Risk Reduction Through Indemnification Contract Clauses

Abstract

Traditional contractual relationships between the owner, architect or engineer, and construction contractors have changed significantly during the past 50 years. Professional liability insurance alone does not guarantee adequate protection from malpractice litigation. The wording of executory contract clauses must be carefully written and construed. This paper reviews recent common law indemnification judgments. Indemnification contract clauses are used by architects, engineers, and constructors as risk allocation mechanisms. Many times professional malpractice risk reduction is not achieved because the clause is not carefully constructed to meet the legal definition of “clear and equivocal” and cannot stand the test of the express negligence doctrine. An understanding of how indemnification can and cannot be used in contracts can prevent undue risks from being accepted and allow maximum protection from successful third party suits. Architects, engineers, and constructors face the development of new laws regarding the use of computer aided drafting and design equipment and software, which will undoubtedly increase future risks and include indemnification contract language.