Aug 10th, 2018
In a previous entry, we discussed the basics of indemnity and indemnification obligations. If you’ve not read it yet, we encourage you to do so before reading this section.
A very popular use of the indemnity agreement occurs when “prime contractors” (more often called ‘general contractors’ in Florida) subcontract out all or a portion of their work under a customer contract, to one or more subcontractors. When a general contractor engages a subcontractor, they are on the hook for the subcontractor’s actions, inactions, and quality of work.
Thus, the prime contractor will often draft a “subcontract” or “subcontractor agreement” which includes provisions for the subcontractor to defend and indemnify the prime contractor for any claims asserted against, or losses suffered by the prime contractor as a result of the subcontractor’s work. These provisions are also often accompanied by a section which requires the subcontractor to acquire, pay for, and maintain insurance (general liability, auto, and workers’ compensation are the three most common). This can provide an additional layer of protection—assuming that the general contractor actually verifies the subcontractor’s insurance—because the general contractor will not be relying solely upon the liquidity and viability of the subcontractor in defending claims, but rather an insurance company.
Sounds simple, right? If you’re a Florida construction business owner, not so fast: you can’t simply draft an indemnity/defense agreement that gives you unlimited protection. The Florida Legislature has put some restrictions on how an indemnity agreement can be drafted (see section 725.06, Florida Statutes.). What’s more, if you fail to draft your indemnity agreement in accordance with the monetary limits specified in section 725.06, your indemnity agreement will be “void and unenforceable”.
If you already have a construction contract and are not sure if it complies with Florida Law, feel free to contact us for a free review. Also, if you are operating in the construction industry in Florida without a written construction contract, you are strongly encouraged to contact a Florida licensed attorney who focuses on Construction Law today. Feel free to contact us for a consultation if we can be of assistance.