Simplicity, not a word always associated with contract law. Contracts in the building industry, however, need conceptual simplicity in order to function as a collaborative agreement rather than a cruel and counterproductive game of “gotcha!”.
The insurance clause, indemnity clause, hold harmless, or any other risk transferring device best serves the project when certain rules apply. Too often, individual firms place onerous demands on subcontractors which do not reflect the relative control over risks associated with the jobsite.
RULE #1: The contractor most actively in control of the peril needs to be in control of the peril. Responsibility equals authority works on jobsites in truly collaborative projects.
For example, crane operators need to control their working area setting rules for entry and exit from the workspace, what and when lifts occur, and any mobilization issues.
Hold harmless agreements can lead to catastrophic losses when a non-professional is assigned site control responsibilities.
RULE#2: Limits of Liability must be reasonable and affordable. Contract demands of ten million dollar excess policies for a contractor installing a fifty square foot tile floor is ludicrous and more costly than their expected fee.
Two results can occur: the contract for that service will be very expensive or a different contractor will expose their liability insurance by hiring that subcontractor. Artisans are becoming harder to attract because unforgiving or intransigent generals hold the line on liability limits.
Think collaboration when designing your contract forms. Is the clause meant to reflect the degree of service versus risk control or is it a means to yell “GOTCHA!” at some point in the future.
The best way to move the job to completion involves risk control at the controllable point. The contractor closest to the hazards, the contractor in position to create the largest liability, maybe the contractor who creates a jobsite choke point should have the ability to smoothly finish their work without hourly territorial argument. Think collaboratively and balance responsibility and authority.
