Different Types Of Indemnity And Their Relative Enforceability In Construction Litigation

• Published date: 24 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Professional Negligence, Construction & Planning
• Law Firm: Cranfill Sumner
• Author: Elizabeth Leonard

Indemnification is a term often thrown about in construction litigation, and you will see it in most standard form construction contracts. But what actually is it, and how useful is it to have when it comes to litigation in the construction context?

Indemnification is a means to shift the risk to some other party, regardless of who is at fault, such that one party, the indemnitor, is required to pay for the damages and costs incurred by another party, the indemnitee. You will often see indemnification clauses in contracts between project owners and general contractors, general contractors and subcontractors, and even owners and subcontractors via flow-down provisions in subcontracts.

There are three main types of indemnity, any one of which can provide indemnification.

EXPRESS INDEMNITY

Express indemnity, also sometimes called express contractual indemnity or simply contractual indemnity, is an indemnity clause that is specifically set out in a written contract. Based upon general contract principles, express indemnity is the most common type of indemnity. For example, a contract between a general contractor and a subcontractor may include an express indemnification provision whereby the subcontractor agrees to hold harmless the general contractor for all claims arising out of the contract, regardless of who is at fault.

There are three main types of express indemnity clauses: broad form, intermediate form, and limited form.

Broad Form Express Indemnity Clauses

Broad form express indemnity clauses require the indemnitor to hold the indemnitee harmless for all liability, even if the indemnitee is solely at fault. For example, a contract between a general contractor and a subcontractor may state that the subcontractor "shall indemnify the general contractor for claims arising out of the contract, whether caused in whole or in part by the negligence of the general contractor. It is specifically understood that this indemnity shall be interpreted as indemnifying the general contractor from its own sole and/or partial negligence." Note that most states, including North Carolina, have statutes prohibiting this type of express indemnity clause.

Intermediate Form Express Indemnity Clauses

Intermediate form express indemnity clauses require the indemnitor to indemnify the indemnitee unless the indemnitee is solely at fault. In other words, if the indemnitor is 1% liable and the indemnitee is 99% liable, the indemnitor is still required to cover the entire loss. An...