Commercial Division Blog

Posted: June 17, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Breach of Contract, Contracts, Indemnification and Advancement

Contractual Obligation to Maintain Insurance and Indemnify Party Demonstrates It Was Intended Beneficiary of Contract

On March 29, 2022, in Board of Mgrs. of the St. Tropez Condominium v. JMA Consultants, Inc., INDEX NO. 656079/2018, Third-Party Index No. 596075/2019, Justice Andrew Borrok of the New York County Commercial Division denied those portions of third party defendant contractor’s motion to dismiss the amended third party complaint alleging breach of contract and contractual indemnification because the contractual language is clear that the third party plaintiff architect/engineer was an intended beneficiary of the contract. The Court explained:

It is well settled that an intended beneficiary of a contract may maintain a third-party action against a contracting party "by establishing (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for his benefit and (3) that the benefit to him is sufficiently immediate, rather than incidental" (Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 336, 451 N.E.2d 459, 464 N.Y.S.2d 712 [1983]; Alicea v City of New York, 145 AD2d 315, 534 N.Y.S.2d 983 [1st Dept 1988]).

QBC's assertion that JMA was not an intended beneficiary of the Contract is not true. The language in the Rider with regard to both QBC's obligation to maintain insurance coverage on behalf of JMA and indemnify JMA makes it very clear that JMA was an intended beneficiary of the Contract (see Dominion Financial Corp. v Asset Indem. Brokerage Corp., 60 AD3d 461, 462, 874 N.Y.S.2d 115 [1st Dept 2009]; Matter of White Plains Plaza Realty, LLC v Cappelli Enters., Inc., 108 AD3d 634, 970 N.Y.S.2d 47 [2nd Dept 2013]). Specifically, the requirements that QBC (1) maintain an insurance policy "for the protection and benefit... of the Architect" and (2) indemnify the Architect "regardless of whether such claims, damages, costs, expenses, or losses are caused in part by a party indemnified hereunder" unequivocally express that JMA was an intended beneficiary of the Contract (NYSCEF Doc. No. 300, Rider, IN 22.1, 28). As pled in the amended third-party complaint, JMA's claims for breach of contract and contractual indemnification are sufficient to survive QBC's motion to dismiss because there is no dispute that the Contract was valid, and JMA was an intended beneficiary of the insurance and indemnification clauses of the Contract.

The attorneys at Schlam Stone & Dolan frequently litigate breach of contract and indemnification claims. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.