2023 New Mexico Statutes › Chapter 56 - Commercial Instruments and Transactions › Article 7 - Indemnity Agreements › Section 56-7-1 - Real property; indemnity agreements; agreements void.

A. A provision in a construction contract that requires one party to the contract to indemnify, hold harmless, insure or defend the other party to the contract, including the other party's employees or agents, against liability, claims, damages, losses or expenses, including attorney fees, arising out of bodily injury to persons or damage to property caused by or resulting from, in whole or in part, the negligence, act or omission of the indemnitee, its officers, employees or agents, is void, unenforceable and against the public policy of the state.
B. A construction contract may contain a provision that, or shall be enforced only to the extent that, it:
(1) requires one party to the contract to indemnify, hold harmless or insure the other party to the contract, including its officers, employees or agents, against liability, claims, damages, losses or expenses, including attorney fees, only to the extent that the liability, damages, losses or costs are caused by, or arise out of, the acts or omissions of the indemnitor or its officers, employees or agents; or
(2) requires a party to the contract to purchase a project-specific insurance policy, including an owner's or contractor's protective insurance, project management protective liability insurance or builder's risk insurance.
C. This section does not apply to indemnity of a surety by a principal on any surety bond or to an insurer's obligation to its insureds.
D. The state, a state agency or a political subdivision of the state may enter into a contract for the construction, operation or maintenance of a public transportation system, including a railroad and related facilities, that includes a continuous obligation to procure an insurance policy, including an owner's, operator's or contractor's protective or liability insurance, project management protective liability insurance, builder's risk insurance, railroad protective insurance or other policy of insurance against the negligence of another party to the contract. If the state, a state agency or a political subdivision of the state insured by the risk management division of the general services department enters into a contract to procure insurance as permitted by this section, the cost of any insurance shall be paid by the risk management division of the general services department and shall not be a general obligation of the state, the state agency or the political subdivision of the state.
E. As used in this section, "construction contract" means a public, private, foreign or domestic contract or agreement relating to construction, alteration, repair or maintenance of any real property in New Mexico and includes agreements for architectural services, demolition, design services, development, engineering services, excavation or other improvement to real property, including buildings, shafts, wells and structures, whether on, above or under real property.
F. As used in this section, "indemnify" or "hold harmless" includes any requirement to name the indemnified party as an additional insured in the indemnitor's insurance coverage for the purpose of providing indemnification for any liability not otherwise allowed in this section.
History:
1953 Comp., § 28-2-1, enacted by Laws 1971, ch. 107, § 1; 2003, ch. 309, § 1; 2003, ch. 421, § 1; 2005, ch. 148, § 1.
ANNOTATIONS
Cross references.
— For contribution among joint tort-feasors,
see
41-3-1 to 41-3-8 NMSA 1978.
The 2005 amendment,
effective June 17, 2005, added Subsection D to permit the state, its agencies and political subdivisions to enter into contracts for public transportation systems that include a continuous obligation to procure an insurance policy against the negligence of another party to the contract and to provide for payment of the insurance premium by the risk management division of the general services department.
The 2003 amendment,
effective July 1, 2003, rewrote the section.
Anti-indemnity provisions in statute.
— As a matter of law and policy, the anti-indemnity provisions of the 1971 version of 56-7-1 NMSA 1978 and the amended version both ensure that an indemnitor only has to indemnify for causes of action that arise from the indemnitor's own negligent conduct. In addition, both versions of the statute are based on public policy promoting safety in construction projects by holding each party to the contract accountable for injuries caused by its own negligence. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2016-NMSC-009,
rev'g
2013-NMCA-021, 297 P.3d 347.
