July 15, 2011

Hold-harmless and indemnification clauses in winter maintenance contracts


The responsibility to guard against a slip-and-fall lies at first instance with the "occupier" of a premises. This is pursuant to the law of occupier's, or premises, liability. This law can be traced back hundreds of years. In many Canadian jurisdictions, this law has for the most part been encoded in legislation. See for example the Occupier's Liability Act in Ontario (R.S.O. 1990, c.O.2), Alberta (R.S.A. 2000 c.0-4) and British Columbia (R.S.B.C. 1996, c.337).

The question of who is an occupier for the most part turns on who has responsibility for, or control over, the premises, and depends on the facts of each particular circumstance. There can be more than one occupier of a premises. For present purposes, it suffices to say that owners, landlords, tenants and property management companies may all fall under the definition. More importantly, a winter maintenance contractor's client will generally always be an occupier of the premises to which they provide their services.

The significance of this is that, under the law of premises liability, the responsibility to manage the risk of a slip and fall starts with the occupier. The occupier, of course, may contract with a maintenance company to meet some of these responsibilities. The contractor however does not, by simply agreeing to meet some of these responsibilities, automatically assume any obligations beyond those which are expressly or by implication described in the contract.

Specify scope of work
The terms and conditions of the contract are therefore extremely important. If it is not clear what work the contractor was to perform under his contract, for example, it will be difficult for a Court or insurance company to determine whether or not the contractor properly performed that work. Such ambiguity can lead to the contractor being found liable where he believes he has done nothing wrong, or to an insurer settling because of the uncertainty.

If, on the other hand, the contract properly describes the scope of work, the contractor should only be liable for breach of contract if he fails to perform that work in accordance with the contractual terms. (The contractor might also be found liable in negligence, of course, independently of the contractual obligations. This can occur, for example, where the contractor becomes aware of a clear and obvious danger but fails to remove the hazard or warn the occupier, or where he creates a clear and obvious danger through activities unrelated to his contract.) Winter maintenance contractors are generally willing to accept this risk. They will assume responsibility for the consequences of their own breaches of contract or negligence.

The lessons to be learned, when we turn to a discussion of contractual terms and conditions, include the following:
  1. Contractual terms and conditions should be specifically tailored to the snow and ice maintenance industry;
  2. The contract should specify which of the parties is responsible to determine when and where ice melting products will be applied;
  3. The scope of work under the contract should be fully and accurately described; and
  4. The contractor should not agree to indemnification or "hold-harmless" provisions which hold the contractor liable for a slip and fall regardless of whether or not the work is properly performed under the contract.
Clause protects client
It is the fourth of these considerations that we will now discuss: the hold harmless /indemnification clause. Occupiers will often ask contractors to agree to "hold-harmless and indemnify" the client from claims relating to a slip and fall. Some of these clauses can be very broad; some contracts can be interpreted to require the contractor to indemnify for slip and falls which occur inside the premises. Others can be so vague or ambiguous so as to have little certain meaning.

Hold harmless and indemnity clauses are often drafted so that they do (or might) require the contractor to provide something for which he is not being paid. In other words, they can be interpreted as a 'side agreement', where the contractor says 'I will hold you harmless for a slip and fall claim, even if I meet the terms of my contract, and do nothing wrong'.

From the contractor's perspective, these clauses should be drafted so that the indemnity will clearly only apply if the contractor is either negligent or fails to perform his work in accordance with the contract. Anything beyond this is to agree to be liable for events over which the contractor has no control and for which the contractor is not being paid. All contractors should accordingly be very wary of extending an indemnity any further in this regard. If in doubt as to the scope of hold-harmless or indemnification provisions in any particular circumstance, the contractor should seek independent legal advice, preferably from counsel experienced with such contracts.

It is also suggested that, if contractors agree to hold-harmless or indemnification provisions, the client should be required to give timely notice of a potential slip and fall claim so that the contractor has the opportunity to put its insurer on notice of the claim. It is suggested that notice within 48 hours of knowledge of the claim is a reasonable notice period.

In addition, contractors might consider exempting certain areas of the premises from the application of the hold-harmless and indemnification provisions. For example, if a leaky eaves trough is of concern, the contract might expressly provide that the contractor is not responsible for a slip and fall which occurs on water or ice formed due to that leak. Similarly, the contract might exclude the contractor's liability for areas where water might pool because asphalt or concrete is in need of repair. In either circumstance, of course, the client should have the option of repairing the defect to resolve the issue. Often, it is a simple matter of putting such an exclusion on a site-map, so long as the map is incorporated as a contract document, and takes precedence (as it should) over the general terms and conditions of the Contract.
Robert Kennaley practices construction law in Toronto and Simcoe, Ontario. He speaks and writes regularly on construction law and contract issues and can be reached for comment at 416-368-2555, 519-426-3777 or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation. Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.