Indemnity Defense and Hold Harmless

Indemnity, defense and hold harmless provisions are complex legal principles, so let’s start with some definitions. Indemnification is the assurance that one party will make the other party whole for any liability, damage, or loss incurred by another. Simply put, indemnity means to compensate another party from loss or damages.

A hold harmless is similar, but not identical to indemnification. A hold harmless clause states that an organization or individual will not be held liable for any injuries or damages caused to the other party. Think of it as a release or waiver of liability.

Finally, defense is the obligation to step in and defend the other party during a claim, be it before or during a legal proceeding. This usually means the retention of legal counsel for another party at no cost to them.
In their absence, each party is usually liable for their own fault and negligence and the damages that flow from that conduct.

Furthermore, barring special circumstances, each party will likely be liable for their own defense in any related lawsuit. However, many contracts include detailed indemnity, defense and hold harmless provisions. These legal clauses are intended to pass actual or threatened claims and losses from one party to another, including the obligation to retain legal counsel for another party.

An example is:

“To the fullest extent permitted by law, the Contractor shall defend, indemnify and hold harmless the Owner, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses, and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss, or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property, other than the Work itself, but only to the extent caused by the negligent acts or omissions of the Contractor, a subcontractor, anyone directly or indirectly employed by them, or anyone for whose acts they may be liable.”

There are certain limitations on the scope of this indemnity under various laws. For example, Florida Statutes 725.06 and 725.08 place limits on the amount and scope of the indemnity as well as preconditions for that indemnity to apply.

When addressing indemnity, defense and hold harmless provisions, consider limiting your obligation to just the specific contracting parties and leaving out third parties like the design professional, for example. Also consider limiting your obligations to your fault or negligence versus the fault of others. Finally, consider adding notice and opportunity to cure, an obligation to pursue your insurance first, and a damage cap. Doing so will go a long way to mitigating your risk.

An example is:

“Any and all claims, demands, offsets or backcharges for defense, indemnity, or hold harmless by Contractor or any and all indemnitees shall only be to the extent Subcontractor or those who Subcontractor is responsible or liable for, are negligent and only after Subcontractor has been given seven calendar days written notice and opportunity to cure, and only after any and all policies of insurance have been put on notice and have been exhausted, and thereafter, Subcontractor’s direct uninsured liability shall be capped at $25,000.”

Know that your insurance or the insurance of others, like your subcontractors, may not cover the claims which could arise under a defense, indemnity and hold harmless provision. Also know that if these provisions trigger your surety’s obligations, your surety will likely look to you to indemnify them. However, if you are obligated in your upstream contracts to provide broad indemnity, defense and hold harmless obligations, ensuring that you pass them onto your subcontractors will mitigate your risk.

We hope this helps you understand the construction contracting process a little better. If you have questions about your contract, send us an email or give us a call (https://www.thelienzone.com/contact/). And make sure to check out our other free tools (https://www.thelienzone.com/tools)and our weekly podcast (https://www.thelienzonepodcast.com/).