In an appeal arising out of a cross-claim for contractual and traditional indemnification, where contractor negligently installed a diaper changing table in a grocery store belonging to petitioner, and the changing table collapsed causing injuries to plaintiffs, petitioner sought defense, indemnification, contribution, and damages pursuant to an agreement between contractor and petitioner which provided that contractor would indemnify and defend petitioner for any damages in connection with any cause of action arising from any negligence of contractor. The indemnification provision was held to be statutorily void and unenforceable because it required contractor to indemnify petitioner for petitioner's own negligence. Similarly, as a matter of both law and policy, contractor was not required to pay for petitioner's legal defense caused by petitioner's own fault. Section 56-7-1 NMSA 1978 voids in its entirety an agreement containing provisions regarding both indemnification and duties to defend. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2016-NMSC-009,
rev'g
2013-NMCA-021, 297 P.3d 347.
Statute in effect when indemnity agreement is signed applies.
— The version of the indemnity statute that is in effect when the parties sign an indemnity agreement governs, irrespective of the statute's subsequent amendment. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, 297 P.3d 347, cert. granted, 2013-NMCERT-001.
Statute in effect when indemnity agreement is signed governs.
— Where, prior to 2003, a grocery store owner and a contractor signed a service agreement that contained an indemnity clause in which the contractor agreed to indemnify the grocery store owner from claims arising out of the contractor's performance of the agreement; in 2005, pursuant to the agreement, the contractor installed a diaper changing table in the owner's grocery store; in 2006, the changing table dislodged and fell from the wall, injuring plaintiff and plaintiff's child; and the 1971 version of 56-7-1 NMSA 1978 was amended in 2003, the contractor did not have a contractual duty to indemnify the grocery store owner under the agreement because the 1971 version of 56-7-1 NMSA 1978, which was in effect when the parties signed the agreement, applied and prohibited all indemnity agreements. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, 297 P.3d 347, cert. granted, 2013-NMCERT-001.
Indemnitee's negligence.
— Section 56-7-1 NMSA 1978 does not prohibit a limitation of liability based on one's own negligence but prohibits the avoidance of all liability for one's own negligence. Fort Knox Self Storage, Inc. v. W. Techs., Inc., 2006-NMCA-096, 140 N.M. 233, 142 P.3d 1.
Agreement to defend extends to the conclusion of litigation.
— Absent contractual language to the contrary, an agreement to defend and indemnify extends to the conclusion of litigation. Guest v. Allstate Ins. Co., 2010-NMSC-047, 149 N.M. 74, 244 P.3d 342,
aff'g in part, rev'g in part
, 2009-NMCA-037, 145 N.M. 797, 205 P.3d 844.
Where defendant's insured sued defendant and plaintiff; defendant agreed to provide plaintiff a defense and indemnification without any further elaboration or condition; plaintiff refused to accept the settlement agreement negotiated between defendant and the insured; and defendant refused to further fund plaintiff's defense or to pay any potential judgment against plaintiff, defendant's obligation to defend plaintiff extended through the end of litigation, whether as a result of a final judgment or a settlement that was acceptable to plaintiff. Guest v. Allstate Ins. Co., 2010-NMSC-047, 149 N.M. 74, 244 P.3d 342,
aff'g in part, rev'g in part
, 2009-NMCA-037, 145 N.M. 797, 205 P.3d 844.
Determination of type of work to be performed.
— Where a contract is so generic in nature that it is not possible to determine the type of work to be performed from the contract itself, the court will look past the contract to the nature of the work being performed at the time of an accident in order to resolve whether the circumstances of a given case are within the scope of the anti-indemnity statutes. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Meaning of "maintenance".
— Work on an improvement to real property that is required to keep that improvement in a good state of repair and operating properly is "maintenance" and is within the scope of the construction anti-indemnity statute. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Construction anti-indemnity statute applies to natural gas processing facility.
— Where a natural gas company hired contractors to perform work at a natural gas processing facility; the service contract provided that the contractors agreed to indemnify the gas company against all claims even if the claim was based in part on the negligence of the gas company; and an employee of one of the contractors sued the gas company for injuries incurred during the cleaning of a "slug catcher", which is a system that removes condensate and other particles from the natural gas, the maintenance of the slug catcher was within the scope of the construction anti-indemnity statute. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Void provision of an indemnity clause does not void the entire clause.
