Contracts

Indemnification

A contract obligation where one party agrees to compensate another for specified losses, often including defense costs.

Indemnification is a contractual obligation where one party (the indemnitor) agrees to compensate another party (the indemnitee) for specified losses or damages, often including the cost of legal defense. Construction contracts almost always include indemnification provisions: contractor indemnifies owner against claims arising from contractor's work; subs indemnify GCs against claims arising from sub work.

The scope of indemnification depends on the form: limited (indemnify only for indemnitor's own negligence), intermediate (joint negligence), or broad-form (regardless of fault). Many states limit broad-form indemnification through anti-indemnity statutes specific to construction contracts. Indemnification is typically backed by the indemnitor's general liability insurance, which is why contracts often require additional-insured endorsements running to the indemnitee.

Frequently asked questions

What is indemnification in a construction contract?+

A contract obligation where one party agrees to compensate another for specified losses or damages, often including defense costs. Standard in construction: contractor-to-owner and sub-to-GC indemnification chains run through almost every commercial contract.

How does insurance back indemnification?+

The indemnitor's general liability insurance typically responds to indemnified claims. That is why contracts require additional-insured endorsements naming the indemnitee on the indemnitor's policy. Without insurance backing, indemnification is only as good as the indemnitor's ability to pay.

Are broad-form indemnification clauses enforceable?+

Often not, in construction contracts. Many states have anti-indemnity statutes that void broad-form indemnification (which would require the indemnitor to cover claims caused by the indemnitee's own negligence). Always review state law and the specific clause.

Related terms

Hold Harmless

A contract clause in which one party agrees to absorb liability for specified claims that would otherwise fall on the other.

Contract

The binding written agreement between owner and contractor defining scope, price, schedule, and terms of the project.

Certificate of Insurance

A document proving a contractor carries required insurance coverage, typically required before work begins.

Subcontractor

A contractor performing specific scope under contract with the prime contractor (typically the GC), not directly with the owner.