Back in March, I wrote about the role of North Carolina’s anti-indemnity statute in the construction industry. The statute, codified at N.C. Gen Stat. § 22B-1, appears below (you can click the image for a larger version):
As my previous blog post indicated, the statute prevents “one party from shifting the entire risk of its own negligence to another.” A recent case from the U.S. Bankruptcy Court for the Eastern District of North Carolina demonstrates how courts utilize the so-called “blue pencil” doctrine to accomplish that goal.
Nobody likes being blamed for somebody else’s mistake. Worse still is shouldering the financial burden on account of another’s wrongdoing.
Yet that’s precisely the position many contractors and subs find themselves in as the result of the presence of an indemnity clauses in their construction contracts.
To my way of thinking, it is fundamentally unfair to shift the entire risk of one’s own negligence to another party. As my Twitter feed has revealed over the last week or so, the state legislatures in Missouri and Minnesota are in the process of wrestling with that unfairness:
The good news for North Carolina contractors is that the Tar Heel State has a statute on the books preventing one party from shifting the entire risk of its own negligence to another.
Image by eschipul via Creative Commons license.
In recent years, a majority of states have ruled that a contractor can be found liable for personal injuries suffered by third parties from accidents occurring after the contractor’s work is completed and accepted.
Not North Carolina.
In a decision handed down on August 7, 2012, the N.C. Court of Appeals (“COA”) once again embraced the “completed and accepted work doctrine,” which provides that an independent contractor is not liable for injuries to third parties occurring after the contractor’s work is completed and accepted. The doctrine has been the “law of the land” in the Old North State since 1946, and our appellate courts show no signs of reversing course.
This post explores the COA’s decision in Lamb v. D.S. Duggins Welding, Inc., considers the merits and drawbacks of the completed and accepted work doctrine and concludes with some observations about the rule’s exceptions and limitations.