What are indemnification clauses?
Indemnification clauses are also referred to as Hold Harmless Agreements. According to the dictionary:
indemnify
1 to make compensation to for incurred hurt, loss, or damage. (Merriam-Webster)
2 secure (someone) against legal responsibility for their actions.(Oxford)
The sense that would apply to construction contracts is #2. An indemnified party in a contract is protected or held harmless against legal responsibility for their actions. A party to a contract can be protected from things they have done that should not have been done (active) or from things they should have done but didn't (passive). Often the prime contractor will include an indemnification clause in the subcontract agreement. This protects the prime contractor from legal responsibility for either active or passive liability - depending on the wording of the clause. The indemnification wording can favor the prime contractor or it can favor the subcontractor. It can also be written in such a way that each party indemnifies the other for things that either party is solely responsible for.
In actual fact a Hold Harmless Agreement and an Indemnification Clause are not actually the same thing. Many contracts however combine the two in the same section.
California legislation has created special requirements for wording of indemnification clauses in construction contracts. Civil Code Section 2782(c) outlines the changes that were made with AB 758 signed on September 29, 2005. This new law became effective in January of 2006. If your contracts are older than January of 2006 the wording of any indemnification clause should be reviewed.
Insurance policies often carry a provision that any subcontractor must name the insured as Additional Insured on the subcontractor's policy and that a written contract with an indemnification clause must be used. Policies vary in this requirement and it is important to know what your policy says about subcontractors.
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