulted at {699 S.E.2d 230} least partlyfrom Amtech’s negligence because Amtech built the defective scaffolding and was responsible for thesafety of its employees working on the elevator project. However, the unambiguous language ofCode § 11-4.1 requires us to look to the contract containing the provision, not the circumstances from



which the claim for indemnification arose, to determine whether an indemnification provision violatesCode § 11-4.1.

The operative language of Paragraph 10 states "If any claims.., be made or asserted, whether ornot such claim(s) are based upon the negligence of Uniwest or [Fountains], [Amtech] agrees toindemnify and save harmless Uniwest from any and all such claims .... "(Emphasis added.) Theplain meaning of this language clearly {280 Va. 442} obligates Amtech to indemnify Uniwest whetheror not the claim is based upon the negligence of Uniwest. These words irreconcilably conflict with thepublic policy expressed in Code § 11-4.1, which voids any contractual provision "which... purportsto indemnify or hold harmless [Uniwest] against liability for damage.., caused by or resulting solelyfrom the negligence of [Uniwest]."

Uniwest’s argument that the statute does not apply because Paragraph 10 is written broadly enoughto encompass claims arising from the negligence of Uniwest and other parties is unavailing. Becausethe phrases "caused by" and "resulting solely from" are disjunctive in the statute, it voids anyindemnification provision that reaches damage caused by the negligence of the indemnitee, even ifthe damage does not result solely from the negligence of the indemnitee. Thus, the issue is notwhether an indemnification provision is written so broadly that it encompasses the negligence ofparties in addition to the indemnitee. Rather, the issue is whether the provision is so broad that itindemnifies the indemnitee from its own negligence.

Paragraph 10 cleady reaches beyond the negligence of other parties and indemnifies Uniwest.Therefore it violates Code § 11-4.1 and is void. 8

Uniwest and its insurers next assert that the circuit court erred when it found that Paragraph 3.18.1 ofthe General Conditions did not obligate Amtech to indemnify Uniwest. We agree.

The circuit court determined that to the extent Paragraph 3.18.1 was incorporated into theSubcontract its effect merely was to require Amtech to step into the shoes of Uniwest and indemnifyFountains. 9 The relevant language from Paragraph 3 of the Subcontract is that "[Amtech] agrees...to assume towards Uniwest all of the obligations and responsibilities that Uniwest has by the [PrimeContract] assumed toward [Fountains]." (Emphasis added.) The plain meaning of these words is thatUniwest’s duty to defend and indemnify {280 Va. 443} Fountains became a duty by Amtech to defendand indemnify Uniwest.

Two other courts have reached the same conclusion when considering similar subcontract languageincorporating AIA indemnification provisions. In Binswanger Glass Co. v. Beers Construction Co., 141Ga. App. 715, 234 S.E.2d 363 (Ga. Ct. App. 1977), the subcontract required the subcontractor "toassume toward the Contractor all the obligations and responsibilities that the Contractor, by [thecontract between the Contractor and the Owner], assumes toward the Owner." Id. at 364. Georgia’sCourt of Appeals ruled that language sufficient to incorporate the indemnification provision in the AIAGeneral Conditions against the subcontractor. Id. at 365. Similarly, in Whittle v. Pagani Bros.Construction Co., 383 Mass. 796, 422 N.E.2d 779 (Mass. 1981), the subcontract stated: ’qheSubcontractor agrees.., to assume to the Contractor all the obligations and responsibilities{699S.E.2d 231} that the Contractor by [its contract] assumes to" the town awarding the cbnstructioncontract. Id. at 780. The highest court of Massachusetts held that language incorporated the AIAGeneral Conditions’ indemnification provision. Id. at 781. We find these decisions persuasive andagree with them. 10

We therefore find that the Subcontract incorporated Paragraph 3.18.1 and hold that it imposed onAmtech a duty to defend and indemnify Uniwest. 11

C. AIU’S DUTY TO DEFEND AND INDEMNIFY UNIWEST

Uniwest and its insurers assert that the circuit court erred when it held that Subdivision E-4 and



Subdivision E-7 did not create a duty by AIU to defend and indemnify Uniwest. We agree.

