As St. Petersburg construction lawyers, we know that indemnity clauses can be one of the most negotiated and litigated provisions in a construction contract, as well as one of the least understood provisions. In this article we will be breaking down indemnity clauses, and discussing their importance to contractors.
What is an Indemnity Clause?
As St. Petersburg construction attorneys, we know that an indemnity clause can be simply defined as a risk transfer provision that seeks to transfer risk from one party to another.
What Does an Indemnity Provision do?
As mentioned above, an indemnity provision will transfer any risk from one party (referred to as the indemnitee) to another party (referred to as the indemnitor). If a construction contract includes an indemnity provision, it’s important for the indemnitor to be aware of the fact that they are agreeing to pay the indemnitee back for any losses that result from a claim or claims brought on by a third party. An example of this situation would be if someone (such as a third party) tripped and fell down a set of stairs and decided to sue the owner of the building (i.e., the indemnitee) for any injuries acquired, accusing the indemnitee of not having the stairs built in accordance with the building code. If the owner (the indemnitee) had an indemnity provision in their construction contract with the contractor (i.e., the indemnitor), the owner could then in turn look to the contractor to reimburse them for any restitution they had to pay to the third party.
What Are Some Things Indemnitors and Indemnities Should be Aware of When Negotiating an Indemnity Clause?
There are many things indemnitors and indemnities will be thinking about when drafting and negotiating an indemnity clause. Below we’ve listed some of the more prominent items.
- Indemnity provisions are only as good as they are enforceable, and only as effective as they are applicable.
- Indemnitors that want to limit their indemnity obligations will want to limit indemnity provisions “to the extent cause caused by” their acts. However, indemnitees that wish to have their indemnity provisions understood easily will want to ask their indemnitees to indemnify them for any losses that “arise out of” the indemnitees work.