The Indiana Legislature has placed limitations on indemnification provisions in construction and design contracts. In particular, Indiana Code 26-2-5-1 specifies that provisions in a “construction or design contract except those pertaining to highway contracts” which contain an indemnification clause that protects a party against liability for bodily injury, property damage or design defects resulting “from the sole negligence or willful misconduct” of that party, are void and unenforceable under Indiana law.
As an example, the owner in a construction contract with a general contractor cannot require the general contractor to indemnify the owner for personal injury and property damage claims if the claim arises from the sole negligence or willful misconduct of the owner. Notwithstanding these limitations placed by the Indiana Legislature on indemnification clauses, indemnity provisions that stop just short of requiring indemnification for a party’s sole negligence or willful misconduct are likely to be enforced by Indiana courts if the indemnification clause is clear and unambiguous.
As a construction contractor or design professional involved in a construction project, your company should pay particular attention to indemnification clauses contained in your construction contracts. The restrictions that have been placed by the Indiana Legislature on indemnification clauses should be just one consideration for your company when reviewing its indemnity clauses in its contracts.
An indemnification clause generally requires your company to hold harmless the other party to the contract. In reviewing indemnification clauses, your company needs to consider under what circumstances you believe it is appropriate for your company to hold harmless the other party to the contract. In counseling my construction clients, I generally advise my clients to try to limit their indemnification obligations so that the obligations only apply if there is negligence on the part of my client. In other words, you should try to limit your indemnification obligation to apply only “to the extent that your company’s negligence” causes a claim.
Overly broad indemnification clauses can cause your company significant hardship and liability related to claims that might arise during or after the conclusion of a construction project.