From The Blog of Gregory Johson, Esq-Subcontractor Liable for General Contractor’s Pre-Notice Defense Fees

 Saw this on a Blog, something to pay attention too if your a sub-contractor…

By Gregory Johnson, Esq.

Many states recognize that a liability insurer is not obligated to pay for the defense of a claim until it is notified of the suit. See, e.g., Home Ins. Co. v. National Union Fire Ins. of Pittsburgh, 658 N.W.2d 522, 533 -534 (Minn. 2003). Once notice of the claim is given to the insurer, even without an express request for a defense, the insurer is obligated to pay post-notice fees if the claim is covered by the policy. Does this same principle apply in the context of a general contractor’s indemnity claim against a subcontractor? Is a subcontractor’s liability for attorney’s fees likewise limited to the period after it has received notice of the general contractor’s indemnity claim? Not according to the Michigan Court of Appeals in Ajax Paving Industries, LLC v. Vanopdenbosch Const. Co., WL 2629802 (Mich. Ct. App. 2010) an unpublished decision released in July 2010.
In Ajax, a general contractor and subcontractor executed a subcontract agreement containing an indemnity clause obligating the subcontractor to indemnify the general contractor and hold it harmless against any claims arising out of the subcontractor’s work whether arising before or after completion of the subcontractor’s work. The subcontract, like most of the agreements used in the construction industry, did not obligate the subcontractor to “defend” the general contractor against such claims, but obligated the subcontractor to indemnify the general contractor against “all suits, actions, legal and administrative proceedings, claims, demands, damages, judgments, liabilities, interest, attorney’s fees, costs and expenses.”