— Subsection A of 56-7-1 NMSA 1978, which declares a provision that requires indemnification for the indemnitee's own negligence to be void and unenforceable, refers only to that particular provision within an indemnity clause not to the entire indemnity clause and remaining provisions in an indemnity clause that provide for indemnification against the indemnitor's negligence are enforceable under Subsection B of 56-7-1 NMSA 1978. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Indemnity clause was partially void.
— Where a natural gas company hired contractors to perform work at a natural gas processing facility and the service contract provided that the contractors agreed to indemnify the gas company against all claims, including the negligence of the contractor, even if the claim was based in part on the negligence of the gas company, the provision of the indemnity clause that required the contractors to indemnify the gas company for the gas company's own negligence was void and unenforceable and the remainder of the indemnity clause that required the contractors to indemnify the gas company for claims based on the contractor's negligence was enforceable. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Rental equipment contract.
— A contract for rental of equipment to be used in a construction project is a contract or agreement relating to construction, and an indemnity clause in such a contract or agreement is prohibited by 56-7-1 NMSA 1978. United Rentals Nw., Inc. v. Yearout Mech., Inc., 2010-NMSC-030, 148 N.M. 426, 237 P.3d 728.
General rule giving rise to the duty to defend.
— If the allegations of an injured third party's complaint show that an accident or occurrence comes within the coverage of a liability policy, the insurer is obligated to defend, regardless of the ultimate liability of the insured. The question presented to the insurer in each case is whether the injured party's complaint states facts which bring the case within the coverage of the policy, not whether the third party can prove an action against the insured for damages. The insurer must also fulfill its promise to defend even though the complaint fails to state facts with sufficient clarity so that it may be determined from its face whether or not the action is within the coverage of the policy, provided the alleged facts tend to show an occurrence within the coverage. Windham v. L.C.I.2, Inc., 2012-NMCA-001, 268 P.3d 528.
Where defendant was hired as a general contractor to construct a structure; defendant hired a subcontractor to install a roof on the structure; plaintiff was injured within the scope of plaintiff's employment with the subcontractor while installing the roof; defendant was named as an additional insured under the subcontractor's liability insurance policy with respect to liability arising out of the subcontractor's work for defendant; plaintiff sued defendant for negligence for failing to take measures that would have prevented plaintiff's accident; and plaintiff made no claim against the subcontractor, plaintiff's allegations arose out of the subcontractor's work for defendant and the insured who issued the liability policy to the subcontractor had a duty to defend defendant regardless of defendant's ultimate liability to plaintiff. Windham v. L.C.I.2, Inc., 2012-NMCA-001, 268 P.3d 528.
When duty to defend is triggered.
— The duty to defend in an indemnity contract arises when the allegations in a complaint state a claim that falls within the terms of the indemnity contract. City of Albuquerque v. BPLW Architects & Eng'rs, Inc., 2009-NMCA-081, 146 N.M. 717, 213 P.3d 1146.
Duty to defend for indemnitee's alleged negligence.
— Where plaintiff and defendant entered into a contract in which defendant agreed to design and supervise the construction of a facility for plaintiff; plaintiff provided design specifications and approved the designs for the facility; shortly after the construction of the facility was completed, a pedestrian fell off a curb while exiting the facility and was injured; the pedestrian sued plaintiff alleging that plaintiff negligently constructed the curb; the indemnity clause of the contract between plaintiff and defendant provided that defendant agreed to defend, indemnify and hold harmless plaintiff against all suits brought against plaintiff because of any injury or damage to any person resulting from any negligent act, error or omission of defendant arising out of the performance of the contract; and the indemnity clause also provided that defendant was not required to defend plaintiff for plaintiff's own negligence, defendant had a duty to defend plaintiff, even for plaintiff's own alleged negligence, because plaintiff's alleged negligence arose out of defendant's performance of the contract. City of Albuquerque v. BPLW Architects & Engr's, Inc., 2009-NMCA-081, 146 N.M. 717, 213 P.3d 1146.
