What you need to know about Indemnification Clauses

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Phil Puccio

Construction projects are risky, and parties spread risk to reduce their own liabilities. Indemnification clauses shift risk from one party to another, but they come in many shapes and sizes. It is therefore important that you read yours carefully.

Terminology and Effect of Compensation

An “indemnifier” promises to indemnify an “indemnifier” for any injury or loss suffered by the indemnified. Subcontractors are typically indemnifiers who promise to “compensate” the general contractor for any damage or loss.

Types of Release Clauses

Prime contractors prefer broad indemnity clauses, while subcontractors prefer to limit their scope.

Limited focus: Subcontractors may only hold themselves harmless from the general contractor for damage resulting from the activities of the subcontractor. The general contractor may be asked to prove that the subcontractor is at fault. The general contractor may be required to suffer personal injury or property damage before the subcontractor is held liable for compensation.

Wide range of tasks: General contractors can demand that subcontractors compensate for the damage incurred. Negligence does not have to be proven. Also, the damage can be caused by the general contractor and the subcontractor would still be liable for compensation.

intermediate: Most indemnification clauses fall into this category. A typical medium-sized indemnity clause obliges the subcontractor to compensate the subcontractor for all losses incurred by the general contractor, unless the general contractor is at fault.

Anti-Indemnification Laws

There is a public interest in wide-ranging indemnification clauses that require indemnities to compensate an indemnity even if the indemnity is negligent. As a result, many states have enacted anti-indemnity laws. Neb. Rev. Stat. Section 25-21,187(1) states that any indemnity clause obliging a party to indemnify an indemnifier for the indemnifier’s negligence is void.

If you need help interpreting or writing an indemnity clause, we recommend that you contact one experienced construction attorney.

Special thanks to Roger Sack for writing this blog.

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Original Source: https://www.ldmlaw.com/2022/01/what-you-need-to-know-about-indemnification-clauses/
Category – Construction

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