Before signing a construction contract that indemnifies the owner, what should the contractor review?

When a contractor is considering signing a construction contract that includes indemnification for the owner, reviewing their liability insurance is critical. Indemnification clauses often shift risk from the owner to the contractor, meaning that the contractor could be held responsible for certain damages or losses, even those that may not directly be their fault.

A thorough understanding of liability insurance helps the contractor ensure they have adequate coverage to protect against potential claims that may arise under the indemnification clause. This entails reviewing not only the insurance limits but also the specific coverage included, such as general liability, professional liability, and any additional endorsements that may apply to construction projects.

Should the contractor fail to assess their liability insurance, they risk inadequately protecting themselves from financial fallout that may result from claims related to indemnification. This aspect is essential to manage overall risk responsibly and safeguard the contractor’s financial interests in the project. Other factors like the project timeline, business plan, and subcontractors' agreements, while important, do not directly address the liability risks posed by the indemnification clause.