In construction contracts, indemnification clauses serve to shift risk from one party to another, usually by requiring one party (the indemnitor) to protect the other (the indemnitee) against certain types of loss or liability. Here are the main types and levels of indemnification which contractors might encounter.
Types of Indemnification
1. Common Law Indemnification:
This indemnity arises outside of the contract and is based on tort law principles. Under common law indemnity, one party (typically one without fault) seeks indemnification from a responsible party. In Florida, common law indemnity requires that the party seeking indemnification is completely without fault and is liable only vicariously. This standard is challenging to meet, as it requires the indemnitee to be entirely blameless .
2. Contractual Indemnification:
Contractual indemnity provisions allow parties to allocate risks and responsibilities as they see fit. These provisions are subject to statutory and judicial constraints, with the intent being to place liability on the party best able to control or mitigate the risk. In Florida, for example, such agreements must be reasonable and clearly articulated in the contract .
Levels of Indemnification
Indemnity obligations are typically structured across a spectrum, from limited to broad forms, with increasing levels of coverage and responsibility:
1. Limited Form Indemnification:
In limited indemnification, the indemnitor agrees to cover only the portion of damages or liability directly attributable to their own negligence. For instance, if the indemnitor (e.g., a contractor) is 60% at fault for an incident, they would only indemnify the indemnitee (e.g., the owner) for 60% of the related liability .
2. Intermediate Form Indemnification:
Intermediate indemnification requires the indemnitor to assume responsibility for damages or liability that occurred in whole or part due to their own negligence. Under this form, even if the indemnitor is only partially responsible (e.g., 1% at fault), they must cover the full amount of the indemnitee’s liability .
3. Broad Form Indemnification:
The broadest level, broad form indemnification, obliges the indemnitor to cover all liabilities incurred by the indemnitee, regardless of whether the indemnitor was at fault. This form of indemnification requires the indemnitor to assume liability for any damages, including those caused solely by the indemnitee’s negligence. Broad form indemnity shifts extensive risk to the indemnitor, which may be unenforceable under Florida law.
These levels define the scope and degree of responsibility the indemnitor assumes in protecting the indemnitee from potential losses. Understanding these distinctions is essential for contractors to gauge their liability exposure and ensure compliance with statutory restrictions.
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