Iowa Court of Appeals Addresses Iowa’s Construction-Contract Indemnity Statute
On November 8, 2023, in the case of Calabretto Building Group v. Tradesmen Int’l, LLC, 2023 WL 7391670 (Iowa Ct. App. 2023) (en banc), the Iowa Court of Appeals addressed Iowa’s construction-contract indemnity statute at Iowa Code Section 537A.5. In 2008, Calabretto Building Group entered into a written contract with a staffing company named Tradesmen International, LLC whereby Tradesmen would furnish employees to Calabretto as requested. Fast forward to 2019, Calabretto was the prime contractor on a construction project and needed a forklift operator. It contacted Tradesmen who furnished an operator to Calabretto under the 2008 written contract. During the project, the operator drove a forklift into a precast beam, which caused property damage. Calabretto sued Tradesmen for the damage.
Tradesmen argued that its written contract with Calabretto contained a hold-harmless provision that barred Calabretto’s claims. Calabretto countered that Iowa Code Section 537A.5 made the hold-harmless provision unenforceable. The district court ruled that the Calabretto/Tradesmen contract was not a “construction contract” under Iowa Code Section 537A.5, thereby making the statute inapplicable. The district court also concluded that no indemnity scenario existed in the case, so the statute did not void the contractual hold-harmless provision.
On appeal, the Iowa Court of Appeals did not address whether the Calabretto/Tradesmen contract was a “construction contract” under Iowa Code Section 537A.5. It instead assumed it was a “construction contract,” and decided the case on other grounds. The first issue the Court addressed was whether an indemnity scenario existed in the case. In concluding that no indemnity scenario existed, the Court explained that an “‘indemnification clause “does not apply to claims between the parties to the agreement. Rather it obligates the indemnitor to protect the indemnitee against claims brought by persons not a party to the [agreement].”’” Because the underlying dispute was between Calabretto and Tradesmen, who were parties to the contract, no indemnity scenario existed to which the statute could apply.
The last issue the Court addressed was whether the fact that the Calabretto/Tradesmen contract was signed in 2008, which was three years before Iowa Code Section 537A.5 was enacted, made the statute inapplicable. The Court first concluded that the “relevant event of legal consequence” was the formation of the contract in 2008. Because the statute was enacted in 2011, the Court next had to decide whether the statute applied retroactively to the 2008 contract. The Court noted that a presumption exists that a statute applies only prospectively, and the presumption is overcome only if the legislature expressly makes the statute retroactive. The Court concluded that the language of Section 537A.5 did not expressly make it retroactive, which meant the statute applied only prospectively. Because the statute did not apply retroactively to the 2008 contract, the statute did not void the contractual hold-harmless provision.
In a concurring opinion, Judge Langholz explained that he would not have addressed the retroactivity issue for several reasons. First, deciding the issue was unnecessary because the Court’s conclusion that no indemnity scenario existed fully resolved the case. Second, the district court did not address the retroactivity issue, and it would be beneficial for the Court to have an independent decision on the issue by the district court before resolving it. Third, he was not convinced that the “relevant event of legal consequence” was the 2008 contract formation instead of the forklift operator’s negligent conduct in 2019. Fourth, he thought it a difficult and close question whether the language of Section 537A.5 allowed it to be applied retroactively. Fifth, if the statute did apply retroactively, he thought that the contracts clauses of the federal and Iowa constitutions may be impacted, thereby creating a difficult constitutional issue. Finally, there was not much briefing by the parties on these difficult issues, and full briefing would greatly benefit the Court in resolving them. For these reasons, Judge Langholz concluded that the better course was not to decide the retroactivity issue, and instead leave it for another day.
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