Maine Legislature Considers a Bill that Would Limit Indemnification Provisions in Construction Contracts

The Maine legislature is considering a bill that, if passed, would have a significant impact on Maine contractors and subcontractors.  LD-587 would make void and unenforceable any provision in a construction contract requiring the parties or their sureties or insurers to indemnify a promisee against liability arising from the negligence or willful misconduct of the promisee.  The bill has been referred to the Committee on Labor, Commerce, Research and Economic Development.

If passed, neither contractors nor subcontractors could be held liable for the actions of other parties to their contracts.  While there are currently some limits to what passes as an acceptable indemnity agreement in Maine, this law would significantly alter the risks of liability in many construction contracts, since owners frequently contract for broad indemnity agreements with their contractors.

The bill was introduced by Assistant Senate Majority Leader, Senator Andre Cushing (R-Hampden) at the request of the Associated Builders and Contractors of Maine.  While it is somewhat unusual for ABC Maine to support a bill limiting contractors’ rights to contract for indemnity from their subcontractors, ABC Maine states that it supports this bill because it holds parties responsible for their own actions, regardless of their leverage in contract negotiations. 

 A public hearing on the bill was held on March 17, 2015.  In oral testimony and written submissions, representatives of Maine contractors and subcontractors explained that they support this bill because they are frequently compelled to submit to onerous contract requirements given Maine’s competitive construction industry.  Opponents argued that the bill is vague, unnecessary, shifts risk from contractors to owners, and puts undue constraints on the free market.  They further argued that contractors should assume responsibility for workplace injuries since they should have primary control over the worksite and procure insurance for accepting that responsibility.

The bill currently remains pending in committee.  Similar bills have been brought before the Maine legislature several times in the past 20 years and have failed to pass.