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Indemnities originated in the construction industry where contractors had complete control of the job site, and owners required them to be responsible for any site-related problems that arose. However, the concept has been extended in the construction industry to engineers and architects who have little or no control over the job site. This increase in liability has little to do with professional competence, resulting in risk exposure which is largely uninsurable. How can engineers and architects (and any other consultants involved) reduce their risk under indemnity clauses if the client insists on including such a clause in the consulting agreement?

This article suggests various strategies, including three different types of indemnity clauses: the mutual indemnity; the insurable indemnity; and third party indemnities. The mutual indemnity requires each party to indemnify the other party (only) for its own negligent acts. The insurable indemnity requires the consultant to indemnify the client for negligent acts “in performance of professional services under this Agreement”. The third party indemnities are requirements that others on the job site (contractors, suppliers etc.) be required by their contracts to indemnify the consultant and the owners from any 3rd party claims, and to carry adequate insurance.

Finally, the article suggests including client indemnification obligations for costs resulting from hazardous worksites, and unauthorized use of copyrighted drawings.

Draft language for each type of indemnification is included.

Read the article here.

Take away:

  • Consultants must be careful not to agree to indemnity clauses which burden them with uninsurable risk. Ideally, the client will also be subject to indemnification obligations.

 

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