Indemnity

An indemnity is a promise to make good another party's loss - and subcontract indemnities are routinely drafted wider than your fault, your insurance, and your ability to pay.

The width comes from three drafting choices: triggering on loss "arising out of or in connection with" the works rather than caused by your breach; extending to consequential loss; and omitting proportionality (reduction to the extent someone else caused the loss). Uninsured indemnity exposure is a bet-the-company clause hiding in boilerplate.

Why it matters to subbies

Ask for the indemnity to be proportionate, capped, confined to direct loss, and within what your insurance actually covers - then have your broker read it, because an indemnity your policy excludes is yours alone.

General information for Australian subcontractors, not legal advice - contract drafting and state legislation vary and change; your document and your state's Act govern. Written by Mat Kennedy at The Construction Contracts Co.