Circuity doctrine did not apply.
— Where plaintiff hired defendant to build a dairy, defendant subcontracted the electrical work; plaintiff sued defendant and the subcontractor for damages caused by the defective wiring of the dairy; plaintiff's action against defendant was for negligent design, misrepresentation, hiring and supervision of the construction of the dairy; defendant demanded that the subcontractor indemnify defendant for liability imposed on defendant for the negligent wiring of the dairy; plaintiff settled with the subcontractor and agreed to indemnify the subcontractor against liability to defendant and to reduce any judgment obtained against defendant to extinguish the claim defendant had against the subcontractor; and defendant claimed that plaintiff's indemnity agreement with the subcontractor created a circular chain of indemnification because of the subcontractor's obligation to indemnify defendant, which barred plaintiff's claim against defendant, the doctrine of circuity did not apply because plaintiff's action against defendant was based on defendant's direct negligence and defendant could not seek indemnification from the subcontractor on plaintiff's claims because they had nothing to do with the subcontractor's negligence. Loper v. JMAR, 2013-NMCA-098, cert. denied, 2013-NMCERT-008.
Evidence of indemnity contract.
— Where an insured sued the insured's insurer and the insurer's attorney for claims that arose out of the handling of the insured's uninsured motorist claim; the attorney told the insurer that if the insurer did not defend and indemnify the attorney, the attorney could not continue to handle the insurer's cases due to a conflict; the insurer asked the attorney to continue working on the insurer's cases and told the attorney that the insurer would defend the attorney; and the attorney continued to work on the insurer's cases, the evidence was sufficient to support the jury determination that an indemnity contract existed between the attorney and the insurer. Guest v. Allstate Ins. Co., 2009-NMCA-037, 145 N.M. 797, 205 P.3d 844,
aff'd in part, rev'd in part
, 2010-NMSC-047, 149 N.M. 74, 244 P.3d 342.
Breach of indemnity contract.
— Where an insured sued the insured's insurer and the insurer's attorney for claims that arose out of the handling of the insured's uninsured motorist claim; the insurer agreed to defend and indemnify the attorney in the insured's suit; and the insurer negotiated a settlement of the insured's claims, which included a release of all claims that the attorney might have against the insureds and their attorneys; the attorney refused to accept the settlement; and the insurer discontinued the defense of the attorney, the insurer breached a material provision of the contract to defend and indemnify the attorney. Guest v. Allstate Ins. Co., 2009-NMCA-037, 145 N.M. 797, 205 P.3d 844,
aff'd in part, rev'd in part
, 2010-NMSC-047, 149 N.M. 74, 244 P.3d 342.
A contract indemnification clause is not invalid
against public policy, because it fails to expressly exclude indemnification prohibited under this section. J.R. Hale Contracting Co., Inc. v. Union Pac. R.R., 2008-NMCA-037, 143 N.M. 574, 179 P.3d 579.
Agreements absolutely void.
— This section does not allow, explicitly or implicitly, indemnification for an indemnitor's negligence. Indemnity agreements, as defined in this section, are absolutely void, whether they indemnify against the indemnitee's or the indemnitor's negligence. Sierra v. Garcia, 1987-NMSC-116, 106 N.M. 573, 746 P.2d 1105, superseded by statute, Holguin v. Fulco Oil Servs., L.L.C., 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Project-specific insurance policy exception.
