What’s an indemnification provision?

Next time you sign a contract, look closely for language requiring either you or your client to “indemnify” and/or “hold harmless” from claims by third parties. This type of provision is commonly referred to as an indemnity provision. In general, it requires one party to reimburse the other for losses and/or damages incurred as a result of a claim against that other party. While many contracts contain such provisions, it is important to understand that state law often limits their reach and enforceability. Consequently, whether it is you or your client who has requested an indemnity provision, it is advisable that you check with your legal counsel to verify that the provision is valid under your state’s specific laws.

By Douglas R. Garmager, Esq.

When entering into a construction contract, parties are often tempted to include the broadest possible indemnification language to protect themselves against any potential liability. They may not realize, however, that many state legislatures have enacted statutes declaring agreements to indemnify, or hold harmless, another person from that person’s own negligence as void and unenforceable against public policy.
These provisions are commonly referred to as anti-indemnity statutes. Here are some examples:

• In California, any provision in a construction contract that “purport[s] to indemnify the promisee against liability for damages for death or bodily injury to persons, injury to property, or any other loss arising from the sole negligence or willful misconduct of the promisee [is] against public policy and [is] void and unenforceable.”¹
• In Florida, any portion of a construction contract “wherein any party referred to herein promises to indemnify or hold harmless the other party to the agreement, contract, or guarantee for liability for damages to persons or property caused in whole or in part by any act, omission, or default of the indemnitee arising from the contract or its performance, shall be void and unenforceable.”²
• In Illinois, any provision in a construction contract “to indemnify or hold harmless another person from that person’s own negligence is void as against public policy and wholly unenforceable.”³
• In New York, an agreement “purporting to indemnify or hold harmless the promisee against liability for damage arising out of bodily injury to persons or damage to property contributed to, caused by or resulting from the negligence of the promisee whether such negligence be in whole or in part, is against public policy and is void and unenforceable.”⁴
• In Texas, “a provision in a construction contract is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend a party, including a third party, against a claim caused by the negligence or fault of the indemnitee.”⁵

These are just a few of the anti-indemnity statutes in place throughout the United States. As with any statute, there are likely exceptions and state-specific interpretations, so you must verify your state’s unique laws in this area. The main point is this: before you or your client request an extremely broad indemnity provision in your next construction contract, check with legal counsel as to whether such a provision runs the risk of being struck down.

ASCE has a Risk Management Hotline which includes contract review services for ASCE professional liability policyholders. This service allows insureds to contact knowledgeable attorneys during business hours. We encourage insureds to utilize this benefit, as it provides them with up to two free hours per policy period of legal advice and support. Call 855.955.2723 today!

¹Cal. Civ. Code § 2782 (2016); see also Cal. Civ. Code § 2782.05 (2016) (addressing contracts and amendments entered on or after January 1, 2013).

²Fla. Stat. § 725.06 (2016).

³740 Ill. Comp. Stat. 35/1 (2015).

⁴NY CLS Gen. Oblig. § 5-322.1 (2015).

⁵Tex. Ins. Code § 151.102 (2015).