Every contractor or subcontractor has seen that indemnification language in a contract that states that the indemnifying party will indemnify the contractor, owner, architect, owner representative (and likely to dog walker, though I’m unclear on that one) for any claim relating to the indemnifying parties actions to include any breach of the construction agreement. This last is likely at the end of a long list of horrors from death to property damage. Further, that clause will likely have the damages include attorney fees, costs, and anything else the drafter of the contract could think of.
While most of these provisions have way too much in them, and they may seem to be non-negotiable, frankly it can’t hurt to ask and the “downstream’ party should try and at least get rid of the overly broad language that 1. bypasses any dispute resolution language that may make the attorney fees provisions more equitable, and 2. potentially makes the downstream party for all damages that could be linked to a breach of contract.
As far as the reasoning to make these changes, they come down to two reasons. The first is that any party to a contract is already on the hook for breach of contract. Failing to meet the terms of the agreement is cause for liability and damages for that breach of contract whether such a claim is based in indemnity or otherwise. Thus this language is overkill at best and totally unnecessary at worst. The second is that most CGL insurance policies do not pay out for damages caused by breach of contract so it is best for business to keep the indemnity to negligence causing death, injury or prpoperty damage so that your insurance policy will help you out should disaster occur.
In sum, there are some relatively easy changes to these clauses that can make them do what they need to do (make the party causing the damage pay for it), without doing too much.
As always, be sure to consult an experienced Virginia construction lawyer when reviewing these indemnity and other provisions of your construction contracts.
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