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Insurance & Bondingaka: hold harmlessaka: indemnification

Indemnity

In Plain English

A promise to cover another party's losses if something goes wrong on the project.

Definition

Indemnity is a contractual obligation by one party to compensate another for losses, liabilities, or damages. In construction contracts, indemnity clauses typically require subcontractors to defend and hold harmless the general contractor and owner for claims arising from the subcontractor's work. The scope of indemnity obligations—whether limited, intermediate, or broad form—is heavily negotiated and varies by state law.

Why It Matters in Bidding

Indemnity provisions are central to how risk flows down from owner to GC to subcontractor, so estimators reviewing sub agreements need to confirm that downstream indemnity matches the obligations the GC accepted upstream. A mismatch leaves the general contractor holding uninsured exposure, and the breadth of the clause affects the insurance certificates and additional-insured status a bidder must furnish.

Example

When awarding a steel package, the GC's contract administrator requires the sub to defend and hold the GC harmless for claims arising from the steel work and to name the GC as additional insured on its general liability policy.

Related Terms

Liability InsuranceCommercial General Liability (CGL)Surety Bond

Frequently Asked Questions

Defend means the indemnifying party pays the legal costs of fighting a covered claim, while hold harmless means it absorbs the resulting liability or judgment. Together they require the subcontractor to step in and protect the GC and owner financially for claims tied to the sub's scope of work.
Indemnity is the contractual promise; additional insured status on the sub's policy is the insurance mechanism that funds it. GCs typically require both so that the sub's insurer responds first to covered claims, preserving the GC's own loss history and limits while backing up the contractual obligation.
Many states have anti-indemnity statutes that limit or void clauses requiring a party to cover another's sole negligence, and the tiers permitted differ widely. Because the same clause can be valid in one jurisdiction and unenforceable in another, contractors review indemnity language against the project's governing state law before signing.

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