58:10-23.11f12. Indemnification agreements

5. a. An indemnification agreement entered into between the State and a response action contractor shall specify and allocate the responsibility of the parties for the payment of claims or judgments covered by the indemnification agreement as follows:

(1) the response action contractor shall be responsible, for all claims or judgments resulting from a single occurrence, for a total payment of an amount equal to either (a) 30% of the amount of the response action contract or (b) $1,500,000, whichever is less;

(2) the response action contractor shall be responsible, for all claims or judgments resulting from a single occurrence, for a total payment in an amount equal to 10% of either (a) the amount of the total claims or judgments that are in excess of the amount for which the response action contractor is responsible pursuant to paragraph (1) of this subsection, or (b) the amount of indemnification for such occurrence set forth in the indemnification agreement that is in excess of the amount for which the response action contractor is responsible pursuant to paragraph (1) of this subsection, whichever is less;

(3) the State shall be responsible for payment of one or more claims or judgments only up to the amount of indemnification set forth for such occurrence in the indemnification agreement, less the amounts for which the response action contractor is responsible pursuant to paragraphs (1) and (2) of this subsection;

(4) a response action contractor shall be responsible for the payment of a claim or judgment covered by an indemnification agreement only to the extent of the amounts for which the response action contractor is responsible pursuant to paragraphs (1) and (2) of this subsection. A response action contractor shall not be responsible for payment of any part of a claim or judgment arising from performance under a response action contract, covered by an indemnification agreement, where the amount of available indemnification for those claims or judgments has been exhausted. Nothing in this subsection shall be construed to limit the liability or responsibility of a response action contractor for payment of any claim or judgment except where the response action contractor has entered into an indemnification agreement with the State pursuant to this act and to the extent provided in that agreement.

The allocations and limits for the payment of claims or judgments for the State and response action contractors pursuant to this subsection do not apply to claims or judgments covered by the provisions of subsection c. of this section.

b. The department is authorized to lower, on a contract-by-contract or other basis, the amount for which the response action contractor shall be responsible, pursuant to subsection a. of this section, for all claims or judgments covered by the indemnification agreement. The department may lower the amount for which the response action contractor shall be responsible for specific kinds of services in a contract, including, but not limited to engineering services, or for all of the services provided in a contract. The department shall make the determination to lower the amount for which the response action contractor shall be responsible based on the availability of environmental liability insurance for contractors in the private market, on the number and quality of bidders, or on other factors the department deems relevant.

c. Legal defense and indemnification shall not apply to (1) claims that are found to have arisen from actions involving gross negligence, willful misconduct, fraud, intentional tort, bad faith, intentional breach of contract, or criminal misconduct by the contractor, (2) claims or judgments for punitive or exemplary damages, or (3) claims involving actions outside the scope of the response action contract.

d. Legal defense and indemnification provided to a contractor shall be on such terms and conditions as shall be prescribed by the department with the advice of the Attorney General consistent with the provisions of this act.

e. Legal defense and indemnification of a contractor pursuant to this section or section 9 of P.L.1991, c.373 (C.58:10-23.11f16), shall not bar the State from exercising any available legal remedies for the enforcement of a contract between, or on the behalf of, the department or other contracting agency and the contractor, the recovery of damages to which the department or agency may be entitled as a result of a contractor's failure to perform the contract, or for the recovery by the Attorney General of funds expended for the defense or indemnification of a contractor if the defense was undertaken in response to a claim brought against the contractor that is found to have arisen from gross negligence, willful misconduct, fraud, intentional tort, bad faith, intentional breach of contract, or criminal misconduct.

f. No person other than a contractor shall have the right to enforce a right of legal defense and indemnification pursuant to this section.

L.1991,c.373,s.5; per s.22, section expired January 10, 1995.