Contract redlines help define the deal. The words that are deleted can matter just as much as what’s left on the page, which is exacrly what this recent case demonstrates.
In Henick-Lane, Inc. v. Hudson Meridian Construction Group, LLC, a New York appellate court enforced the parties’ negotiated deletion of “any other economic loss” from an indemnity provision. The court dismissed claims for purely economic losses, including lost rent. However, it left questions about security costs and lost equipment for further proceedings.
Indemnity Obligations On Trial
Henick-Lane, an HVAC contractor, filed suit for breach of contract, seeking final payment for HVAC work on a mixed-use building in Brooklyn. The owner and its insurer counterclaimed, alleging that defective work caused a variety of damages, including four major water leaks, property repairs, and lost rental income.
The trial court granted the owner and insurer summary judgment on $291,180.71 in alleged property damages. That amount included security costs during repairs and the cost of replacing equipment known as “gas trains.”
The Appellate Court Reverses Based on a Redline
The contractor appealed the decision, claiming it was at odds with their agreement. Under the contract, Henick-Lane was to indemnify the owner for damages and liability arising from personal injury, wrongful death, or property damage connected with the contractor’s work. However, the redline history showed that the parties intentionally deleted “any other economic loss” from that list.
New York courts must strictly interpret contractual indemnity obligations. As a result, the appellate court declined to read the deleted language back into the agreement. The court therefore affirmed the dismissal of the counterclaims to the extent they sought purely economic losses (like damaged equipment and lost rent). The decision affirmed the other damages which were supported by the contract.
Key Takeaway: Draft Indemnity and Damages Clauses Together
Project teams should preserve the negotiation record and evaluate every deletion against the contract’s remaining risk-allocation provisions. A broad reference to property damage may not establish whether the parties can recover lost rent, security, financing costs, temporary operations expenses, or other carrying costs.
The agreement should address relevant damage categories expressly and state whether the parties intend to allow, cap, or waive them.
Teams should coordinate the indemnity provision with:
- Waivers of consequential damage
- Insurance requirements
- Repair obligations
- Limitations of liability
- Applicable notice and claims procedures
Drafters should also distinguish indemnity obligations from first-party contract damages. One event may give rise to several types of claims, each with its own contractual trigger, limitation, and remedy.
Enforceability and damage classifications will obviously vary by jurisdiction and the situation. So, when in doubt, it’s a good idea to obtain project-specific legal and insurance advice.
Make Consequential Damages Choices Explicit
Learn how to identify and allocate categories such as lost rent, financing costs, and other indirect losses. Use that framework to coordinate indemnity, damages waivers, insurance requirements, and liability limits.
