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Indemnity Clauses: What to Know Before Beginning a Project

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Before you sign the contract for your next construction project, have you taken a close look at the different clauses? There’s a specific clause meant to protect you—and your contractors—when accidents or costly mistakes happen. Any construction attorney or general consultant specializing in construction law can tell you that indemnity clauses are complex and can cause a tangle of legal disputes.

A Brief Overview of Indemnity Clauses

The indemnity clause lays out how risk is allocated among the parties tied to the contract. Though many people can be involved in a construction project, in an indemnity clause there are three key parties: the claimant (who makes the claim), the indemnitee (who is being accused), and the indemnitor (who takes responsibility). 

Take this sample scenario: You’ve hired a general contractor for a major home renovation project. A subcontractor injures themself and sues you, the homeowner. Fortunately, your contract’s indemnity clause states the general contractor will pay for the subcontractor’s medical bills and other related expenses.

In the above scenario, you are the indemnitee, the subcontractor is the claimant, and the subcontractor is the indemnitor. Responsibility was transferred to the general contractor, protecting you from paying medical bills and legal expenses. Transferring risk is a delicate matter, and you can imagine how common it is to stir dispute when each party disagrees about how it’s applied in real life.

The 3 Types of Indemnity Clauses

  1. Broad form — The indemnitor assumes all responsibility for the indemnitee, e.g. a general contractor takes responsibility for the subcontractors.
  2. Immediate form — The indemnitor assumes all responsibility unless the indemnitee is completely responsible. This is “all or nothing.”
  3. Comparative form —  The indemnitee has to be fully responsible for the negligent act.

How to Deal with an Indemnity Clause Dispute

If disputing over an indemnity clause, negotiating on your can further complicate a complex situation. Inexperienced negotiation can cause multiple accused parties to get entangled in a seemingly endless dispute. Seek assistance from a certified construction attorney with specialization in construction disputes.