Friday, January 15, 2016

Third Department Appears to Indicate That "Hogeland" Indemnity Is Not Available Unless Insurance Is Actually Procured

The General Obligations Law at sections 5-321 and 5-322.1 prohibits a party to a contract or agreement from being indemnified for its own negligence.  Section 5-321 pertains to agreements related to the leasing of real property, and section 5-322.1 pertains to construction contracts.  Where a broadly worded indemnity provision purports to indemnify a party for its own negligence, it will be void or voidable upon a finding of active fault (the party may still be indemnified for its vicarious liability).

For years, however, the "Hogeland" exception has permitted an actively negligent landowner to be indemnified for its own negligence where sophisticated parties have negotiated the agreement at arms-length and have shifted the risk of loss to third-parties through mutually beneficial insurance (see Hogeland v. Sibley, Lindsay & Curr Co., 42 NY2d 153 [1977]). 

A question has been raised, however, what happens to a broadly worded indemnity provision pursuant to GOL 5-321 if the party who is obligated to procure the insurance, typically the tenant in the landlord-tenant context, fails to do so?  

The Third Department seems to indicate that the indemnification provision will be void and unenforceable under those circumstances.  In Reutzel v. Hunter Yes, Inc., the Third Department stated the general "Hogeland" principal, but indicated that the "Hogeland" analysis "presupposes... that the required insurance actually is procured."  In the case before the Court, the record was not clear whether such insurance had actually been procured.  Under those circumstances, the Court declined to grant summary judgment to either party, suggesting that if such insurance was not procured then the "Hogeland" exception would not apply, and the landlord could not be indemnified for its own negligence.   

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