Indemnity clauses
An indemnity clause makes you promise to cover someone else's losses. Reasonable when it tracks your own fault; dangerous when it's drafted to cover losses 'howsoever arising' — including those caused by the other party's own negligence. The test that cuts through the legalese: would your insurer pay a claim under this clause? An uninsurable indemnity is a promise to pay from your own pocket.
It converts a claim someone would have to prove against you into a debt you agreed to pay — often bypassing the defences, proportionate-liability rules, and damage limits that would otherwise protect you. That's why indemnities are drafted broadly by the receiving side: the clause is worth more than the underlying legal claim it replaces.
'Howsoever arising', 'whether or not caused by negligence', indemnities with no carve-out for the indemnified party's own negligence or wilful misconduct, and indemnities covering 'any breach of this contract' (which turns every minor breach into an indemnified debt). Also watch scope creep: indemnifying the principal and the head contractor and their consultants extends your promise to parties you have no contract with.
Public liability policies commonly exclude or limit liability assumed under contract beyond what the law would impose anyway. That means the broadest indemnities are precisely the least insured — you're granting cover your insurer refused to write. Before signing, send the indemnity and insurance clauses to your broker together; if the broker winces, negotiate. The same review should confirm the insurance clause only asks for cover you actually hold.
Mutuality (they indemnify you on the same terms), a carve-out reducing the indemnity to the extent the loss was caused by the indemnified party's negligence, a cap tied to your insurance limits, and scope confined to third-party personal injury and property damage from your own works. These are standard asks a reasonable counterparty accepts — and the refusals tell you what they expect the clause to do. A full review reads the indemnity beside the LD and insurance clauses, where the combined exposure actually lives.
Common questions
An indemnity that runs in only one direction — you cover their losses, they don't cover yours — and typically extends beyond your fault: losses 'howsoever arising', or expressly including those caused by the indemnified party's own negligence. The one-sidedness compounds: broad indemnity, no cap, no mutual obligation, and an insurance clause that doesn't actually respond to the promise you just made.
Because liability policies are priced for what the law would make you pay, and a broad contractual indemnity makes you pay more than that — policies commonly exclude or restrict liability assumed under contract beyond your legal liability. The practical consequence: the wider the indemnity you sign, the larger the uninsured gap you personally carry. Always read the indemnity clause and your policy's contractual-liability wording together, ideally with your broker, before signing.
A reasonable baseline: indemnity limited to third-party personal injury and property damage arising from your own works and your own negligence; reduced proportionally to the extent the other party contributed; mutual where exposure runs both ways; and capped in line with your insurance program. That protects the counterparty against the risk you genuinely create without making you the project's unpaid insurer.
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