Note: This is an update to the original released in June 2010.

What is an indemnity clause?

An indemnity clause is a contractual provision that can operate to extend a consultant’s liability beyond the scope generally recognized by law and beyond the scope of professional liability insurance coverage.

Indemnity provisions are a common source of dispute during contract negotiations between consultants and clients, often due to a lack of understanding of their legal implications. Clients, particularly large project owners, will typically seek to have consultants provide a contractual indemnity similar in nature to the indemnities given by contractors. Contractors, however, are in a much different position from consulting engineers on a construction project.

How indemnities differ for Contractors

Contractors assume control of an owner’s property and occupy it for the purpose of constructing the project. It is often therefore reasonable for the owner to ask the contractor to indemnify the owner for all damage or injury that arises on the site. The same logic does not apply to consultants. Consultants may have some site presence, but do not occupy or exercise control over the site in the manner contractors do. Consultants also do not control the Contractor’s or Owner’s workers nor the way the work is carried out.

Consultants engaged in construction projects should not accept indemnity clauses which cause them to assume liability greater than what would otherwise be imposed by law. Such indemnities are also unsuitable for consultants on non-construction projects.

Edition Editors:

Kathryn Ekman, P.Eng., Robert Lew, P.Eng., Rob McLeod, CAIB, CIP

Edition Reviewer:

Tanya Sadlo, LL.B., ICD.D