{280 Va. 444} Subdivision E-4 requires AIU to defend and indemnify any entity insured under theCNA Policy. 12 Under the errors and omissions endorsement of the CNA Policy, Continental insuredany entity Amtech was required by a written agreement to provide with insurance "to the extent that itis required to be indemnified by [the] written agreement." Similarly, Subdivision E-7 requires AIU todefend and indemnify any entity "to whom [Amtech was] obligated by a written Insured Contract toprovide insurance." For this purpose, an "Insured Contract" is defined as "any oral or written contractor agreement.., under which [Amtech] assume[d] the tort liability of another party."

The circuit court concluded that neither provision applied because the Subcontract did not impose onAmtech a duty to defend and indemnify Uniwest. As we have determined, that conclusion was errorbecause Paragraph 3.18.1 of the General Conditions was incorporated into the Subcontract andcreated such a duty.

Amtech, ABM, and AIU argue that Subdivision E-4 and Subdivision E-7 still do not apply becauseAmtech had no obligation to provide insurance to Uniwest. We disagree.

The Zipf Specifications require Amtech either to include Uniwest as an additional insured under itsexisting policies or to purchase separate insurance for Uniwest. 13 The clear language of theSubcontract contradicts the assertions by Amtech, ABM, and AIU that it did not incorporate theinsurance requirement in the Zipf Specifications.

As we noted, we interpret the unambiguous terms of a contract according to their plai’n meaning.PMA Capital Ins. Co., 271 Va. at 358, 626 S.E.2d at 372-73; see also Bentley Funding Group, L.L.C.v. SK&R Group, L.L.C., 269 Va. 315, 329, 609 S.E.2d 49, 56 (2005); American Spirit Ins. Co. v.Owens, 261 Va. 270, 275, 541 S.E.2d 553, 555 (2001). In addition, we read the contract as a wholeand give effect to every provision when possible. Hood, 152 Va. at {280 Va. 445} 258, 146 S.E. at285; see also Dowling v. Rowan, 270 Va. 510, 518, {699 S,E.2d 232} 621 S.E.2d 397, 400 (2005);American Spirit Ins. Co., 261 Va. at 275, 541 S.E.2d at 555.

Amtech, ABM, and AIU rely on our decision in VNB Mortgage Corp. v. Lone Star Industries, Inc., 215Va. 366, 209 S.E.2d 909 (1974), and argue that the Zipf Specifications were incorporated only for alimited purpose. In that case we determined that in agreeing to provide materials and perform work inaccordance with specifications incorporated in a contract between an owner and a generalcontractor, a subcontractor was bound to those specifications only for the purpose of providing thematerials and performing the work. Id. at 369-70, 209 S.E.2d at 912-13.

While a similar provision appears in the Subcontract in this case, it is distinguishable on two grounds.First, the Zipf Specifications are incorporated into the Subcontract not only by that provision’sreference to the Prime Contract but by reference in Exhibit B as well. Moreover that provision of theSubcontract, unlike the one in VNB Mortgage, states that the specifications are "incorporated hereinand made a part of this Subcontract for all intents and purposes."

Second, the Subcontract also states "[t]he attached exhibits shall form the contract" and explicitly listsExhibit B. Exhibit B required Amtech to "furnish and install" its work "in accordance with" the ZipfSpecifications. Nothing in the plain meaning of these words limits the incorporation of the ZipfSpecifications to the technical requirements for the elevators to the exclusion of other requirements,including the insurance provision.

Therefore we find that both predicates of the CNA Policy and Subdivision E-7 are met: theSubcontract required Amtech to defend and indemnify Uniwest and to provide insurance to Uniwest.Consequently, Uniwest was an insured under the CNA and AIU policies. Therefore, we hold that AIUhad a duty to defend and indemnify Uniwest under both Subdivision E-4 and Subdivision E-7.14

D. DAMAGES

© 2011 Matthew Bencler & Company, Inc., a member of the LexisNexis Group. All fights reserved. Use of this product is subject tothe restrictions and terms and conditions of the Matthew Bender Master Agreement.


Amtech, ABM, and AIU argue that our conclusions necessarily require that we remand for furtherproceedings to determine the {280 Va. 446} extent to which the accident giving rise to theEmployees’ lawsuit was caused by Uniwest’s negligence. We agree.

As we have determined, the Subcontract does not require Amtech to indemnify Uniwest for its ownnegligence. Amtech is not liable to contribute to Uniwest’s settlement with the Employees to theextent, if any, the accident was caused by Uniwest’s own negligence.

