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PCCA Journal|1
st
Quarter 2010
25
There are many risk shifting clauses
typically found in the General Condi-
tions, and the subcontractor should
insist upon receiving and carefully
reviewing these documents before
incorporating their terms into the
subcontract.
Indemnification Clauses
The owner usually attempts to re-
quire the contractor to indemnify the
owner for all losses incurred related
to the construction work. Unsurpris-
ingly, owners prefer to make the
contractor liable for anything and
everything that happens on the job
related to the project. For example:
The Contractor shall indemnify
and hold the Owner, its employ-
ees, agents, officers and other con-
tractors, harmless from any and all
claims, suits, liabilities or actions
of any kind arising out of or relat-
ing to the work of the Contractor
and its agents, officers, employees,
and subcontractors and suppliers
at any tier.
Such a clause can put all liability
onto the contractor even for problem
caused by or otherwise the respon-
sibility of the owner. For example,
assume that the owner’s representa-
tive drives his truck into a backhoe
of the contractor and is injured. As
the liability for the employee’s claim
“relates to the work” of the contrac-
tor, the contractor would be liable
for all damages regardless of the fact
that the owner’s employee may have
been negligent.
The effectiveness of such indem-
nification provisions is limited by
many statutes that render indemnifi-
cation agreements unenforceable to
the extent that they attempt to shift
liability from a negligent party to a
non-negligent party to a construc-
tion contract. It is important to note,
however, that this limitation may be
overcome if the contracting parties
provide for effective insurance cover-
age for indemnity.
Contractors should avoid these all-
inclusive indemnity clauses. Instead,
liability for claims on a construction
project should be allocated based on
fault. In other words, if the owner or
its agents are 90 percent at fault and
the contractor is 10 percent at fault,
the contractor should only be re-
quired to pay 10 percent of the loss.
This is an equitable division of li-
ability that encourages each party to
control all risks in their own power.
No Damages for Delay Clauses
An owner will frequently attempt
to limit its liability to the contrac-
tor for delay damages by including
Continued on page 26
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