United States: NC Anti-Indemnity Statue Update, New Changes Now In Effect

Last Updated: August 9 2019
Article by William S. Durr and Evan M. Musselwhite

On July 8, 2019, Governor Roy Cooper signed into law HB 871, significantly altering North Carolina's anti-indemnity statute, N.C. Gen. Stat § 22B-1 ("Anti-Indemnity Statute"), particularly as it relates to indemnity agreements in design professional contracts.


In general terms, an indemnity agreement is an agreement to make good and save another harmless from loss on some obligation which he or she has incurred or is about to incur to a third-party.  The indemnity agreement obligates the promisor to reimburse his or her promisee for loss suffered or to save him or her harmless from liability.  The indemnity obligation typically applies if a third-party makes a claim against the promisee that was caused by the promisor.  While the indemnity obligation is not fully triggered until the third-party's claim prevails, the obligation to indemnify is often coupled with a duty to defend the promisee from the third-party claim.

The Duty to Defend

Many indemnity agreements in design professional contracts provide that the promisor shall "defend" the promisee in the event of a third-party claim arising out of the promisor's negligent acts or omissions.  By way of example, a typical agreement might provide that an engineer shall defend, indemnify, and hold harmless a project owner from any third-party claims arising out of the engineer's negligent acts or omissions.  The duty to defend differs from the obligation to indemnify in that the duty arises when a third-party claim is made.  In other words, if there is a third-party claim against the project owner that allegedly is a result of the engineer's negligence, the engineer must assume the defense of the project owner from the claim.  Typically this requires retaining an attorney to defend the project owner from the claim.  The duty to defend arises long before an arbitrator, judge, or jury determines whether the engineer was at fault. The engineer may be required to pay to defend the project owner, based on the allegations alone, even if it the trier of fact later determines the engineer was not at fault.  Until now, such duty to defend clauses in professional design contracts generally have been found valid and enforceable in North Carolina provided they did not run afoul of the existing anti-indemnity prohibitions of N.C. Gen. State § 22B-1, which declares void and against public policy construction contract indemnity agreements requiring a party to be indemnified for that party's own negligence.

Duty to Defend Requirements Revised for Design Professionals

Under subsection (c) of the new Anti-Indemnity Statute, any such duty to defend in an agreement that includes design professional services is now against public policy, void, and unenforceable.  This new subsection (c) provides:

Provisions in, or in connection with, a construction agreement that includes design professional services or a design professional agreement purporting to require a design professional to defend a promisee, the promisee's independent contractors, agents, or employees, the promisee's indemnitees, or any other person or entity against liability or claims for damages or expenses, including attorney's fees, proximately caused or allegedly caused by the professional negligence, in whole or in part, of the promisor, the promisee, or their derivative parties, whether the claim is alleged or brought in tort or contract, is against public policy, void, and unenforceable.

The new law became effective August 1, 2019, and applies to contracts entered into, amended, or renewed on or after that date.  While it remains to be seen how Courts will interpret the new law, it seems reasonably clear that any provision in an agreement that purports to require a design professional to defend the other contracting party from third-party claims will be found void and unenforceable.  On its face, the statute applies only to certain listed design professionals including architects, landscape architects, engineers, land surveyors, geologists, and soil scientists.  The new prohibition also applies not just to design professional agreements but to any construction agreement that includes design professional services.  Thus, the revised statute could have wide-ranging implications in design-build contracts, which are project delivery systems in which both the design and construction of a project are contracted by a single entity.

The Exception to the New Rule

While the revised statute clearly prohibits duty to defend clauses in contracts involving professional design services, it does not prohibit the recovery of attorney fees altogether.  A design professional may still be contractually required to pay a promisee's attorney fees as part of its duty to indemnify the promisee from losses caused by the design professional.  For example, if a third-party brings a claim against a project owner that is alleged to arise out of the engineer's negligence, the engineer will not have to provide the project owner with a defense of the claim.  Rather, the project owner will proceed to defend itself from the third-party claim and will incur attorney fees in doing so.  Practically speaking, this means that the project owner will have to pay to defend itself and then try to recover those costs later from the engineer.  If it is ultimately found that the third-party claim against the project owner was, in fact, caused by the engineer's negligence, the engineer's indemnification owed to the project owner may include the attorneys' fees and expenses the project owner incurred in defending the third-party claim.  If it is found that the third-party claim was not caused by the engineer, the project owner will not be able to recover its attorney fees from the engineer.

Expansion of Existing Anti-Indemnity Statute

The new subsection (b) to the Statute also arguably expands the scope of the existing anti-indemnity protection, or at least codifies existing norms. The new subsection (b) applies to both construction and design professional agreements.  It provides that an indemnity clause is void and unenforceable unless the fault of the promisor is a proximate cause of the loss, damage, or expense.  This means that for an indemnity agreement to be valid, the fault of the person making the promise to indemnify (or its derivative parties) must have actually caused the loss or damage, at least in part. The revisions also apply to all loss, damage, or expenses (e.g., economic losses) and are not limited to liability for bodily injury or property damage.  It has been understood by many practitioners that fault was always an underlying requirement to an obligation to indemnify.

Indeed, I am unaware of any reported decisions in the construction or design field in which a party was required to indemnify another when the party providing the indemnity was not at fault.  That said, some indemnity provisions in construction and design contracts are broad enough to arguably require indemnity even if the party giving the indemnity was not at fault.  For instance, a clause requiring a contractor to "indemnify a project owner for all claims, losses, or damages related to the Project" could arguably be interpreted to require the contractor to indemnify the project owner for any loss related to the Project even if the contractor didn’t cause the loss.  This new section seems to codify the common understanding in the construction field that the promisor must have actually caused a loss to trigger its indemnity obligation.  While it might not change much in terms of existing law, the revision should provide a useful tool in contract negotiations when faced with a very broad indemnity clause.


The revisions to the Anti-Indemnity Statute significantly change indemnity provisions that are common in construction and design contracts. These changes should prompt contractors, subcontractors, designers, and engineers to review their standard form contracts to ensure compliance with the revised Statute.  They should also provide a useful tool in future contract negotiations when faced with either a duty to defend or a broad indemnity clause.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions