Construction Contractors: Beware Of Over-Indemnification (A Gentle Reminder)

Like an alligator in the swamp, every few years this issue resurfaces ready to take a bite out of unsuspecting contractors; namely the abuse of the indemnification clause to shift inappropriate risk.

Indemnification provisions play an important role in managing the risks associated with construction contracting.  Indemnity clauses require one party to take on the obligation to cover the loss or damage that has been or might be incurred by another party.  Basically, one party to the contract agrees to assume responsibility for certain liability resulting from third-party claims against the other party to the contract.  The indemnification agreement may be a separate agreement, or more typically in construction projects, is embedded into the contract.