Melick & Porter Achieves Appellate Victory On Multimillion-Dollar Contractual Indemnification Claim

May 2023 • Source: Melick & Porter

In an appeal handled by the appellate team of michael Byrne, Bob Powers, & Michael Mazurczak of Melick & Porter, the Massachusetts Appeals Court recognized that a literal interpretation of an overly broad contractual indemnification provision would lead to “absurd results,” and ruled that a business consultant who provided financial and marketing services to the owner of a parking garage was not obligated to indemnify the owner for a multimillion-dollar verdict arising out of negligent security.  In K.W. v. LAZ Parking Limited, LLC, 102 Mass. App. Ct. 1115 (2023), the Court affirmed a judgment holding that the parties could not have intended for the indemnification provision to apply, notwithstanding its expansive language.

The case arose out of a rape which occurred in a downtown Boston parking garage adjacent to a hotel.  The plaintiff, K.W., filed a negligent security action against the entities which owned and managed the garage, as well as LAZ Parking, which acted as a consultant to the garage manager (JPA I).  After a trial, the jury found the owner and manager liable and awarded the plaintiff $4 million in damages.  LAZ was not found to have been negligent.

Under their agreement, LAZ provided JPA I with advice on financial issues, staffing, equipment and pricing, but was not involved in the day-to-day operations of the garage.  Both LAZ and JPA I agreed that LAZ played no role in security matters.  Nevertheless, the contract included an indemnification provision which called for LAZ to indemnify JPA I for “any and all liability … arising from … injuries to persons … that arise from the conduct or actions of the servants, agents or employees of any person.”  Claiming that the provision broadly applied to any liability connected to the operation of the garage, JPA I sought indemnity from LAZ.  The Superior Court ruled that the provision could not plausibly be interpreted to apply as written, and concluded that the parties did not intend for it to apply to a claim arising out of garage security.  JPA I appealed, and the Appeals Court affirmed. 

Noting that a literal reading of the provision “would require LAZ to indemnify JPA I for losses having nothing to do with the garage whatsoever,” and that such a sweeping obligation could not be reconciled with the limited consulting services LAZ provided to assist JPA I in the management of the garage, the Appeals Court ruled that the agreement was ambiguous.  Thus, the Court looked to the context of the contract as a whole, the history of the relationship, and the testimony of the parties to determine their shared intent.  Based on this evidence – including the fact that JPA I had never sought indemnity from LAZ for any prior claim, and had not even notified LAZ of a prior sexual assault committed in the garage by the same assailant twelve days before the attack on K.W. – the Court concluded that the contractual indemnification provision was not intended to apply.

The decision demonstrates that the language of a contract cannot always be taken at face value, and underscores the importance of carefully drafted risk-shifting provisions.  If you have questions about contractual indemnification issues or negligent security liability, Melick & Porter’s experienced attorneys are always available to help.