Hold Harmless Clause Complications

A cautionary tale: When a customer's dog bites a subcontractor, the contractor finds his government contract may leave him holding the bag for a homeowner's insurance payout. June 2, 2009

I was on a job where I was the acting general, government funded residential rehab stuff. I brought my painter in to give me an estimate on finishing some built-ins we had done. The homeowner was there and expecting his arrival. She has a very large pitbull.

I made introductions, they shook hands, and her dog leapt from the couch and attacked my painter, who is an independent contractor and one of my best friends. Myself, two of my employees, and the homeowner had to tear this dog off of his chest. I had it in a semi head lock while the homeowner was trying to force the dogs face away from the painter. It flipped me over into a fish tank which crashed onto my head, and got his leg. We were able to pull it off of him and get him to the hospital. To make a long story short, he was injured enough to miss three weeks of work. Her homeowners insurance settled out with him.

Due to some wording in this government agencies contract which basically states contractor will accept responsibility for any and all injuries and hold xxxx agency xxxx and homeowner harmless during the time that work was performed or resulting of the performance thereof, her insurance company is counter suing me for reimbursement of their settled amount plus costs. The contract is a very generic standard item. It doesn't actually specify that injuries must be work related, nor am I as a contractor allowed to alter these terms or even bring my own terms to the table. Due to tight pockets, my own liability insurance lapsed for two days, one of course being the day things went down.

So I am stuck without defense and looking at owing 15k for some lady's dog trying to kill one of my associates. Do I have anything to worry about? They also want me to pay for the aquarium and all of its contents.

Forum Responses
(Business and Management Forum)
From contributor G:
The dog owner is responsible for the dog’s actions no matter what a contract says.

From contributor J:
You are probably liable. Depending on the state you’re in and its laws that may change. The court/jury may throw the case out and may not. Insurance companies have high priced attorney's, but juries tend to think of them as deep pockets. Long story short, get some legal advice, quick.

From contributor X:
Start from the very beginning, how you got the job, how you met the people the first time on up. Don't leave anything out, every detail for every moment of time. As humans we tend to forget the simplest things that could be important. It refreshes your memory when the time comes, and you'll need it. Give copies to your attorney. Your attorney will do a better job for you.

From the original questioner:
I've kept a very detailed log of any and all communication that we've had, all incidents and so on. The thing that makes me the most nervous is that the unmentioned agency had a big meeting about the contract. The construction manager wanted it changed. The big people all agreed, but then their lawyers said if they do at this point in the game, they would be admitting it was broken. The work I get from them is about 75% of my work load. I've signed a few of these contracts since on vacant properties, but I can't see putting myself in that situation where a homeowner is concerned. We live in a world where McDonalds can be sued for hot coffee. The implication isn't enough.

From contributor C:
Good that you kept a log. Unfortunately you need to take that to an attorney. We're a bunch of cabinetmakers that all have an opinion. That's probably all we have to offer in a matter like this. My experience has been that insurance companies throw out a huge net that may or may not yield their desired result, but in the meantime you have to defend yourself, and that usually entails an attorney. It doesn't sound right that you would pay for the actions of someone else's pitbull but we don't live in a fair world. Hope this works out for you.

From contributor C:
Just another thought about how crazy the insurance companies can be. Some years back I was the general on a large residence. A concrete truck got in a head-on delivering to my job and two people were killed. The insurance company named me because the concrete was destined for my job. Pretty absurd right? Well, yes, but I still had to pay a lawyer (they charge more than we do) to get it all worked out. It was an absolute nightmare. By this logic, the pitbull would not have had anyone to attack unless you were doing work there, so obviously that puts you at fault. You've got to love our system.

From contributor J:
Sometimes those companies have to sue to justify the write off. They will make efforts to recover knowing all well and good they won't, it can also have something to do with their contract with their law firm. What’s amazing is the acceptance of fault in the payoff to the painter!

From contributor G:
Hold harmless-indemnity clauses are fairly common in our business dealings. Have your insurance co. review any such clauses in your future contracts and make sure they add coverage for this. I know this doesn't help you now, but it may help others who are reading this post. I hope everything works out for you. I have been there as I know many of us have.

From contributor O:
An agreement to hold harmless means that you will hold harmless. The way you protect your backside is to buy insurance, and make sure that insurance covers your 'promise to hold harmless'. Why the government feels that the risk of injury to a sub should be on you most likely has a dozen reasons, starting with the fact that the government most likely assumes that the homeowner may be un, or underinsured. It also assumes that that insurance cost will be passed on to them through your bid. The discussion why 'they' choose to do it that way could go on for pages. The simple bottom line is that you are, most likely, responsible because you agreed in the contract to be responsible. It didn't say you will be responsible unless you let your policy lapse for some reason.

Get an attorney who has experience with corporate liability defense cases and tell him that he should look into a defense or countersuit based on a theory that your state's 'keeping a vicious animal' statute creates an "absolute strict liability" and that overrides private contract. (Refer him to the dynamite cases for strict liability). If adequately framed, and tenable in your state, that approach might convince the insurance company adjustor/attorney to settle for some nominal amount.

Unless that tank was worth a lot, or you have collateral issues with your main contract involving penalties for failure to maintain your insurance, or something else not mentioned. I would suggest that the amount in issue would not support a decision by either side to bear the costs of a trial and either a settlement or arbitration (if available in your state) would be the expected outcome. Discuss that with your attorney.

From contributor N:
Based on the MN laws and my years of working in the business you should not be held responsible for the homeowners dog. Her company may try to collect but any judge should throw it out. As a pet owner you are 100% responsible for your pet and you cannot collect from a third party. You subcontractor should have contacted legal counsel before accepting a settlement. I'm betting they offered him that and hoped he would go away.

The best thing you can do is contact an attorney for advice and look at the possibility of counter suing for your expenses. The attorney you talk to may take the cost out of any settlement.

From contributor L:
Of course contact an attorney, at the same time if need be can you counter sue for the fish tank falling on you? That could have caused as much or more damage to you than the dog! We do have a crazy world to live in nowadays, and I bet an attorney could find as many ways to go after the homeowner as they are going after you.

From the original questioner:
I just find it absurd that I can be held responsible for something completely out of my control and not job related. Yes, my insurance should have been current. With the market being as it is, I've been hanging by a thread as many are right now and I won't be in that situation again. But that doesn't alleviate the fact that from a legal view, in a hold harmless contract, unless specified, there are no boundaries at all for what we can be held accountable for. Whether or not they hold up in court is another story, but there are costs regardless. The time I have invested already is phenomenal.

Ideally a government agency would expect the costs of business to be passed to them, but every situation is not the same. It's a very cost controlled situation, myself being the only contractor on their approved list that actually has employees instead of sub/employees and that actually carries workers comp, so I'm competing against people not on the same level. There are pros to the relationship, steady work, and etc. but I'm re-evaluating the whole situation.