You are frequently required to sign a contract presented by a general contractor, property manager or large customer requiring you to indemnify them. It’s a one-way indemnity and the question is whether a mutual indemnity would rectify things or, at least, make the issue less risky.
The mutual indemnity language reads something like this:
“Notwithstanding the foregoing, it is expressly agreed between CONTRACTOR and SUBCONTRACTOR that Indemnification and Hold Harmless paragraphs, in their entirety, shall be fully reciprocal and binding both parties equally.”
This solution is not what I’d recommend; in fact, I avoid mutual indemnity whenever possible as I will elaborate below.
Why Don’t Alarm Companies Offer Indemnity?
Let’s start with a brief background. For many reasons, alarm companies do not indemnify their customers; it’s just that simple.
In fact, such indemnity would be antithetical to the rest of the Standard Form Agreement protective provisions because not only are you not indemnifying but you are also contracting away liability for all and any damages or loss caused by others, or even if caused by your negligence.
Therefore, offering indemnity would not only negate the protective provisions but also expand the risk and liability beyond the customer to claims by third parties if they sought relief from the customer.
I have been practicing law for a long time and I confess that I do not see how mutual indemnity actually works — at least not in the practical world. It seems to me that it completely vitiates indemnity.
In mutual indemnity, each party would agree to indemnify for their contribution to the loss. Easier said than done for a couple of reasons. Many times, if not most of the time, it’s not clear which party, or to what degree a party, contributed to a loss.
More problematic is that a determination of fault or degree would require a finding by a judge after trial. Since most cases are resolved prior to trial, and even fewer make it through to the end of the trial to a decision or verdict, the resolution on indemnity will not be reached. The mutual indemnity will not play a part in the resolution of the case.
If any of you weekend lawyers have a different take on mutual indemnity, please enlighten me. Even better, have your high-priced lawyers explain it to you or to all of us.
Practicality, Not Inflexibility
When negotiating general contractor or vendor agreements, we need to be practical and not have an inflexible position. Some jobs are more valuable and important than others are, which means that accommodations often must be made.
This generally means that you need to be willing to take on a bit more risk to get the work. But you still have to be mindful that you are not willing to — and should not be willing to — “risk the farm” for one job or opportunity.
That is especially so when skilled legal negotiation can soften or modify the GC and vendor agreements when it comes to indemnity and a few other provisions.
Generally, you will find that, when it comes to installation, we can be more accommodating and agree to most of the GC and vendor agreement terms. Holding alarm companies to the same risk standards as other contractors coming onto a property to perform their services seems fair to me.
However, you must be vigilant when contracting for the after-install services. You must not significantly increase your risk when it comes to the after-install services and this is the case for a couple of reasons:
- Those to whom you subcontract the service will not appreciate the increase in risk and exposure. Your once-in-a-lifetime job or connection is still just one more account to them—and rightly so.
- Most of the risk comes and most of the claims arise from after-install services, such as monitoring. Typically, the loss comes after the system is finished and there has been service or monitoring in place.
