In Retreat at Charleston Nat’l Country Club Home Owners Ass’n, Inc. v. Winston Carlyle Charleston Nat’l, LLC, 2025 WL 466562 (S.C. Ct. App. Feb. 12, 2025) the South Carolina Court of Appeals issued an opinion clarifying what is required for an indemnity agreement between a contractor and its subcontractors to be enforceable. The case involved the construction of a multi-family development consisting of 32 buildings with 129 townhome units.
Builders FirstSource-Southeast Group, LLC (“BFS”) was responsible for providing materials and labor, including framing, windows, doors, and related components for the project. A dispute arose when Plaintiffs The Retreat at Charleston National Country Club Home Owners Association, Inc. and The Retreat at Charleston National Country Club Horizontal Property Regime (collectively, “the Plaintiffs”) claimed BFS’s framing and window installation services were deficient. The alleged deficiencies caused water intrusion, leading to significant damage. The Plaintiffs filed suit against BFS for the damages.
BFS had contracted with several subcontractors for work under two versions of its Master Subcontract Agreements, both of which contained indemnity provisions. BFS sought indemnification from its subcontractors based on the indemnity provisions in the subcontracts.
The subcontractors filed motions for summary judgment, which were granted. The trial court found the indemnity provisions in BFS’s subcontracts were unclear, “inherently confusing” and failed to “clearly and unequivocally provide for indemnity for BFS’s own negligence.” The trial court also held the indemnity provisions violated a South Carolina statute and public policy by purporting to require subcontractors to defend BFS for its sole negligence. BFS appealed to the Court of Appeals.
The Court of Appeals analyzed the two different, but similar, versions of the subcontract using the standard set forth in the seminal case of Concord & Cumberland Horizontal Prop. Regime v. Concord & Cumberland, LLC, 424 S.C. 639, 819 S.E.2d 166 (Ct. App. 2018). The Concord standard requires that contracts seeking to indemnify a party for its own negligence must be clear and unequivocal. The Court of Appeals considered three factors to determine whether the provisions were clear and unequivocal: (1) whether the indemnity provision is consistent or contradictory with the agreement as a whole; (2) whether the language leaves no doubt that a subcontractor is being asked to indemnify a contractor for its own negligence; and (3) whether the allocation of liability is unambiguous.
The Court found that one version of the indemnity provisions to be inherently confusing as it purported to require subcontractors to indemnify BFS for its sole negligence, while simultaneously claiming to limit the indemnity “to the extent” of the subcontractors’ negligence. The Court found the second version to be equally as confusing as it included multiple indemnity clauses, including a “disguised” provision buried in the fine print of a warranty provision that would allow BFS to seek indemnity for personal injuries and property damage arising from the sole negligence of BFS in selecting and selling the products BFS provided to the subcontractors for installation. The Court found this particular provision to be conflicting with the other clauses throughout the subcontract.
The Court of Appeals upheld the trial court decision to grant summary judgment in favor of the subcontractors. The Court of Appeals also found the provisions violated public policy and South Carolina statues as they purported to require the subcontractors to indemnify BFS for its sole negligence.
The Court of Appeals’ holding is significant as it reinforces the requirement for indemnity clauses to be clear and unequivocal, especially when they seek to indemnify a party for its own negligence. The clear and unequivocal standard is also a commonly used and remains applicable throughout many jurisdictions in interpreting indemnity agreements. This ruling also underscores the importance of understanding and adhering to public policy and statutory requirements in your jurisdiction because even if the indemnity provision in this case had been clear and unequivocal, they still would have been struck down.