Construction Law

The indemnification clause is one of the most significant—and often misunderstood—provisions in construction contracts.  Whether you're a general contractor or a subcontractor, understanding how indemnification works can help safeguard your business against legal and financial risks.

An indemnification clause, sometimes referred to as a "hold harmless" clause, requires one party to compensate another for certain losses or damages that may arise during a project.  In construction, this often means that a subcontractor agrees to indemnify a general contractor for liability resulting from the subcontractor's work.

THE POSITIVES FOR CONTRACTORS

• Risk Allocation – A well-drafted indemnification clause helps clearly allocate risks among the parties. Contractors can then better manage their exposure to potential losses.
• Insurance Compatibility – A contractor's general liability policy may cover indemnity obligations, minimizing the financial impact of a covered claim.
• Liability Protection – Indemnity provisions can protect contractors from third-party claims arising from the actions or negligence of other parties involved in the project.

THE NEGATIVES FOR CONTRACTORS

• Overbroad Language – Clauses that require a contractor to indemnify for all damages, regardless of fault, can be extremely risky. This can lead to unfair financial burdens and increased risk.
• Insurance Coverage Gaps – If a clause is too broad or vague, your insurer may deny coverage, leaving you to pay out of pocket for claims you assumed would be insured.
• Hidden Exposure – Some clauses include a "duty to defend" that kicks in before establishing fault which may require you to front legal defense costs for another party, even if you're ultimately found not responsible.

WHY LEGAL GUIDANCE MATTERS

Indemnification clauses aren't inherently bad—but they do require scrutiny.  When used fairly, they can create a balanced allocation of risk and protect all parties involved.  When misused, they can become legal landmines.  Contractors who take the time to understand and negotiate these clauses from an informed perspective are better positioned to protect their business and bottom line. 

Our Construction Law Team serves clients across West Virginia, Ohio, Pennsylvania, and the surrounding region and can help you navigate these challenges by reviewing contracts and advising on risk allocation.  If you're bidding on a project or negotiating a contract and want to ensure your legal protections are in place, contact Bowles Rice today for guidance tailored to your specific needs.