What is a Hold Harmless Agreement and Why Do You Need One?

As a general contractor, you are hired to get the job done right, on time and on budget. Yet, from the moment you accept the job until well after completion, you are exposing yourself to significant risk, both from the work done by your employees and the work done by your subcontractors. By using a properly executed hold harmless agreement with insurance requirements between you and your subcontractors, the subcontractors and their insurance companies will have agreed to accept your liability for the work the subcontractor did on the job site.

What is a hold harmless agreement?

Simply put, a hold harmless agreement is a contract between you and your subcontractors that states that they are responsible for the cost of bodily injury or property damage that arises out of their ongoing and completed operations. Not only that, a well-constructed hold harmless agreement will require the subcontractor’s insurance policy to recognize you as an additional insured for ongoing and completed operations should a lawsuit be filed naming you as a responsible party.

Why do you need one?

Let’s take a look at some common scenarios where hold harmless agreements came into play.

  1. A new homeowner notices a leak in her lower-level ceiling and after an inspection, it is discovered that the flooring installer put a nail through the radiant floor heating pipe. The homeowner sues the general contractor for the cost of the repairs. A signed hold harmless agreement between the GC and the sub will require the responsible subcontractor to cover the damages from his or her company’s work.
  2. A roofer falls off a ladder and suffers injuries that not only cause hospitalization, but they also prevent him from returning to work. The hold harmless agreement should require the subcontractor to provide the GC with proof of a valid worker’s compensation policy. It should also require the sub to carry general liability, business auto, and umbrella policies, etc.
  3. If that injured roofer decides to sue the GC for negligence in failing to provide a safe workplace, the hold harmless and indemnification wording in the subcontractor agreement can transfer the liability from the GC back to the subcontractor’s general liability insurance.

A hold harmless agreement not only protects the general contractor from its subcontractors’ negligence, but it also helps subcontractors ensure they have a minimum standard of liability limits should a claim arise. The proper hold harmless agreement will spell out exactly what type of insurance is required and minimum limits, thereby reducing the GC’s exposure in case of a loss.

At Mason & Mason, we have found that one consistent point about hold harmless agreements: each one is different. We encourage our clients to consult an attorney before constructing or signing a hold harmless agreement to make sure the agreement will both hold up in the court of law and to make sure the agreement is fair to both parties.