— Where subcontractor's insurer brought an action against the general contractor and the general contractor's insurer seeking a declaratory judgment that it had no obligation to indemnify the general contractor following a wrongful death lawsuit by an employee of the subcontractor, and where the district court held that although this section voids the subcontract agreement's provisions requiring the subcontractor to indemnify the general contractor for the general contractor's own negligent acts and omissions, other provisions in the subcontract agreement were not contrary to this section and were therefore enforceable, including the provision requiring the subcontractor to add the general contractor as an additional insured on the insurance policy; the district court did not err in granting the general contractor's motion for summary judgment because the subcontract agreement's provisions, requiring the purchase of a project-specific insurance policy and requiring the subcontractor to add the general contractor as an additional insured, fall under the exception identified in 56-7-1(B)(2) NMSA 1978, and thus the subcontract agreement does not violate 56-7-1(A) NMSA 1978 and 56-7-1(F) NMSA 1978.
First Mercury Ins. Co. v. Cincinnati Ins. Co
., 882 F.3d 1289 (10th Cir. 2018).
California provisions unenforceable.
— Under New Mexico choice of law rules, the indemnity provisions of a contract made in California but performed in New Mexico were not enforceable because they were contrary to fundamental policies of the forum. Tucker v. R.A. Hanson Co., 956 F.2d 215 (10th Cir. 1992).
Properly-pled indemnification claims.
— A property-pled indemnification claim must allege that the indemnitee caused some harm and is liable for claims made against the indemnitor. Frederick v. Sun 1031, LLC, 2012-NMCA-118, 293 P.3d 934.
Improperly-pled indemnification claims.
— Where defendants offered investment packages to the public that consisted of interests in real property; plaintiff invested in three properties; defendants created the third parties to act as the seller of the real property; plaintiff sued defendants for violations of the New Mexico Securities Act of 1986, 58-13B-1 NMSA 1978 et seq. [repealed]; and defendants filed complaints against the third parties for indemnity on the ground that the third parties sold the real property interests that comprised the alleged securities that plaintiff bought; the third party complaint did not state an adequate claim for proportional or traditional indemnification because it did not allege that the third parties were wholly or partially liable to plaintiff for the violations of the Securities Act that plaintiff alleged in the complaint. Frederick v. Sun 1031, LLC, 2012-NMCA-118, 293 P.3d 934.
Traditional indemnification and proportional indemnification.
— The right to traditional indemnification, or common law indemnification, involves whether the conduct of the party seeking indemnification was passive and not active. Active conduct is found if an indemnitee has personally participated in an affirmative act of negligence, was connected with negligent acts or omissions by knowledge or acquiescence, or has failed to perform a precise duty which the indemnitee had a duty to perform. Passive conduct occurs when the party seeking indemnification fails to discover and remedy a dangerous situation created by the negligence or wrongdoing of another. Traditional indemnification is a judicially created common-law right that grants to one who is held liable an all-or-nothing right of recovery from a third party. Proportional indemnification applies when the one seeking indemnification has been adjudged liable for full damages on a third-party claim that is not susceptible under law to proration of fault among joint tortfeasors. Proportional indemnification applies only when contribution or some other form of proration of fault among tortfeasors is not available. New Mexico recognizes proportional indemnification, which allows defendants to recover from a third-party for the portion of a plaintiff's loss which the third-party's conduct caused, even when the law does not apportion fault amongst tortfeasors under a theory of comparative fault. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2016-NMSC-009,
rev'g
2013-NMCA-021, 297 P.3d 347.
Traditional indemnification does not apply when the jury finds a tortfeasor actively at fault.
— Traditional indemnification would allow a party who has been found liable without active fault to seek restitution from someone who was actively at fault. One held vicariously liable has an action for traditional indemnification against the person whose act or omission gave rise to the vicarious liability. The legislature left traditional indemnification as the only scheme for a passive joint tortfeasor to recover from the active joint tortfeasor under four categories of vicarious and derivative liability listed in 41-3A-1(C) NMSA 1978. The application of traditional indemnification is limited to cases truly premised on vicarious or derivative liability. Traditional indemnity does not apply when the jury finds a tortfeasor actively at fault and apportions liability using comparative fault principles. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2016-NMSC-009,
rev'g
2013-NMCA-021, 297 P.3d 347.
