Indemnification Clause

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A properly worded indemnification clause is critical to reducing risk in a construction contract. An indemnification clause may include any, or all, of three distinct obligations, including to (1) indemnify, (2) defend, and (3) hold harmless the client.  Indemnify means to reimburse your client following a loss.

Chapter on Indemnification Clauses

Kent Holland’s chapter on indemnification clauses is included here.  Details include avoiding uninsurable losses.

Article on Duty to Defend

Kent Holland’s article Design Professionals Should not Agree to Defend Clients

Sample Indemnification Clause

Sample 1:

Consultant shall indemnify and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 2: For California contracts must add that there is no duty to defend:

Consultant shall indemnify and hold harmless (but not defend) the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 3: Instead of referencing BI and PD, reference “third party claims”

Consultant shall indemnify and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs arising out of third party claims to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 4: Include a duty to defend in the main text for CGL type claims but add sentence at conclusion to carve out professional liability claims.

Consultant shall indemnify, defend and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs arising out of third party claims to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability. The duty to defend shall not apply to professional liability claims.

Sample 5: A different way to address defense obligations:

The foregoing defend, hold harmless and indemnity obligations of this paragraph shall apply solely to any such causes of action, damages, costs, expenses or defense obligations covered by Consultant’s Insurance specified in this Agreement.

Sample 6: Instead of agreeing to indemnify for all damages, including reasonable attorneys fees, strike out the attorneys fees in the body of the indemnity clause and use the simple one sentence shown in the above examples for attorneys fees or use the following:

Consultant agrees to reimburse Client for reasonable defense costs, provided however that such obligation is limited to the portion of such costs equal to the percentage of Consultant’s liability as ultimately determined to be caused by the willful misconduct or negligence of Consultant using principles of comparative fault.

Recommended Reading on Indemnity

The Changing Face of Indemnity  By Brian K. Stewart, Esq., Collins, Collins, Muir + Stewart, LLP

 


Articles on Indemnification Clauses from ConstructionRisk newsletters:

Indemnity Obligation Not Owed to Client for Claims Partially Caused by Client’s Negligence. Duty to Defend Only Applies to Claims Directly Attributable to Indemnitor’s Actions within Scope of Work

Where an indemnity clause did not expressly state that the subcontractor was required to indemnify its client, the prime contractor, for all damages including those caused partially by the client’s own negligence, the subcontractor’s indemnification obligations were...

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