A Straightforward Guide to Dealing with Broad and Intermediate Form Indemnities in Construction Contracts
There’s some tough language in this article—because dealing with broad form and intermediate form indemnities in construction contracts requires a tough stance. These clauses, often buried in the fine print of an Owner’s or an EPC’s (Engineering, Procurement, and Construction) or GC’s (General Contractor) contract terms, are dangerous for Contractors and Subcontractors. Let’s call it what it is: these indemnities stink.
The goal of this article is simple—while many pieces about indemnities are written by lawyers or insurance professionals with the client’s best interest in mind, this one is written by a construction contractor for contractors and subcontractors. It’s time to level the playing field.
Understanding Broad and Intermediate Form Indemnities
Here’s what these indemnities mean in everyday language for construction professionals:
Broad Form Indemnity: This clause passes all financial liability for a claim (often involving bodily injury, death, or property damage) caused by up to 100% of the Owner’s, EPC’s, or GC’s negligence to the Contractor or Subcontractor.
Intermediate Form Indemnity: This clause transfers liability to the Contractor or Subcontractor for claims where the Owner, EPC, or GC was up to 99% negligent.
The difference? Nothing. Both indemnities dump the financial burden onto the Contractor or Subcontractor, whether it’s a result of total or partial negligence by the Owner or their higher-tier contractors. In simple terms, they’re terrible deals.
The Legal Landscape: Anti-Indemnity Statutes
The good news is that 43 states (and counting) have enacted some form of anti-indemnity legislation to combat these unfair contract clauses. However, not all statutes are created equal:
Some states only outlaw broad form indemnities.
Some states outlaw both broad form and intermediate form indemnities.
Some offer exceptions that still leave Contractors vulnerable.
A few are completely worthless in protecting Contractors.
Two states that stand out with strong anti-indemnity laws are Texas and Colorado. Their statutes (Texas Insurance Code Chapter 151 and Colorado Revised Statutes §13-21-111.5) are models of robust protection for contractors.
Practical Negotiating Options
So, what can Contractors and Subcontractors do when faced with broad or intermediate form indemnities in a contract? Here are a few strategies to consider:
1. Negotiate for a Limited Form Indemnity
The ideal scenario is to negotiate for a limited form indemnity. This version only holds each party responsible for their own negligence, meaning you aren’t held accountable for mistakes outside your control.
Here’s an example of limited form indemnity wording:
“Subcontractor shall defend, indemnify, and hold harmless the Client from all claims for bodily injury, death, or property damage that occur during the performance of the Subcontractor’s work, but only to the extent caused by the Subcontractor’s negligence, as proven in a court of competent jurisdiction.”
This is fair—each party cleans up their own mess.
2. Address the List of Indemnitees
Often, indemnity clauses include a laundry list of people and entities your company would be responsible for, such as:
“Contractor shall indemnify, defend, and hold harmless the Owner, GC, Lender, Construction Advisor, and all their employees, parents, subsidiaries, affiliated companies, agents, representatives…”
This can involve hundreds or thousands of unknown people who may have little understanding of the importance of jobsite safety. It’s unreasonable for a contractor to be responsible for such a broad group. Consider negotiating additional terms that emphasize jobsite safety as a key responsibility. Here’s an example of language to include:
“Owner and Contractor agree that jobsite safety is vitally important to the protection of workers and project success. Therefore, all personnel from the General Contractor, Lender, and other affiliated entities must complete a mandatory two-day safety training course, at the Owner’s expense, before being allowed onsite. Written consent from the Contractor, along with proof of course completion, is required for entry.”
If the Owner or GC claims that the Contractor is “in control” of the site, then this clause gives you a fair negotiating stance—safety is your responsibility, and that includes enforcing conditions to keep it that way.
3. Negotiate Hard
Don’t underestimate the financial risk these indemnities pose. If you lose an indemnity claim for something that wasn’t your fault, it could bankrupt your company. Fight for fair terms, and don’t back down easily. Remember: broad and intermediate form indemnities are on their way out, just like the dinosaurs. The sooner they disappear, the better.
Final Thoughts
Broad and intermediate form indemnities in construction contracts are designed to shift the burden of responsibility away from Owners, EPCs, and GCs, and onto lower-tier Contractors and Subcontractors. These clauses are not only unfair, they can be financially devastating.
By understanding the dangers of these indemnities, learning how to negotiate for better terms, and supporting legislation that protects your interests, you can safeguard your business from unnecessary risk.
If you ever feel overwhelmed by a contract’s indemnity clause, don’t hesitate to get legal or professional advice. The future of your business could depend on it. Negotiate hard, and protect yourself from liability that isn’t yours to bear.
