Contractor Installed Defective Materials? Look to The Supplier.

A Contractor May Be Held Liable For Its Supplier's Defective Materials. But That May Not Be The End Of The Story.

By: Robert S. Tanner, Esq. and Ian T. Kravitz, Esquire

Retailers are sometimes held liable for product defects, even though they did nothing more than sell a product without knowledge of its defects. The same thing can happen to contractors and subcontractors. They incorporate the defective work or materials of someone else into their own work and end up being liable to the person to whom they sold the defective work or materials. But, that's not necessarily the end of the story.

In Diplomat Properties Limited Partnership v. Tecnoglass, LLC, 2013 WL 2218514 (Fla. 4th DCA May 22, 2013), Diplomat Properties, L.P. ("Owner") owned the Westin Diplomat Resort and Spa in Hollywood, Florida. Owner contracted with Shower Concepts, Inc. ("Contractor") to furnish and install shower doors. Contractor entered into a subcontract with Tecnoglass, LLC ("Supplier"), who fabricated the doors. Sometime after the doors were installed, many of them spontaneously fractured.

Owner proceeded for its damages against Contractor in arbitration. Owner alleged that Contractor breached its contract and/or warranty in furnishing and installing the defective doors. Contractor did not defend, and a judgment for $2.5 million was entered against Contractor. In exchange for Owner's agreement not to pursue collection of the judgment against Contractor, Contractor assigned to Owner the rights it had against Supplier in connection with the defects in the glass doors. By virtue of the assignment from Contractor, Owner stepped into Contractor's shoes and then exercised Contractor's right to sue Supplier. One of the claims against Supplier was for indemnification.

"Common law indemnity is a claim that shifts the entire loss from one who, although without active negligence or fault, has been obligated to pay . . . ." Supplier sought an order dismissing the suit on the grounds that there was no special relationship between Supplier and Contractor, and that the arbitrator made no findings that Contractor's liability to Owner was vicarious, constructive, or derivative to Supplier. The trial court granted Supplier's Motion to Dismiss, and an appeal was taken. The appellate court reversed.

The appellate court stated that the real issue to determine whether indemnification is proper, is whether the party seeking indemnification is completely without fault. It does not matter whether the party seeking indemnification is only 1 percent at fault versus 99 percent fault of the other party. If there is any fault of the complaining party,. Indemnification cannot be found.

Here, the appellate court held that it was improper to dismiss the action. Since Owner, suing in the shoes of Contractor, alleged that Contractor was completely without fault, and that any liability of Contractor was solely the result of Contractor being vicariously, constructively, or derivatively liable for Supplier, Owner had properly stated a claim for indemnification. Since there had not yet been any finding that Contractor had improperly installed the defective materials, Owner could proceed in Contractor's shoes against supplier.

Thus, a person such as Owner, who suffers a loss, is not necessarily limited to claims against the party with whom the owner contracts. Suppliers of materials remain potentially liable all of the way up the chain of supply if there materials are indeed defective. Practicalities sometimes force one to take further steps. Just because Owner obtained a judgment against Contractor does not mean Contractor had the ability to pay the judgment. Likely, Contractor was financially unable to pay the judgment and, probably for that reason Owner accepted Contractor's assignment of claims and the responsibility to prosecute those claims. Presumably, Owner proceeded against Supplier with a good reason to believe that Supplier did have an ability to pay.