IREON Insights: The hidden dangers of broad indemnification clauses - a dual perspective from legal counsel and insurance professionals

 

 

Part one of two appeared in the February 24, 2026 issue of the NYREJ.

Recap:
In part one, legal counsel examined how overly broad indemnification clauses can expose contractors and subcontractors to sweeping liabilities — including contractual disputes that fall outside traditional insurance coverage. Part two continues the discussion from the insurance broker’s perspective, focusing on how contract language, insurance policies, and risk transfer must align to avoid costly coverage gaps.

As an insurance broker specializing in contracting and development insurance, we are regularly asked to review contracts, indemnifications, and insurance requirements. As our colleagues at Zisholtz & Zisholtz correctly stated, it all starts with a contract and what is contained in that contract that spells out who transfers risk to whom.

It is a common — and costly — mistake to assume that a certificate of insurance naming an owner or general contractor as additional insured automatically conveys coverage and risk transfer. The certificate is worthless absent a written agreement that explicitly requires insurance, specifies limits, and mandates additional insured status, waiver of subrogation, and primary and non-contributory wording.

The first thing an insurance company adjuster will request when a claim is filed is a written contract. They will verify that the correct entity appears on both the policy and in the contract. They will confirm that the scope of work described in the policy matches the actual work being performed and determine whether the contract contains the required insurance, indemnification, and additional insured language.

Conclusion
The intersection of contract law and insurance coverage creates a complex risk landscape for contractors and subcontractors. Broad indemnification clauses can impose unexpected liabilities that far exceed the scope of work or available insurance protection.

To adequately protect your business:

• Never sign a contract without legal review of the indemnification provisions

• Ensure your insurance broker reviews contracts alongside your attorney

• Verify that your insurance policy accurately reflects your scope of work

• Confirm that contractual insurance requirements align with your actual coverage

By coordinating legal and insurance expertise before breaking ground, contractors can avoid the devastating consequences of inadequate protection and ensure they are not unwittingly assuming risks far beyond their original bargain.

Stuart Zisholtz, Esq. is a partner in the commercial & construction litigation practice; Richard Zisholtz, Esq. is a partner in the commercial & construction litigation practice with Zisholtz & Zisholtz, LLP, Garden City, N.Y.; and Jeffrey Rubin is an executive vice president with HUB Healthcare & Client Advisory, Manhattan, N.Y.