Accordingly, we will remand for trial to determine the issue of relative liability for the accident and forentry of judgment against Amtech and AIU for compensatory damages based upon Amtech’s relativeliability. Damages shall further include the costs of Uniwest’s defense in the Employees’ lawsuit forwhich Amtech and AIU are liable based on their duty to defend it in that litigation, to the extent suchcosts have not yet been paid by Amtech and its insurers.

III. CONCLUSION

We affirm the circuit court’s holding that Paragraph 10 of the Subcontract is void against the publicpolicy expressed in Code § 11-4.1. However, because we hold that Paragraph 3.18.1 of the PrimeContract imposed a duty on Amtech to defend and indemnify Uniwest and we find that Uniwest wasinsured under Subdivision E-4 and Subdivision E-7 of the AIU Policy, we will reverse the contraryrulings of the circuit court and remand for further proceedings consistent with this opinion.

Affirmed in part, reversed in part, and remanded.

Footnotes

The first $ 500,000 of coverage was a self-insured retention managed by ABM Insurance Services, adivision of Amtech’s parent company, ABM Industries, Inc. We refer to ABM Insurance Services andABM Industries, Inc. as ABM.2

We refer to this provision of the AIU Policy as Subdivision E-4.3

We refer to this provision of the AIU Policy as Subdivision E-7.4

We refer to Stinson’s estate and Bruce collectively as the Employees.5

Gibley continued to represent Uniwest on claims by Fountains against it and Amtech incidental to theEmployees’ lawsuit. Hohn continued to represent Amtech to preserve its defense that thePennsylvania workers’ compensation statute barred the Employees’ further recovery from it.6

Uniwest promptly objected to AIU and Amtech and notified its own insurers, PMA, U.S. Fire, andFederal.7

The agreed order found that the limits of the CNA Policy had been eroded by the defense of Amtechand Uniwest by Hohn and Lynn in the Employees’ lawsuit and by the defense of Amtech and ABM inthe litigation brought against them by Uniwest and its insurers. To the extent those expensesexhausted the coverage amount, Continental was discharged of further obligation. Any unexhausted



balance would be contributed to satisfy the judgment against Amtech and ABM in this case.8

In its separate brief, Federal argues that Code § 11-4.1 does not apply because of its languagestating that it "shall not affect the validity of any insurance contract, workers’ compensation, or anyagreement issued by an admitted insurer." That language is irrelevant here where the question iswhether the indemnification provision of a construction subcontract is void pursuant to Code § 11-4.1.The Subcontract is not an insurance contract and neither Uniwest nor Amtech, the parties whoexecuted it, are admitted insurers.9

There is no question that Paragraph 3.18.1 required Uniwest to indemnify Fountains.10

While the provisions of the Prime Contract applied only "to the extent not otherwise excluded ormodified by the terms of th[e] Subcontract," we have found that Paragraph 10 was void ab initio.Thus, it could not have excluded or modified Paragraph 3.18.1. Nevertheless, Amtech, ABM, and AIUnow argue that Paragraph 3.18.1 should not apply because the existence of Paragraph 10 in theSubcontract led the parties to believe Paragraph 3.18.1 would not apply. Even if this argument hadmerit, it was not presented to the circuit court and we will not consider it for the first time on appeal.Rule 5:25; Hawthorne v. VanMarter, 279 Va. 566,581,692 S.E.2d 226,235 (2010).11

In light of this holding, we do not reach the argument by Uniwest and its insurers that the negotiationsbetween Hohn and Gibley created an independent agreement by Amtech to defend and indemnifyUniwest.12

Uniwest and its insurers argue that the circuit court’s finding that Uniwest was an additional insuredunder the CNA Policy compels a finding that it was an additional insured under Subdi,vision E-4. Wereject that argument. The circuit court clearly limited that finding to claims "against [Continental] only"and expressly stated that the order was "without prejudice to any claims or defenses of any otherparty to this action."13

The actual term used in the Zipf Specifications is "Construction Manager." Although the ZipfSpecifications do not define that term, the circuit court interpreted it to refer to Uniwest. In addition,Uniwest and Federal reiterate that interpretation in their briefs in Record No. 091496. Amtech, ABM,and AIU have never disputed that Uniwest is the Construction Manager.14

In light of this holding, we do not reach the arguments by Uniwest and its insurers that AIUacquiesced in or is estopped from denying a duty to defend and indemnify or waived its ability toreserve its rights. Finally, because we find that Uniwest is an additional insured under the AIU Policy,the remaining arguments by Amtech, ABM, and AIU are moot.

