Indemnification Clause Templates for Architects & Engineers

November 17, 2016

PNN_1602We’ve posted several times about the confusion surrounding so-called “standard contracts,” as well as the most commonly misunderstood clauses in design professional contracts. When reviewing a new contract for the first time, it can be helpful to know what sound contract language looks like. In February, we published an issue of ProNetwork News titled Template of Reasonable Contract Clauses for Design Professionals. In it, author Kent Holland of ConstructionRisk, LLC lays out 16 templates to help architects and engineers deal with contract review and negotiation.

The following is an excerpt of the Indemnification clause portion of the newsletter, including six different templates for this deceptively complex contractual requirement:

In the examples provided below, some include an obligation to indemnify a client for reasonable attorneys fees and defense costs.  To the extent the a/e is required to pay attorneys fees for its client only because it obligated itself do so by the indemnification clause (i.e., attorneys fees would not be imposed on the a/e by a court under common or law or statute), then these costs will not be covered by insurance.  The contractual liability exclusion will bar their recovery.

Sample 1:

Consultant shall indemnify and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 2: For California contracts must add that there is no duty to defend:

Consultant shall indemnify and hold harmless (but not defend) the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 3: Instead of referencing BI and PD, reference “third party claims”

Consultant shall indemnify and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs arising out of third party claims to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 4: Include a duty to defend in the main text for CGL type claims but add sentence at conclusion to carve out professional liability claims.

Consultant shall indemnify, defend and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs arising out of third party claims to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability. The duty to defend shall not apply to professional liability claims.

Sample 5: A different way to address defense obligations:

The foregoing defend, hold harmless and indemnity obligations of this paragraph shall apply solely to any such causes of action, damages, costs, expenses or defense obligations covered by Consultant’s Insurance specified in this Agreement.

Sample 6: Instead of agreeing to indemnify for all damages, including reasonable attorneys fees, strike out the attorneys fees in the body of the indemnity clause and use the simple one sentence shown in the above examples for attorneys fees or use the following:

Consultant agrees to reimburse Client for reasonable defense costs, provided however that such obligation is limited to the portion of such costs equal to the percentage of Consultant’s liability as ultimately determined to be caused by the willful misconduct or negligence of Consultant using principles of comparative fault.

We hope you’ll download the PDF version of this issue of ProNetwork News. Sample Template Clauses include:

1. Certifications
2. Compliance with Law
3. Copyright of Documents
4. Cost Estimates Exceeded – Redesign Services Required
5. Incorporation by Reference and Flow Down
6. Indemnification
7. Limitation of Liability
8. Payment Provisions
9. Prevailing Party Attorneys fees
10. Site Visits/Inspection
11. Standard of Care
12. Suspension of Services
13. Time of Performance
14. Waiver of Consequential Damages
15. Withholding Fees
16. Warranties

As always, if you have questions about your contracts or professional liability insurance, please don’t hesitate to call your local a/e ProNet broker today.

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