From the Field: Limits of Standard Indemnity in Contractors Injury Cases

By Brent Kettelkamp & James A. Junkin

Subcontractor liability, both from an OSHA and lawsuit perspective, is concerning on construction sites as well as general industry. Contracts between project owners and contractors frequently incorporate indemnity and hold harmless agreements (IHHAs) as a means of distributing risk and determining responsibility for workplace injuries. While these clauses are intended to protect the hiring entity, their effectiveness often falls short when serious incidents or allegations of negligence arise.

This article examines the practical and legal limits of standard IHHAs, highlighting how variations in state law, contractual ambiguity, and nondelegable duties can undermine their intended protection. It also outlines strategies that hiring clients can adopt to minimize exposure to financial and reputational harm.

The Shortcomings of Standard IHHAs

The widespread reliance on IHHAs demonstrates an industry intent to shift liability from the hiring entity to the contractor. However, the degree to which such risk transfer is legally enforceable depends heavily on jurisdictional precedent, contractual precision, and the scope of nondelegable responsibilities retained by the hiring client.

Even a well-drafted IHHA cannot completely absolve a hiring client from liability. Safety responsibilities imposed by statute or regulation often remain the client’s obligation, regardless of any attempt to assign them to a contractor. As a result, organizations relying solely on standard indemnity language frequently discover that their protection is partial at best, leaving them exposed to litigation, penalties, and public scrutiny.

Limitations of Standard Indemnity Clauses

Public Policy and Jurisdictional Constraints

Courts routinely invalidate indemnity clauses that conflict with public policy. Although the definition of gross negligence varies from one jurisdiction to another, it is universally recognized as conduct exceeding ordinary carelessness. Some states interpret gross negligence as reckless disregard for safety, while others emphasize a conscious indifference to known risks. These distinctions make local legal expertise essential when drafting or enforcing indemnity agreements, as a clause permissible in one state may be void in another.

State Law Variability

Every state applies its own framework for indemnity enforcement. Certain jurisdictions restrict or prohibit indemnification provisions that protect a party from its own sole negligence, particularly in construction, energy, and transportation sectors. The interaction between state indemnity statutes and insurance law further complicates interpretation, underscoring the importance of tailored contract language that reflects jurisdiction-specific limitations.

Ambiguity and Contract Interpretation

The wording of many IHHAs lacks the precision required to withstand judicial scrutiny. Courts typically construe ambiguous language against the party seeking indemnification. Phrases such as “all claims arising out of the work” are notoriously broad and subject to conflicting interpretations, depending on context. To avoid this, indemnity clauses must employ clear, narrowly defined terms and align with relevant case law to ensure enforceability.

Statutory Responsibilities and Nondelegable Duties

Hiring clients are often subject to statutory obligations that cannot be transferred to contractors through contract language. For example, under the Occupational Safety and Health Act (OSHA) and corresponding state programs, employers are legally required to maintain a safe workplace. A company that fails to meet this standard may face citations and penalties—even if an IHHA assigns those duties to another entity. Nondelegable duties ensure that ultimate responsibility for worker safety remains with the hiring client.

Shared Liability Under Comparative Negligence

Even when an IHHA is enforceable, comparative negligence or contribution laws may require the hiring client to share in the damages. Jurisdictions applying pure or modified comparative negligence systems allocate fault based on each party’s contribution to the incident. Thus, a hiring client may still bear financial liability proportional to its involvement, effectively diminishing the indemnity’s protective value.

Insurance Limitations and Exclusions

An IHHA does not automatically guarantee coverage under either party’s insurance policy. Many commercial general liability policies contain exclusions for contractually assumed liability, particularly where gross negligence or intentional acts are alleged. Consequently, both hiring clients and contractors must review their insurance policies to confirm whether indemnity-related exposures are covered or excluded. Failing to align contractual obligations with insurance coverage can leave both parties financially vulnerable.

