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A Better Partnership
April 17, 2014

MSC holds that a claim for breach of an indemnity provision of a contract accrues separately from a claim for breach of the underlying contract

In Miller-Davis Co. v. Aherns Construction, Inc., the Michigan Supreme Court found that a general contractor's contractual indemnity claim against a subcontractor was not time barred even though the subcontractor's faulty construction took place more than six years before the contractor filed its suit.  The Court concluded that even though the contractor's claim that the faulty construction itself breached the parties' contract was barred by the applicable six year limitations period, the contractor's claim that subcontractor had breached the indemnity provisions of that contract was an independent claim that accrued separately.  Specifically, the Court held that the indemnity claim necessarily accrued after the subcontractor's breach of performing work to applicable specifications.  Indeed, the Court concluded that there could not have been a claim by the owner against the general contractor that would have triggered the subcontractor's indemnity obligation until the non-conforming work was discovered in February 2003, only about two years before the suit was filed.  Thus, the breach of the indemnity obligation was timely.  Additionally, based upon evidence that the general contractor had agreed with the owner to perform corrective work, the Court concluded that the owner had made a claim against the general contractor which triggered the subcontractor's indemnity obligations under the contract.  Finally, the Court concluded that the general contractor's indemnity claim did not need to establish that the nonconforming work caused the owner's moisture problems.  Instead, the general contractor merely needed to prove that incurred losses because of the subcontractor's failure to indemnify for the corrective work.   

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