Most construction contracts have hold harmless agreements, which are also known as indemnity agreements. In such contracts, the indemnitor agrees to cover any damages assessed to the indemnitee for injury or property damage liability. There are three different forms of indemnity agreements, and each one has different insurance implications.

Intermediate Form
In this type of agreement, the indemnitor takes responsibility for accidents that happen during the course of the project. However, there is an exception for accidents arising purely from the indemnitee’s negligence. If a subcontractor is at least one percent liable, he or she pays for the accident.

Broad Form
The indemnitor takes all responsibility for accidents happening during a project. This is true regardless of who is at fault. Subcontractors must pay for their own negligence, the negligence of the general contractor and joint negligence with the general contractor. Unless the indemnitor insures the assumed liability, this type of agreement may be prohibited in most states.

Limited Form
In the limited form agreement, the indemnitor takes all financial liability for accidents that happen during the project. However, the indemnitor only assumes responsibility for his or her own liability. If an accident happens where each party is 50 percent liable, the general contractor would be entitled to 50 percent of the judgment from the subcontractor.

Injuries and damages the insured must pay because of a contract are excluded in the ISO CGL form. However, there is an exception for liability in insured contracts, which includes portions of contracts where the insured assumes tort liability for a third party’s injuries. If the damage or injury takes place after the contract’s execution, the exception allows the subcontractor insurance coverage for liability assumed in a hold harmless agreement. When an indemnity agreement requires subcontractors to pay for them, the policies cover legal fees for general contractors.

By naming the general contractor as an additional insured, a subcontractor may insure assumed liability. Since ISO changed its endorsements for additional insureds in 2004, it is important to understand that they are not covered for sole negligence now. If a contract has a broad form type of indemnity agreement, this could be problematic for the parties involved. All contractors should work with attorneys to make sure the terms of hold harmless agreements are fully understood. It is also essential to work with insurance agents to understand how coverage applies to agreements. The best time to get rid of coverage gaps is before a job starts, so discuss these issues with an agent immediately.