CRIS CRIS Contract Analysis & Indemnification 1 — Questions and Answers
Question 1: What is the purpose of an indemnification (hold harmless) clause in a construction contract?
- To set the payment schedule for the project
- To shift responsibility for certain losses or liabilities from one party to another (Correct answer)
- To define the project completion date
- To specify the insurance limits each party must carry
Correct answer: To shift responsibility for certain losses or liabilities from one party to another
An indemnification clause contractually obligates one party (the indemnitor) to defend and pay specified losses on behalf of another party (the indemnitee).
Question 2: A 'broad form' indemnification clause in a construction contract requires the subcontractor to indemnify the general contractor for:
- Only the subcontractor's own negligent acts
- Losses caused by the subcontractor and the general contractor, including the GC's sole negligence (Correct answer)
- Property damage to third parties only
- Workers' compensation claims filed by the subcontractor's employees
Correct answer: Losses caused by the subcontractor and the general contractor, including the GC's sole negligence
A broad form indemnity obligates the subcontractor to cover even the indemnitee's own negligence, which many states restrict or prohibit by anti-indemnity statutes.
Question 3: Which type of indemnification clause is most commonly enforceable in states with anti-indemnity statutes?
- Broad form indemnity
- Intermediate form indemnity
- Limited form (comparative fault) indemnity (Correct answer)
- Absolute indemnity
Correct answer: Limited form (comparative fault) indemnity
Limited or comparative fault indemnity, where each party bears responsibility proportional to its own negligence, typically survives anti-indemnity statutory scrutiny.
Question 4: What does an 'additional insured' endorsement on a subcontractor's general liability policy provide to the general contractor?
- It makes the GC the primary policyholder, replacing the subcontractor
- It extends the subcontractor's liability coverage to the GC for claims arising from the subcontractor's work (Correct answer)
- It eliminates the subcontractor's indemnity obligations under the contract
- It provides the GC with direct access to the subcontractor's policy limits for any reason
Correct answer: It extends the subcontractor's liability coverage to the GC for claims arising from the subcontractor's work
An additional insured endorsement grants the named GC (or owner) direct rights under the subcontractor's policy for covered claims arising from the subcontractor's operations.
Question 5: The ISO CG 20 10 endorsement adds an additional insured for liability arising from:
- Completed operations only
- Ongoing operations only (Correct answer)
- Both ongoing and completed operations
- Products liability only
Correct answer: Ongoing operations only
ISO CG 20 10 covers additional insureds for liability arising out of the named insured's ongoing operations at the designated project location.
Question 6: A subcontract requires the subcontractor to provide 'primary and non-contributory' coverage to the GC. This means:
- The subcontractor's policy pays first before the GC's own insurance, and the GC's policy will not share the loss (Correct answer)
- The GC's policy pays first and the subcontractor's policy contributes the remainder
- Both policies share each loss equally regardless of limits
- The subcontractor must purchase a separate policy solely for the GC's benefit
Correct answer: The subcontractor's policy pays first before the GC's own insurance, and the GC's policy will not share the loss
A primary and non-contributory requirement obligates the subcontractor's insurer to respond first and bars the GC's insurer from being called upon to contribute to any covered loss.
CRIS CRIS Contract Analysis & Indemnification 1
What is the purpose of an indemnification (hold harmless) clause in a construction contract?