In an appeal arising out of a cross-claim for contractual and traditional indemnification, where contractor negligently installed a diaper changing table in a grocery store belonging to petitioner, and the changing table collapsed causing injuries to plaintiffs, and where, at trial, the jury returned a comparative fault special verdict form, finding petitioner 40% at fault for either failing to exercise ordinary care to provide proper hardware to contractor, failing to supervise the installation of the diaper changing table, or failing to conduct reasonable inspections of the table between the time of installation and the time of plaintiffs' injuries, petitioner sought defense, indemnification, contribution, and damages pursuant to New Mexico common law and an agreement between contractor and petitioner which provided that contractor would indemnify and defend petitioner for any damages in connection with any cause of action arising from any negligence of contractor. Traditional indemnification was not applicable because plaintiffs clearly advanced, and the jury found, theories of liability that alleged petitioner to be an active tortfeasor, and this was not a true vicarious liability case that would entitle petitioner to traditional indemnity because the jury found petitioner actively at fault. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2016-NMSC-009,
rev'g
2013-NMCA-021, 297 P.3d 347.
Common law right to indemnification.
— Common law indemnification allows a passive tortfeasor who is not at fault to recover in full from an active tortfeasor who is at fault. The court of a jury must determine whether a tortfeasor was an active or passive tortfeasor. The fact that a court or a jury apportions fault to a tortfeasor does not establish whether the tortfeasor was a passive tortfeasor and entitled to indemnification. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, 297 P.3d 347, cert. granted, 2013-NMCERT-001.
Common law right to indemnification not barred by statute.
— Common law indemnification is not precluded by 56-7-1 NMSA 1978 because the statute applies only to agreements to indemnify, not to common law indemnification. The fact that an indemnity agreement is unenforceable under 56-7-1 NMSA 1978 has no effect upon a party's common law right to indemnification. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, 297 P.3d 347, cert. granted, 2013-NMCERT-001.
Common law indemnification requires a determination of whether an indemnitee was a passive or an active tortfeasor.
— Where, pursuant to a service agreement between a grocery store owner and a contractor, the contractor installed a diaper changing table in the owner's grocery store; the changing table dislodged and fell from the wall, injuring plaintiff and plaintiff's child; plaintiff sued the grocery store owner under the non-delegable duty doctrine based on the grocery store owner's failure to maintain safe premises; the jury apportioned fault between the grocery store owner and the contractor, but did not determine whether the grocery store owner was an active or a passive tortfeasor; and the grocery store owner sued the contractor for common law indemnification, the district court erred in granting summary judgment for the contractor because issues of material fact existed as to whether the grocery store owner was a passive or an active tortfeasor which would determine whether the grocery store owner was entitled to common law indemnification. Safeway, Inc. v. Rooter 2000 Plumbing & Drain SSS, 2013-NMCA-021, 297 P.3d 347, cert. granted, 2013-NMCERT-001.
Law reviews.
— For article, "Statutory Adoption of Several Liability in New Mexico: A Commentary and Quasi-Legislative History,"
see
18 N.M.L. Rev. 483 (1988).
For note, "Contract law: New Mexico interprets the insurance clause in the oil and gas anti-indemnity statute:
Amoco Production Co. v. Action Well Service, Inc.,
",
see
20 N.M.L. Rev. 179 (1990).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
40 Am. Jur. 2d Indemnity §§ 9 to 12, 19 to 27.
What law governs right to indemnity between tort-feasors, 95 A.L.R.2d 1096.
Tenant's agreement to indemnify landlord against all claims as including losses resulting from landlord's negligence, 4 A.L.R.4th 798.
17 C.J.S. Contracts § 221; 42 C.J.S. Indemnity § 1.