Balanced Indemnification Provision Provides a Fair ‘Hold Harmless’ Agreement
Brian Perlberg, Executive Director of ConsensusDocs Coalition & AGC Senior Counsel
Posted: January 21, 2022 | Legal
ConsensusDocs standard agreements contain an indemnification provision that some refer to as a “hold harmless” agreement. ConsensusDocs, unlike other standard contract documents, integrates its terms and conditions in the same document as the agreement. This provides better integration and avoids conflict between two separate documents.
ConsensusDocs utilizes a limited form of indemnification. In the prime agreement, the ConsensusDocs 200, the Constructor is considered the indemnitor and holds the indemnitee, the Owner, harmless from liability. However, this “hold harmless” shield for the Owner is only to the extent of Constructor’s own negligence. This limited form indemnification provision employs a comparative fault analysis to determine the scope of financial responsibility. In other words, ConsensusDocs follows the principle that a contractor should be responsible for its negligence, but not the negligence of others.
This contrasts with broad form indemnification. Broad form indemnification would have the indemnitor/Constructor hold the indemnitee/Owner harmless for the indemnitee’s own negligence even if the indemnitee/Owner were 100% at fault. Many state legislatures have deemed this unfair and outlawed the enforceability of such through anti-indemnification laws. In those states, an indemnification provision in a construction contract that indemnifies a party from its own negligence is void and unenforceable. By contrast, the ConsensusDocs limited indemnification is enforceable even under state anti-indemnification laws because the obligation extends only to the extent of one’s own negligence.
In addition to utilizing a limited form of indemnification, ConsensusDocs’ indemnification is reciprocal. Both parties are required to indemnify one another. This gives equal treatment to Owners and Constructors alike. An Owner indemnifies the Constructor to the extent of the Owner’s own negligence. So, in addition to getting protection from the Constructor for the Constructor’s negligence, it must give protection to the Constructor for the Owner’s own negligence. This follows the principle of “What’s good for the goose is good for the gander.”
ConsensusDocs are the only contracts endorsed by 40+ leading design and construction industry organizations. With a library of 100+ contract documents addressing all methods of project delivery, ConsensusDocs incorporates fair risk allocation and best practices to represent the projects best interests. Coalition members represent design professionals, owners, contractors, subcontractors, and sureties (DOCS). For more information, please visit www.consensusdocs.org or email [email protected]