How to Transfer Risk in a Construction Contract Part 2
In Part 1 of our two-part article, we suggested two ways to transfer risk in a contract: a hold harmless agreement and an indemnification agreement. Before we discuss the final two, we’d like to touch on the importance of having an attorney draft your clauses.
With effective drafting, contracts will distribute and allocate risk fairly and place risk responsibility on the appropriate party. Often, whichever party drafts the contract tends to have the advantage. To ensure you reach equity among all parties, it’s important to consult with a Florida construction lawyer before signing any contract.
Coverage as an additional insured may be required in certain contracts. Owners and contractors should be sure to require down-tier contractors and subcontractors to add them on their liability policy as an additional insured. An additional insured gives owners and contractors protection in addition to their existing indemnification agreement. To secure coverage, be sure that insurance requirements, coverages, policy limits, and additional insured status are obtained and properly documented.
Waivers of Subrogation
Waivers of subrogation are commonly used in construction contracts to avoid litigation and allocate the risk of loss to the insured. The waiver transfers risks by allowing the insurer to recover for damages or losses caused by a negligent third party on the behalf of the insured party.
In this article series, we’ve scratched the surface of how you can transfer the risks in your construction projects. The following clauses can be explored with an attorney.
- Dispute resolution clause
- Delay clause
- Time is of the essence clause
- Limitation of liability clause
- Liquidated damages clause
Remember, clauses are selected based on the unique needs of the construction project. Consult with an attorney to ensure your contract has the right clauses to protect your interests.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.