The indemnity article is the most expensive paragraph in a subcontract, and it's the one almost nobody reads. It is a private agreement about who pays when something goes wrong on a job — and it operates independently of who was actually at fault, unless the clause or state law says otherwise.
Three things matter more than anything else in that paragraph:
Every construction indemnity clause is some version of one of three shapes. The wording varies; the economics don't.
| Form | What you're agreeing to | Who it favors |
|---|---|---|
| Broad form | You cover the upstream party's liability even when the loss was 100% their fault and you did nothing wrong | The GC / owner, aggressively |
| Intermediate form | You cover the loss whenever your negligence contributed at all — including their share of a shared-fault claim | The GC / owner |
| Limited (comparative) form | You cover only your own proportionate share of fault | You |
Intermediate form is the one most subs are actually handed, and it deserves a hard look, because the arithmetic is worse than it sounds. Under a true intermediate-form clause, 1% of the fault can pull 100% of the indemnity. A claim where a jury assigns you a sliver of responsibility and the GC the rest can still land entirely on you, because your negligence was the trigger and the clause doesn't apportion after that.
Watch the trigger language specifically. There is a large practical difference between "caused by the negligence of Subcontractor" and "arising out of or in connection with Subcontractor's work." The second phrasing doesn't require negligence at all — it only requires that the claim have some connection to your scope. That's how a sub with a clean crew ends up funding somebody else's lawsuit.
A standard commercial general liability policy contains a contractual liability exclusion: it does not cover liability you assume by contract. Then it gives most of that back for liability assumed under an "insured contract" — a defined term that captures the part of a contract where you assume the tort liability of another party for bodily injury or property damage to a third person.
Most construction subcontracts qualify. That give-back is genuinely valuable and it's the reason contractual risk transfer works at all. But it has hard edges, and the edges are where contractors get hurt:
This is also why the limits you carry should be set against the contracts you sign, not against what the last renewal happened to be.
"Defend, indemnify, and hold harmless" reads like one obligation. It's three.
The duty to defend is typically broader than the duty to indemnify and triggers on an allegation, not a finding. Which means you can fund the other side's defense in a case you ultimately win outright — and if that defense obligation isn't structured to fall inside your policy's insured-contract coverage, you fund it with your own money while your own defense runs in parallel.
If you negotiate one thing in an indemnity article, negotiate the defense obligation: cap it, tie it to a proportionate-fault finding, or make it reimbursement-after-determination rather than pay-as-you-go.
Every state Bettr Coverage works in limits construction indemnity by statute. The general shape is similar; the mechanics are not, and the drafting is precise enough that the outcome depends on your exact clause.
| State | Statute | General effect on construction contracts |
|---|---|---|
| Georgia | O.C.G.A. § 13-8-2(b) | Voids provisions indemnifying a party against liability arising from that party's own negligence |
| South Carolina | S.C. Code § 32-2-10 | Voids promises to indemnify a party for that party's sole negligence |
| North Carolina | N.C. Gen. Stat. § 22B-1 | Voids agreements to indemnify against liability caused by the promisee's own negligence |
| Tennessee | Tenn. Code § 62-6-123 | Voids indemnity for the indemnitee's sole negligence in construction contracts |
| Florida | Fla. Stat. § 725.06 | Different approach — permits broader indemnity only if the contract states a monetary limitation on indemnification bearing a reasonable commercial relationship to the contract |
General description only, current as of 2026 and simplified. Scope, exceptions, and judicial interpretation vary considerably, and these statutes are amended over time. Have construction counsel review the actual clause — this is a legal question, not an insurance one.
Two practical takeaways. First, the fact that a clause is unenforceable doesn't stop it from being signed, tendered, and litigated — you still spend money establishing that. Second, Florida's approach is the one that trips up out-of-state contractors most often, because it isn't a flat prohibition; it's a formality requirement, and a clause that fails it may fail entirely.
South Carolina contractors have a second layer to think about here, since the post-2024 tort reform environment changed how shared-fault claims and available limits interact — see South Carolina contractor general liability after the 2024 Tort Reform Act.
A properly drafted subcontract asks for three separate things, and they do three separate jobs:
Miss any one and there's a gap. And the mirror image matters too: if you hire subs, your subcontracts should require the same three things flowing down, plus certificates that are actually collected and current. Uninsured subs are also a workers' comp audit problem, not just a liability one — the premium bill for an uninsured sub lands on you.
Bettr Coverage is an independent commercial insurance agency serving Georgia and the wider Southeast, and contract review before signing is one of the highest-value things an agent does that costs a contractor nothing. Send us the insurance and indemnity articles of a subcontract and we'll tell you what your current program actually backs up, where the promise runs past the policy, which endorsements the contract requires that you don't currently carry, and what the limits should be given the work you're bidding. That's a redline-stage conversation — after a claim, the paragraph is what it is. We handle every line of the program together, so the GL, umbrella, auto, workers' comp, and the certificates going out the door line up with the contracts coming in.
Bettr Coverage reviews the insurance and indemnity requirements against your actual policy — limits, endorsements, and the gaps — before you sign.
Get a free coverage reviewThe paragraph where one party agrees to absorb another party's legal liability. In construction it flows downhill — the sub indemnifies the GC and owner for claims arising out of the sub's work. It's a contractual promise by your company, binding whether or not insurance responds to it.
Broad form covers the other party even for their own sole negligence. Intermediate form triggers whenever your negligence contributed at all, and can pull 100% of the loss from 1% of the fault. Limited form covers only your proportionate share. Intermediate is the most common clause handed to subs.
Partly. The CGL excludes assumed contractual liability, then gives it back for an "insured contract." That reaches bodily injury and property damage to third parties, within your limits — not economic loss, delay damages, liquidated damages, or anything above your limits.
Georgia, South Carolina, North Carolina, and Tennessee each void, in whole or in part, indemnity for a party's own (especially sole) negligence in construction contracts. Florida instead requires a stated monetary limitation bearing a reasonable commercial relationship to the contract. Details vary — confirm with construction counsel.
Three promises. Indemnify = reimburse a loss. Hold harmless = absorb it so it never reaches them. Defend = pay their legal fees, triggered by an allegation rather than a finding — which is why it's usually the most expensive of the three.
Indemnity creates the obligation. Additional insured status puts the upstream party on your policy so they tender to your carrier. Waiver of subrogation stops your carrier from suing them afterward. You need all three; any one alone leaves a gap.
The trigger language, whose negligence is covered, whether the defense duty is separate and capped, which damage categories are included, whether the insurance article matches what the indemnity promises, and whether there's any cap at all. Send it to your agent at redline, not after a claim.
For general information only. Not a quote, contract of insurance, or legal advice. Statutory descriptions are simplified summaries current as of 2026; anti-indemnity statutes are amended over time and are interpreted differently by courts across jurisdictions — consult qualified construction counsel regarding any specific contract. Insurance coverage for assumed contractual liability depends on the exact policy form, endorsements, exclusions, and limits in force. Coverage subject to policy terms and carrier appetite.