One Over-Reaching Clause Doesn't Void An Entire Contract

Tuesday, January 30, 2018 8:51 am
February 2018 - Volume 40 Number 2


Sec. Nat’l Ins. Co. v. Sunset Presbyterian Church, 2017 Ore. App. Lexis 1501 (Dec. 6, 2017)

A CGL policy insurer remains on the hook to indemnify a subcontractor despite an Oregon law--- "a statute unique to construction agreements"---that limits indemnity clauses.

Security National Insurance Company (SNIC) provided a Commercial General Liability (CGL) insurance policy to subcontractor B&B Tile & Masonry Corporation (B&B) on a project to construct a church for Sunset Presbyterian Church (Sunset). Litigation over construction defects led Sunset to settle with its general contractor and all project subcontractors except for B&B. Sunset also took an assignment of the contractor’s rights against B&B and then asserted those rights under the subcontract’s indemnity provision.

A trial court ruled that, to the extent that the indemnity provision required B&B to indemnify the contractor for the general contractor’s own negligence, the subcontract was partially voided pursuant to Oregon law (ORS 30.140). In this appeal, filed by Sunset, SNIC extended its argument, contending that B&B’s obligation under the subcontract to make the general contractor an additional-insured under SNIC’s policy was "wholly" void under ORS 30.140.

ORS 30.140 provides, in relevant part, that "any provision in a construction agreement that requires a person or that person’s surety or insurer to inde[..]