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Pitfalls of Indemnity Agreements: Protecting Yourself and Your Insurability

Monday, July 29, 2019
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By: Matt Meyer, Senior Sales Executive / Risk Advisory Solutions, Construction Practice

In the construction industry, contractors often rush to execute agreements without fully understanding how their coverage responds in the event of a loss. The following scenario illustrates what can transpire in these cases, specifically regarding indemnity agreements.

Before starting a new construction project in Milwaukee, Wisconsin, a general contractor required their electrical contractor to comply with an indemnity agreement. Eager to begin, the electrical contractor signed the agreement in a hurry and began working on the project. Weeks later, an accident occurred on-site in which the general contractor was solely negligent. However, despite the GC’s negligence, the liability and cost of the accident fell entirely on the electrical contractor. Why do you think this happened?

Accidents in Construction – Determining Who Is Liable

While rushing to sign the indemnity agreement for the project, the electrical contractor failed to catch the broad language within the document. The contract stated, “in the event of an accident, the general contractor would be covered, even if proven solely negligent.” Fully aware of this clause, the general contractor tendered the claim to the electrical contractor immediately following the accident.

After receiving the claim, the electrical contractor contacted their insurance carrier with the expectation they would provide coverage for the accident. However, the claim was denied because the carrier stated they were not obligated to provide defense for the general contractor’s sole negligence. The electrical contractor was then left responsible for covering the thousands of dollars in damages on their own.

Ensuring Your Protection

At the Horton Group, we recognize that indemnity agreements play a key role in risk management programs, and our goal is to prevent our clients from experiencing a scenario such as the electrical contractor’s. To achieve this goal, we focus on helping clients develop successful techniques to drive down their costs, workload, and risk, especially concerning contract review. To explore this topic further and help ensure your protection, contact Matt Meyer via email matt.meyer@thehortongroup.com or by phone, at 262-347-2659. 

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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