Opinion ID: 1209550
Heading Depth: 1
Heading Rank: 1

Heading: is the indemnity provision from the 1972 standard specifications for highway construction null and void because it purports to indemnify the state of alaska for its sole negligence in violation of as 45.45.900?

Text: The state claims that its right to indemnity arises from § 107-1.14 of the 1972 Standards. This section provides in part: Responsibility for Damage Claims. The Contractor shall indemnify and save harmless the Department, its officers and employees, from all suits, actions, or claims of any character brought because of any injuries or damage received or sustained by any person, persons or property on account of the operations of said Contractor; or on account of or in consequence of any neglect in safeguarding the work; or through use of unacceptable materials in constructing the work; or because of any act or omission, neglect, or misconduct of said Contractor;... [1] Rogers contends that this indemnity provision is rendered void and unenforceable by AS 45.45.900. [2] The statute states: Indemnification Agreements Contra to Public Policy. A provision, clause, covenant, or agreement contained in, collateral to, or affecting any construction contract which purports to indemnify the promisee against liability for damages for (1) death or bodily injury to persons, (2) injury to property, (3) design defects or (4) any other loss, damage or expense arising under (1), (2), or (3) of this section from the sole negligence or wilful misconduct of the promisee or the promisee's agents, servants or independent contractors who are directly responsible to the promisee, is against public policy and is void and unenforceable; however, this provision does not affect the validity of any insurance contract, workers' compensation or agreement issued by an insurer subject to the provisions of AS 21. (Emphasis added). No cases have construed the indemnity language in the 1972 Standards in light of AS 45.45.900. 1. Does the Indemnity Provision Purport to Indemnify State for its Sole Negligence? The state argues that the indemnity provision is not covered by AS 45.45.900 because the clause does not purport to indemnify the state where it is the sole cause of an accident. The state argues that sole negligence as used by AS 45.45.900 is not the same thing as own negligence as used by this court in Burgess Construction Co. v. State, 614 P.2d 1380, 1382 (Alaska 1980). Rogers argues that an indemnity clause does not have to expressly state that it covers indemnification for the indemnitee's own negligence to be covered by the statute because AS 45.45.900 reads purport to indemnify. This court has held that an indemnity clause like this one is broad enough to cover the state for its own negligence. In Manson-Osberg Co. v. State, 552 P.2d 654, 659 (Alaska 1976), this court held that the unambiguous language of indemnity clauses as reasonably construed should be given effect even if the contractual language does not contain words specifying indemnity for the indemnitee's own negligence. In light of the widespread use of insurance as a means of allocating risks among contracting parties, the court rejected the old view that clauses allowing indemnification for an indemnitee's own negligence were unenforceable and against public policy. Id. In Burgess, construing an indemnity provision very similar to the one in this case, this court affirmed summary judgment for the state stating that: [i]f we were to assume that Burgess [contractor] was fault free, the indemnity clause would still be effective as written. Most modern authorities hold that an indemnity clause such as the present one is effective to shift responsibility for an accident where the indemnitee is negligent and the indemnitor is not. 614 P.2d at 1382 (footnotes and citations omitted). In Stephan & Sons v. Municipality of Anchorage, 629 P.2d 71, 78 (Alaska 1981) the court discussed AS 45.45.900 while interpreting another indemnity clause very similar to the one in this case, but did not apply the statute because the contract in question had been entered into before the statute's effective date. Therefore, the court stated that the Burgess rule applied to construing the indemnity provision. Id. Thus, prior to the enactment of AS 45.45.900, Manson-Osberg, Burgess and Stephan & Sons held that an indemnity provision like the one in the 1972 Standards was broad enough to indemnify the state for its own negligence even if the contractor was not negligent. We believe that the cases hold that such indemnity provisions provide for indemnification for the indemnitee's sole negligence, even if we did not use that exact language in prior cases. The crux of this case then is what effect the passage of AS 45.45.900 had on the indemnity provision. 2. Is the Indemnity Provision Void as Against Public Policy? Rogers states that AS 45.45.900 renders the indemnity provision from the 1972 Standards void and unenforceable. The state says that Rogers is not arguing that AS 45.45.900 per se bars enforcement of the indemnity provision. However, the language of AS 45.45.900 could be read to imply that all such indemnity provisions are per se void because we have held that such a provision does purport to indemnify the state for its sole negligence. We are not inclined to accept a reading of the statute that would invalidate the indemnity provisions in every contract entered into between the state and construction contractors. We think AS 45.45.900 should come into effect only when it is determined, as between the state and the contractors, that the state is solely negligent. This court has held that an ambiguous statute should be construed in the most beneficial way the language will permit to avoid hardship, forfeiture or injustice. [3] (Citations omitted). City of Anchorage v. Thomas, 624 P.2d 271, 273 (Alaska 1981). The indemnity provision involved here is not against public policy as a general proposition, but is only against public policy in those instances that it purports to indemnify the state for its negligence in the absence of contractor negligence. 3. Were There Genuine Issues of Material Fact Making Summary Judgment Improper With Respect to the Effect of this Indemnity Provision? Rogers claims that summary judgment was improper because the trier of fact did not allocate percentages of causation between the parties. If at trial the state is found to be solely negligent, it claims that AS 45.45.900 would void the indemnity clause and leave no basis for indemnification. Rogers also claims that the accident did not occur on account of the operations of [the] Contractor. The state argues that adopting Rogers reading of the statute and indemnity provision would frustrate settlements with third parties and thwart the intent of the parties to assign the risk of loss through contract. The state further claims that when it entered into this indemnity agreement it did not intend to contract for a lawsuit. The indemnity clause may govern in the present case if the accident occurred on account of the operations of [the] contractor and if it was not caused by the sole negligence of the state. The state has not established an absence of genuine issues of material fact concerning these points and a trial with respect to them will be necessary. See Civil Rule 56.