By Bruce Jervis
General or prime contractors have always been enamored with indemnification clauses. Place one in every subcontract and if there is any injury on the project the subs will ultimately be liable. The prime contractor will be exonerated even if it shared responsibility for a safety hazard.
The inequity of this arrangement, imposed by prime contractors with superior economic leverage, has attracted the attention of state legislatures and appellate courts. In many jurisdictions, indemnification against one’s own negligence is unenforceable. But this leads to a question. Is the indemnification clause entirely unenforceable or can the contractor still enforce the clause to the extent the injury loss was caused by others?
A California court recently addressed this question. It concluded that an anti-indemnification statute, tracked by the language of the subcontract clause itself, intended to create a system of comparative fault. The prime contractor could not be indemnified by the subcontractor to the extent the injury loss was caused by the prime’s own negligence. But, the prime was entitled to indemnification to the extent the loss was caused by the subcontractor or others.
One’s opinion of subcontract indemnification clauses generally depends on whether one is the indemnitee (prime or general contractor) or the indemnitor (subcontractor). Objectively, however, there are issues of fairness and public policy. There is also the principle of freedom to contractually allocate risk. Your comments are welcomed.