Grubb & Ellis Management Services, Inc. v. 407417 B.C., LLC – 7/27/2006

July 31, 2006

Arizona Court of Appeals Division One Affirms Enforcement of Contractual Indemnity Provision.

Appellant Landlord and Appellee Management Company entered into a management agreement that obligated Landlord to indemnify Management Company “except for [Management Company’s] gross negligence or willful misconduct.” The trial court enforced the indemnity provision and denied Landlord’s counterclaim for implied indemnification. This appeal followed.

Judge Hall, writing for a unanimous panel, found that the parties’ agreement “clearly and unequivocally” set forth the Landlord’s obligation to indemnify the Management Company, even for negligent management of the premises. The court found that public policy does not prohibit a party from seeking indemnity for professional negligence; the plain language of the provision made it a “specific indemnity clause,” which covered the Management Company’s negligence; and the Landlord failed to timely raise the affirmative defense that the Management Company was grossly negligent. The court further found that the Landlord’s recovery on claims for implied contractual indemnity and indemnity implied by operation of law were precluded by the existence of an express indemnity provision in the contract.

Judge Hall authored the opinion, Judges Norris and Ehrlich joined