Morris Manning & Martin, LLP

New Georgia Law Limits the Scope of Indemnities in Design and Engineering Contracts

08.23.2016

On July 1, 2016, a new Georgia statute, O.C.G.A. § 13-8-2(c) went into effect that both limits the scope of contractual indemnities given by architects, engineers and land surveyors and prescribes language that must be used in such indemnity clauses.

This new statutory requirement, O.C.G.A. § 13-8-2(c), provides:

(c) A covenant, promise, agreement, or understanding in or in connection with or collateral to a contract or agreement for engineering, architectural, or land surveying services purporting to require that one party to such contract or agreement shall indemnify, hold harmless, insure, or defend the other party to the contract or other named indemnitee, including its, his, or her officers, agents, or employees, against liability or claims for damages, losses, or expenses, including attorney fees, is against public policy and void and unenforceable, except for indemnification for damages, losses, or expenses to the extent caused by or resulting from the negligence, recklessness, or intentionally wrongful conduct of the indemnitor or other persons employed or utilized by the indemnitor in the performance of the contract. This subsection shall not affect any obligation under workers’ compensation or coverage or insurance specifically relating to workers’ compensation, nor shall this subsection apply to any requirement that one party to the contract purchase a project specific insurance policy or project specific policy endorsement.

O.C.G.A. Code § 13-8-2(c) (emphasis added).

Accordingly, in all contracts with architects, engineers and land surveyors entered into after July 1, 2016 the only indemnity language that will be enforceable is indemnification for “damages, losses or expenses to the extent caused by or resulting from the negligence, recklessness, or intentional wrongful conduct of the indemnitor.”

As drafted, the statute is unclear on a number of key issues, such as: (i) the scope of the indemnitor’s obligation (i.e., can the indemnitor only agree to “indemnify” and not agree to defend or hold the indemnitee harmless?) and (ii) the scope of the indemnity that can be given (i.e., can the indemnitee be indemnified from third party claims—for example from liability to third parties and third party claims—or must the indemnity be limited to indemnity for just “damages, losses or expenses” incurred by the indemnitee due to the negligence, recklessness or intentionally wrongful conduct of the indemnitor?) Accordingly, until these and other questions regarding the wording of the statute are clarified through either judicial interpretation or clarification from further legislation, all new indemnity provisions in such agreements should closely track the statutory language. To do otherwise is to risk having the entire indemnity provision stricken.

All contracts for design, engineering and for land surveying services that are executed after July 1, 2016 should be reviewed and revised to ensure they comply with the new statute. Any agreements executed prior to July 1, 2016 with different or more expansive indemnity language (such as requiring indemnification for any breach of contract) remain enforceable, as the new law is not retroactive.

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The information presented is for educational and informational purposes and is not intended to constitute legal advice. Readers should consult their professional advisor. Any opinions expressed within this article are solely the opinion of the featured author and not of Morris, Manning & Martin, LLP.