The song we learn in our youth is the song we sing for life. Children often blame others for their mistakes and misdeeds – a desperate effort to shift responsibility and avoid unpleasant consequences. As adults engaging in commerce, we are not much different. It is virtually impossible to find a construction contract which does not contain “indemnification”, “hold harmless”, “additional insured”, and/or “waiver of subrogation” provisions. These risk transfer clauses often seek to hold the subcontractor and its insurers legally accountable for jobsite accidents and injuries which are not the fault of the subcontractor. This finger pointing can unfairly shift the financial responsibility for accidents caused by others to the innocent subcontractor or it’s insurance company by increasing insurer liability and destroying subrogation potential – both of which raise the cost of insurance and give the owner and/or general contractor a license to act carelessly.
Indemnity and Hold Harmless Clauses
He who has the gold makes the rules. Owners and general contractors have been able to insist on indemnity clauses which shift the responsibility to pay damages (often including attorney’s fees and litigation costs) from one party (indemnitee) to another (indemnitor), without regard to who actually caused the loss. An example of such a clause reads as follows: Subcontractor shall indemnify and hold harmless the Owner, Architect, General Contractor, 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. The above language also serves as a “hold harmless” clause by which one or both parties agree to absolve the other party and not hold it responsible for any loss, damage, or legal liability. Such clauses are often woven together and intertwined in contract language.
Anti-Indemnity Statutes
Many states have enacted legislation intended to right this wrong and place the financial responsibility for accidents and injuries on the party responsible for causing them. Forty-five (45) states have enacted anti-indemnity statutes that limit or prohibit enforcing indemnification agreements in construction settings. (read more http://www.claimsjournal.com/news/national/2014/04/03/246663.htm)
Claims Journal – Property Casualty Industry News