Opinion ID: 1100512
Heading Depth: 3
Heading Rank: 1

Heading: Boh Brothers' Duty Under the Contractual Indemnity Clause

Text: We first consider whether the indemnity clause in the public contract between Boh Brothers and the City imposed a duty upon Boh Brothers as a matter of law to defend the City and Dubroc against the plaintiff's claims. The contract clause required Boh Brothers to defend and indemnify the City and Dubroc against claims arising out of the performance of the work under the contract, including, but not limited to, any and all claims ... which result from any breach by the contractor of any of the terms... of the contract, as well as any and all claims resulting from the sole negligence, liability, strict liability and/or fault of the contractor and/or the joint and/or concurrent negligence, liability, strict liability and/or fault of the contractor with any other persons or parties whomsoever. The provision relieved Boh Brothers of the obligation to defend and indemnify Dubroc, as the Engineer / Consultant, for liability of the Engineer / Consultant, his agents or employees arising out of the preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs, or specifications. We find that the City's and Dubroc's claim for defense under the indemnity agreement is premature under settled law, as these parties have not yet sustained any compensable loss. This court has observed that an indemnity agreement is a specialized form of contract which is distinguishable from a liability insurance policy. Meloy v. Conoco, Inc., 504 So.2d 833, 839 (La.1987). An indemnitor is not liable under an indemnity agreement until the indemnitee actually makes payment or sustains loss. Id. Thus, this court has held that a cause of action for indemnification for cost of defense does not arise until the lawsuit is concluded and defense costs are paid. Id.; Morella v. Bd. of Comm'rs of Port of New Orleans, XXXX-XXXX (La.App. 4 Cir. 10/27/04), 888 So.2d 321, 325. As this lawsuit is still pending, and no determination of liability has been made, the court of appeal erred in finding that Boh Brothers owed a duty to defend, or pay for defense costs, under the terms of the contractual indemnity provision. We therefore reverse the court of appeal's holding that Boh Brothers owed a duty as a matter of law to defend the City and Dubroc, and defer this claim until the lawsuit is concluded and liability is determined.