The Basics Of Construction Law Indemnity Contracts
Indemnification clauses: You see them in almost every construction law contract, and the word “indemnity” seems to arise in a number of legal areas. But what does indemnity mean? How does an indemnification clause affect your construction contract?
What is Indemnity?
Indemnification simply means that someone assumes responsibility for being liable for another party’s actions. If A indemnifies B, and later C sues B, A will defend the claim made by C, and/or pay damages that C wins against B. A “stands in the shoes” of B, for the purpose of satisfying the claim made by C.
You can probably see how important indemnification is in a construction project. An owner doesn’t want to be sued for any injuries or damages caused by the builder’s actions. The contractor doesn’t want to be sued for any errors or mistakes made by subcontractors. The subcontractor only wants to be responsible for its work—it doesn’t want to have to pay damages to someone for something that the subcontractor did not do.
Common Indemnity Contracts
Most often, indemnity happens when the general contractor indemnifies the owner from damages, harm or lawsuits that happen during construction. After all, the owner is not in the construction business, is not handling the construction, has little control over the day to day operations at the construction project, and as such, doesn’t want to be responsible to any third parties for anything the general contractor does or fails to do.
After that, each subcontractor will indemnify both the general contractor, and the owner as well. You can see how the owner on a construction project now has multiple levels of indemnification—from the general contractor, as well as from each subcontractor.
Kinds of Indemnity Clauses
Indemnify clauses can be specific, or broad. In our example above, A may indemnify B for anything, no matter who did what wrong. A is saying that even if B “messes up,” that A will take care of any claim made by C. This kind of agreement certainly favors B, giving it almost complete protection from lawsuits or claims.
Or, with a more limited indemnification clause, A may indemnify B only for things that A does wrong that would cause C to make a claim. In that case, B is still liable for anything it does wrong, because A has only indemnified A’s own actions.
Indemnity clauses should be specific. Do they come into play when a claim is made, or when a lawsuit is filed? Which party has the right to settle a case? Who pays for the lawyers, or costs of defense? Indemnity clauses should be specific on these, and similar points.
Indemnity clauses are strictly construed by courts, and must be drafted clearly, and in a way that all parties know their rights and obligations. The more broad the clause (that is, the more than is indemnified by the clause), the more likely it is to be scrutinized by a court.
Call our Fort Lauderdale construction attorneys at Sweeney Law P.A. at 954 440-3993 for help today with your construction contracts and agreements.