This article was written by Chadd Reynolds and edited by David Cook.
Upcoming blog posts will focus on common contract provisions found in construction contracts. Such provisions are not solely limited to construction contracts and can be found in many other types of business contracts as well. This post will highlight indemnity clauses.
An indemnity clause is a common contract provision used to allocate risk between parties to a contract. The clause obligates one party (the Indemnitor) to protect the other party (the Indemnitee) from certain losses, typically arising from claims of third parties. It may require the Indemnitor to reimburse the Indemnitee for losses or expenses, or satisfy judgments, or even defend the Indemnitee in a lawsuit.
The following is a typical indemnity clause:
The [Indemnitor] shall indemnify, defend, and hold harmless the [Indemnitor] and its officers, directors, agents, consultants, and employees from and against any and all claims, expenses, losses, and damages, including but not limited to attorney fees, arising out of or related in any way to the performance of the work of this contract to the extent such claim, expense, loss, or damage is due to bodily injury, death, or illness, or damage to or destruction of tangible property, caused in whole or in part by the negligence of, or breach of this contract by, the [Indemnitor], its subcontractors or suppliers, anyone directly or indirectly employed by them, or anyone for whose acts they may be liable, even if the party indemnified hereunder may have or is claimed to have caused such claim, expense, loss, or damage.
Courts will tend to uphold such provisions if they are clear and unambiguous as to which party bears what risks. However, some states have enacted anti-indemnity statutes that limit which types of risk a party can be indemnified for due to its own negligence.
For example, Georgia has an anti-indemnity statute prohibiting indemnification in construction contracts if property damage or bodily injury results from the Indemnitee’s sole negligence. Georgia’s anti-indemnity statute was recently amended to also apply to architects and engineers.