Indemnities: The Bane of Design Firms
Indemnity clauses in design firm agreements can be deal breakers. Design firms are consistently advised to only agree to indemnities that are insurable. Their insurance agents, professional liability insurance carriers, lawyers, and risk management advisors all emphasize the same message: “don’t agree to an uninsurable indemnity agreement”. By doing so, they fulfill their obligation to their design firm clients, highlighting the uninsurable risks involved and often suggesting insurable alternative language. However, many clients of design firms may not be interested in this insurable language, as they have their own risk advisers who emphasize the importance of protecting that client’s interests, even if that means insisting on an indemnity clause that is not insurable under design firms’ insurance program. Client representatives must navigate their responsibilities to their bosses and owners, and they could potentially face repercussions if they agree to an indemnity that is not “tough enough”.