Mitigation Strategies for Hiring Clients

Although indemnity clauses play a valuable role in risk allocation, they cannot serve as the sole safeguard. Hiring clients should adopt a multi-layered risk management approach combining contractual, procedural, and operational controls.

Before awarding work, clients should rigorously evaluate contractors for financial stability, technical competence, safety performance, and training programs. Many organizations employ prequalification software to standardize this process. By ensuring that only well-qualified contractors are selected, hiring clients can significantly reduce the likelihood of incidents and disputes.

Comprehensive Contractor Prequalification

Proactive Risk Management

Effective risk management begins before the project starts. Detailed prework hazard analyses, continuous monitoring, and adherence to safety protocols minimize exposure and enhance resilience. A proactive system enables early identification of hazards, targeted intervention, and consistent compliance with safety standards, thereby reducing costs related to downtime, liability, and reputational damage.

Expert Legal Oversight

Given the complexity of indemnity law, hiring clients should retain attorneys experienced in construction, environmental, occupational safety, and contract law. Legal professionals can draft or review indemnity language to ensure compliance with governing statutes and case law, while also identifying potential pitfalls in insurance coordination and contractor obligations.

Precise Contractual Language

Ambiguity is the greatest enemy of enforceability. Indemnity clauses must define the scope and limits of liability in unambiguous terms, clarifying the extent of coverage, exclusions, and triggering conditions. Clarity minimizes the likelihood of disputes and improves the clause’s ability to withstand judicial scrutiny.

Insurance Due Diligence

Both the hiring client’s and contractor’s insurance programs should be evaluated to ensure adequate coverage of assumed indemnity obligations. Contractors must carry sufficient limits and include endorsements aligning with contractual requirements. Subcontractor insurance should also be verified, as deficiencies downstream can jeopardize the entire project’s protection framework.

Routine Review and Revision

Because laws and case precedents evolve, indemnity agreements must be periodically reviewed and updated. Regular assessment ensures alignment with current statutes, judicial interpretations, and business realities. Open communication between clients and contractors during these reviews fosters transparency, prevents disputes, and strengthens long-term partnerships.

PRACTICAL STEPS TO REDUCE LIABILITY RISK

• Conduct thorough contractor vetting: Assess financial health, performance history, safety culture, and training.
• Implement robust risk management systems: Use hazard assessments, audits, and monitoring to prevent incidents.
• Engage legal experts: Utilize attorneys specializing in construction and occupational safety law for clause drafting and review.
• Use precise contractual terminology: Define indemnity scope clearly to prevent misinterpretation.
• Verify insurance adequacy: Review all policies, including subcontractor coverage, to confirm IHHA obligations are insured.
• Regularly update agreements: Reassess IHHAs to reflect new laws, precedents, and business conditions.

Reassessing Indemnity: A Path to Sustainable Risk Control

Standard indemnity and hold harmless agreements, while useful, rarely provide complete protection for hiring clients. Jurisdictional variations, ambiguous wording, and the persistence of nondelegable duties mean that liability transfer has limits. To manage risk effectively, organizations must integrate legal, contractual, and operational safeguards that go beyond traditional indemnity provisions.

Safety professionals and risk managers play a critical role in this process. By ensuring robust contractor oversight, legal compliance, and proactive safety management, they help their organizations avoid preventable losses and uphold their ethical and regulatory responsibilities. A well-informed, multi-pronged approach not only reduces liability but also supports a culture of safety and accountability across the entire contractor network.

Brent Kettelkamp, Esq., is a shareholder with Ogletree Deakins and a member of the Veriforce Strategic Advisory Board. His practice focuses on occupational environmental, health, and safety law, representing employers in OSHA litigation and compliance matters across multiple industries.

James A. Junkin, M.S., CSP, MSP, SMS, ASP, CSHO, is the Chief Executive Officer of Mariner-Gulf Consulting and Services, LLC, Chair of the Veriforce Strategic Advisory Board, and past Chair of the Professional Safety editorial review board. He serves on the advisory board for the National Association of Safety Professionals and hosts The Risk Matrix podcast.