Contractors insurance Toronto, Ontario, Canada

A Halloween edition of “Simon Says” features a construction risk article on:
Indemnification Agreements.

I’ve seen some scary indemnification agreements in my career. Some butchered from the parts of many resulting in abhorrent Frankencontracts!

Contractors should consider contractual risks carefully before bidding or entering any contractual agreement. If you are awarded a contract but you didn’t really consider the Indemnification Agreement carefully enough, you may wish to hold off the celebrations for a while. You could actually be in the dark about a very nasty risky surprise lurking in the agreement! Indemnification Agreements can be creepy! They take on many forms and have the potential of seriously damaging your business’ results.

The Indemnification Agreement is one of the most important parts of your contract. Here are some considerations as you review indemnification agreements in a contract:

1. Is it a standard form such as a CCDC Indemnification Agreement or is there a Supplementary Condition (SC) that alters the standard form?  Have you read and understood how the SC changes the effect of or totally replaces the CCDC standard clause? If altered, is the intent of the Indemnification Agreement reasonable?

2. Is it one sided in favour of your customer?

3. Does it contain risk broadening words such as “any and all; every character and kind whatsoever; in any manner; solely; not limited to; and/or howsoever caused”? Accepting this could haunt you for an eternity!

4. Does it contain words that suggest only the contractor is responsible such as “solely; hold harmless; waive all rights against”?

5. Is the indemnification wording confined to what is reasonable in common/tort law, or by signing are you possibly assuming risk that goes beyond common law or negligence?

6. Does the Indemnification Agreement spook you so much that you might wish to bring it to the attention of your association or legal counsel to exorcise it ….or at least help you with it? After all, more heads is often better than one when battling the evil forces that intend to transfer harm upon you.

If the Indemnification Agreement you are considering transfers risk to such an extent that you could be liable for anyone’s actions, even those outside of your supervision giving you almost supernatural accountability, should you be increasing your bid cost or should you attempt to negotiate more reasonable terms or even walk away? Frankencontracts bring sometimes monstrous risks. If you’re uncertain about the risk you may assume, do yourself a favour: contact your professional advisers such as insurance brokers and legal counsel before signing.

Simon Fenn
Fenn & Fenn Insurance Practice Inc.

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