Indemnification is a concept whereby one party contractually agrees or is otherwise legally obligated to bear the financial risks of another party. These parties are respectively known as the indemnitor and indemnitee. The construction industry relies on indemnification clauses to manage and transfer risk. Consider some of the common indemnification provisions that may be encountered in construction contracts.

As insurance products go, cyber is in its youth. It’s a teenager, about 15 years old for argument’s sake. In its earlier years, it was widely misunderstood and easily dismissed unless your business model was truly e-commerce. However, as businesses of all types and sizes moved to the cloud and SaaS replaced in-house software on a LAN, more and more business processes were automated, and more data was accessible from anywhere.

The term “risk transfer” means just that: a risk that one party bears is transferred to another. In reality, risk transfer in the context of a contractual transfer of risk from an insured to an insurer is better understood as a transfer of the financial costs of certain risks. For example, if a subcontractor injures a third-party or damages their property, the subcontractor’s commercial general liability policy should provide the subcontractor with defense and indemnification coverage. In other words, the financial cost of a covered risk is transferred from the insured to its insurance carrier. The ability to finance the costs of potential risks is a key tool in how most construction contracts are structured. Here is how.

As a contractor, do you need professional liability coverage? Many assume the answer is no, and respond with reasons such as:

Materials for a construction project are crucial. Without them, the project will not get done. How can you protect these supplies and avoid substantial financial losses?

There are multiple options for contractors, but the right solution will depend on the project and your role. Most often contractors will turn to builder’s risk policies and installation floaters.

In the construction industry, it seems you are either asking someone to sign a contract or being asked to sign a contract daily. With so many contracts, and the complexity involved, it can often be difficult to accurately assess your risk exposures. Yet oversights and mistakes in this process can be extremely costly.

You would not sign a contract without reading it first. And this means a lot of reading if you are a contractor. So, how are you managing this review process? Do you understand all the implications a contract could have on the future of your business?

Most companies will say they review all contracts with the help of their attorney. This is the optimal path, but we need to throw a wrinkle in it. When was the last time you involved your insurance broker in that review process?

You trust your insurance broker to review a key contract you utilize every year: your insurance policy. They ensure your company’s risk is properly transferred to the insurance carrier using the most up-to-date coverages, endorsements and enhancements available in the market. But when it comes to reviewing and updating insurance requirements in a contract, the insurance broker is often left out of the picture. Now your attorney is forced to be the legal expert AND the insurance expert.

The modern contract review process involves a meeting between your attorney and insurance broker on an annual basis at a minimum. This collaboration helps ensure you are properly addressing all risks you face before you sign a contract.

Let’s look at some common scenarios in which this updated contract review process could have prevented significant losses.

As the contractor for a construction project, you are presented with significant risks, especially with each subcontractor you bring onto the job. You may be held liable for damages or injuries caused by the work subcontractors perform on your behalf – that could be an injured employee of a subcontractor or even injuries to on-site visitors. To reduce your exposure to loss and protect your business, it is critical to implement risk transfer strategies.

Risk transfer is shifting risks of loss for damage or injury to another party. For contractors, this means requiring provisions to be included in all subcontractor contracts in order to transfer the risk appropriately.