Ask the Attorney: I frequently do work for builders who want me to sign a subcontractor agreement with an indemnity clause. Should I sign it?
First, a brief explanation about indemnity: indemnity is a promise to pay for the cost of possible damage, loss or injury.
Your alarm contract has an indemnity provision for your benefit (or at least it should). It requires that your customer indemnify you for any claims made by third parties.
Subcontractors are often asked to sign agreements indemnifying the general contractor. This is typical. Here are a few things to consider before you sign an indemnity agreement:
- Ensure your insurance coverage is sufficient for the potential indemnity obligation and your insurer has no problem with this agreement.
- Make sure the indemnity language is acceptable. This may require getting advice from an attorney. The indemnity obligation should only extend to claims arising from your work. I have seen provisions that are extremely broad and could be interpreted to provide indemnity for any claims made against the general contractor. Also, make sure the general contractor’s agreement does not provide that you indemnify the ultimate homeowner/occupant. If the homeowner/occupant ends up being your customer, then you will have a contract with them and you don’t want your contract with the general contractor creating any ambiguity as to which agreement should apply. And if the homeowner/occupant does not end up being your customer, you would be left with absolutely no protection.
- Asses whether it is worth the risk. Is this a small one-off project for a builder you do not know? Or is it a very lucrative arrangement for a well-respected builder? This is a business decision on your part.