Colorado’s Snow Removal Service Liability Limitation Act Restricts Enforceability of Indemnity Provisions
On May 30, 2018, Colorado Governor John Hickenlooper signed into law Senate Bill 18-062, referred to as the “Snow Removal Service Liability Limitation Act” (the Act), codified at C.R.S. § 13-21-129. The Act is based on model legislation drafted by the Accredited Snow Contractors Association (ASCA), which saw similar legislation pass in Illinois, with bills before lawmakers in New Jersey, New York, Pennsylvania, Indiana and Massachusetts. The primary focus of the Act is to void certain indemnity agreements that are common in condominium association and commercial property snow removal contracts. It becomes effective on August 8, 2018.
Language of the Act
By its terms, the Act applies to contracts for the following services: (1) plowing, shoveling, or other removal of snow or other mixed precipitation from a surface; (2) deicing services; and (3) a service incidental to either (1) or (2), including operating or otherwise moving equipment or materials used for snow removal or deicing services. C.R.S. § 13-21-129(2)(d). The Act makes any effort to require indemnification for one’s own negligence in such contracts void as against public policy.
Specifically, the following types of provisions will no longer be enforceable:
An agreement by a service provider (snow removal contractor) to indemnify a service receiver (typically a property owner or property management company) from the service receiver’s own acts or omissions.
An agreement by a service receiver to indemnify a service provider from the service provider’s own acts or omissions.
An agreement by a service provider to hold harmless a service receiver from any tort claim arising from the service receiver’s own acts or omissions.
An agreement by a service receiver to hold harmless a service provider from any tort claim arising from the service provider’s own acts or omissions.
An agreement by a service provider to defend a service receiver from any tort claim arising from the service receiver’s own acts or omissions.
An agreement by a service receiver to defend a service provider from any tort claim arising from the service provider’s own acts or omissions.
C.R.S. § 13-21-129(3).
The new legislation, however, does not apply to contracts for services on public roads, at public utilities, or at public or other commercial airports. C.R.S. § 13-21-129(4)(a-c). It also does not apply to “an insurance policy, a surety bond, or workers’ compensation.” C.R.S. § 13-21-129(4)(d).
Anticipated Effect of the Act
Many snow removal contractors are small companies with relatively unsophisticated business practices. Often, new business opportunities are contingent on executing a property owner’s or property management company’s standard contract form. Those forms are written for an owner’s protection and frequently contain a broad indemnity clause, similar to the following:
To the fullest extent permitted by law, you shall, at your own cost and expense, defend and indemnify (property owner/property manager) from and against any and all claims directed at the indemnified party. To the fullest extent permitted by law, you shall indemnify and hold harmless the indemnified parties from any and all liabilities, obligations, claims, demands, settlements, and penalties for any incidents arising out of based upon, or in connection with your performance.
Such language generally is used by owners and managers to force contractors to assume defense and indemnity obligations for the owner/manager’s own fault – as terms such as “arising out of” and “based upon” can be vague and ambiguous.
The intended effect of the Act is the elimination of such broad indemnity. The Act provides snow removal contractors and their insurers – who had become accustomed to assuming liability for acts the contractor did not commit – with a measure of relief from such requirements. Owners and managers who view blanket indemnity provisions as a means of protecting themselves may find they are no longer able to shift risk in this manner. Rather, the Act aims to ensure that liability is assigned to the party at fault.
The prohibitions on indemnity for one’s own fault is reminiscent of Colorado’s anti-indemnity statute applicable to construction professionals, codified at C.R.S. § 13-21-111.5(6). Under that provision, Colorado contractors may not be required to indemnify or defend another person against liability arising out of that person’s own fault. The legislature enacted the anti-indemnity restriction in construction matters in 2007, and the provision has not been seriously challenged in any Colorado court. It is likely the Act will receive similar treatment from courts in the future and be enforced as written.
Effect of the Act on Additional Insured Obligations
Of note to insurers is language concerning insurance policies, surety bonds, or workers’ compensation, the precise application of which has yet to be determined. C.R.S. § 13-21-129(4)(d). Property owners frequently include contract terms requiring additional insured status under a service provider’s policy. As language requiring additional insured status is not, by its own terms, an agreement to indemnify, hold harmless or defend, it would not appear that the Act’s prohibitions would affect such requirements.
Although some states have prohibited a requirement that a party provide additional insured status to another, such requirements historically have been legislatively driven. See Ore. Rev. Stat. § 30.140 (extending a prohibition on broad indemnity to any insurer providing coverage). Absent such additional legislative action in Colorado, the current additional insured model will likely remain unchanged in the immediate future. Insurers should therefore operate as though any third party to which it granted additional insured status under a snow removal contractor’s insurance policy may be entitled to coverage for any claim to which that policy applies.