Indemnity: What You Don’t Read Can Hurt You

Seeking justice can be painful.I’ll try not to bore you with too much legal mumbo-jumbo on this one.  But boy, this one really gets my panties in a twist, because it’s just WRONG, WRONG, WRONG!

Indemnification is a legal concept that means I’m protected against liability for something you do wrong.   It is common in contracts for both parties to say “I indemnify you for my negligent acts.  If someone sues you for something I did wrong, I’ll take the blame and defend you.”  Sounds chivalrous, no?  Motherhood and apple pie.

Well, the Bigg Elevators of the world, or at least their lawyers, have discovered that (1) liability can be expensive and that (2) most people don’t read the contracts foisted upon them, especially if the font is 8 point or less.  So lots of lawyers in the construction industry take the first step of indemnity erosion:  they make you indemnify them, but say nothing about them indemnifying you.   I see this frequently in contracts we’re asked by General Contractors to sign.  I always read my contracts thoroughly, regardless of the font size, and tell them I’ll agree to indemnify them as long as they agree to indemnify me.  That’s called reciprocity, and it’s a very reasonable request.  It’s so reasonable that I’ve never had a customer refuse.

But Bigg Elevator has gone beyond unilateral indemnity.  Here’s an example from a contract I recently saw:

Owner shall indemnify, defend and save harmless Bigg Elevator from and againstliabilities, losses and claims of any kind or nature imposed on, incurred by, or asserted against Bigg Elevator arising out of the concurrent, active or passive negligence of Bigg Elevator in any way connected with the services provided under this Agreement or the use or operation of the equipment.”

Here’s another example, from Mega Elevator:

“In consideration of Mega Elevator performing the services herein specified, you expressly agree to indemnify, defend, save harmless, discharge, release and forever acquit Mega Elevator, our officers, agents and employees from and against any and all claims, demands, suits, and proceedings brought against us or our employees of any nature whatsoever, including but not limited to loss, damage, injury or death that are alleged to have arisen from or alleged to be in connection with the presence, use, misuse, maintenance, installation, removal, manufacture, design, operation or condition of the equipment covered by this agreement, specifically including claims or losses alleged or proved to have arisen from the joint or sole negligence of Mega Elevator or our employees.”

If those are too jargony, read the bold parts to get the gist of them.  Yes, the owner has agreed that if Bigg Elevator (or Mega Elevator) causes harm, you, the owner, take on the liability.

I happen to think that it’s morally wrong for a company to include such language in their contracts.  But that’s what can happen when you don’t read your contracts.

Lessons for you:

1.  Read your contracts.  If they completely make your eyes glaze over, and you can’t get through them, then hire a lawyer.

2.  Don’t sign unilateral indemnity.  What’s good for the goose is good for the gander.  There’s no good reason for only one party to indemnify the other, since you’re both capable of screwing up.

3.  Don’t indemnify the other guy against his negligent acts.  That’s just ridiculous.

4.  Don’t be afraid to ask for changes.  Lawyers aren’t scary people, so don’t be intimidated when the sales rep says “I’ll have to pass that by Legal.”  In my experience lawyers are actually more likely to be reasonable, because they realize their contract is one-sided.  It’s the minions that are told to hand out contracts that figure nothing can be changed because “Legal said.”


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