Kotecki Cap Waivers In Construction Contracts

By: Mollie O’Brien, Associate

Under the Kotecki case, employers are generally not liable to a general contractor sued by its employee in contribution for amounts exceeding workers’ compensation benefits. In the context of actions associated with injuries sustained by employees, employers ultimately should revisit their contracts to determine whether this “Kotecki cap” was waived.

Employers in the construction industry should review their contracts to determine whether indemnity provisions found affect the application of the Kotecki doctrine. The effects of a Kotecki waiver puts an employer, once third partied into the employee’s injury litigation, in the same position as any other defendant for purposes of applying the Illinois Contribution Act.

In Virginia Surety Co. v. Northern Ins. Co. of New York, 24 Ill.2d 550, 558 (2007), the Illinois Supreme Court ruled an employer can waive this cap by agreeing to indemnify another party, such as a general contractor. The language in that case was unequivocal and stated that:

To the fullest extent permitted by law, the Subcontractor WAIVES ANY RIGHT OF CONTRIBUTION AGAINST AND shall indemnify and hold harmless, the Owner, Contractor, Architect, Architect’s consults, and agents and employees of any of them from and against claims, damages losses and expenses * * * arising out of or resulting from performance of the Subcontractor’s Work under this Subcontract, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use therefrom WHICH IS caused in whole or in part by negligent acts or omissions of the Subcontractor, the Sub-contractor’s subcontractors, anyone directly or indirectly employed by them or any for whose acts they may be liable, regardless of whether or not such claim, loss or expenses is caused in part by a party indemnified hereunder.

Drafters of construction agreements have since been inclined to incorporate similar language into agreements despite the fact the “Kotecki cap” is not mentioned directly.

Employers should be aware of such provisions and ultimately understand the effect these provisions may have on their exposure in cases brought by their employees.