3 Types of Hold Harmless Agreement and When to Use Them
The Importance of a Hold Harmless Agreement
A hold harmless agreement is a contract clause typically used in construction contracts aimed to release one party from consequences or liabilities due to the act of other. The Hold Harmless agreement is commonly provided by the subcontractor to the contractor, builder, or other related professionals, insuring against all work being executed by the subcontractor. The provisions of a Hold Harmless agreement will minimize the risk of being part of a litigation or allow you to pursue a claim for indemnity if a subcontractor or any of his employees sustain an injury.
A hold harmless agreement clause in a contract document should have specific language to protect the contractor or the intended parties. The agreement must include provisions to neglect any claims, damages, losses, expenses or any other cause of action to the contractor if any problem or dispute arises in the construction project.
The hold harmless agreement protection will vary depending on the jurisdiction in which the contract is being executed. In some cases, the agreement will protect the contractor from claims brought by corporations or companies not forming part to the agreement.
Three Basic Types of Hold Harmless Agreements
There are three basic types of Hold Harmless Agreements in the construction industry: Broad Form, Limited Form, and Intermediate Form.
Broad Form Hold Harmless Agreement
The subcontractor being insured assumes all related liability for accidents, its own negligence, general contractor negligence, and the combined negligence of both the contractor and subcontractor.
This is not the agreement recommended form due to its broad terms and many jurisdictions prohibit this form of hold harmless agreement. In some cases, to validate this type of agreement, the subcontractor must finance its own liability with an additional insurance policy.
Intermediate Form Type
Under this form of agreement, the subcontractor assumes all liability for accidents and negligence.
The subcontractor is responsible for his related actions and will not be held accountable for the general contractor's accidents or negligence. It is one of the most common used types of hold harmless agreement. It is not dependent on whether it was subcontractor's fault or not; it only depends on who was executing the accident or who was acting in a negligent way. In the case that both parties were negligent, the subcontractor will be held responsible for his actions and will be liable for his actions and omissions.
Hold Harmless Agreement Limited-Form
In a hold harmless limited-form agreement, the subcontractor will be held accountable only for the accident or negligence, but on a limited form. The subcontractor will assume liability only for the proportional part of what was his responsibility. This type of agreement will limit the liability of the subcontractor only to his responsibility and will include others, under their respective hold harmless agreements for their corresponding part of the accident or negligence.
Items to Include on Hold Harmless Agreement
Normally, a Hold Harmless Agreement will contain specific language and, in many instances, these document can be provided by your insurance company or by the contract issuer.
If you have a hold harmless agreement in your hand, be sure it is one of these:
- Terms Definition
- List of Exceptions for Indemnification
- Notice of Claim
- Authorization of Indemnification
- Assumption of Defense
- Failure to Defend
- Settlement and Consent (for both parties)
- Rights and Obligations of both parties
- Governing Law
- General Provisions
In terms of wording, the clause shall be similar to the following:
"Contractor shall agree to defend, indemnify, and hold harmless the Owner and ______________________ (lender), and the (City/State/County) from liability and claim for damages because of bodily injury, death, property damage, sickness, disease or less and expense arising from Contractor’s Performance under this agreement to install or construct housing rehabilitation to be paid for out of the proceeds of the Owner’s rehabilitation loan. Contractor is acting in the capacity of an independent Contractor with respect to the Owner"
Every county could potentially require specific language to address the aforementioned issues, so be sure to verify the validity of your clause and contract language.