One of your clients has probably proposed contract language that requires you to “defend, indemnify, and hold harmless” the project owner for specific (or not so specific) types of claims that might arise in the future. This language hopefully caught your attention raised some concern. But what do these words actually mean and why should you object?
Starting at the beginning, a “duty to defend” is well defined through cases involving insurance contracts. The idea is that when a specific category of claims is asserted against one contracting party, the other party will step in to “defend” those claims. For example, an insurance policy is a contract. When you notify your insurance carrier of a claim asserted against you that is covered by your policy, the insurer will step in to help you hire a lawyer (and most importantly, pay the legal fees).
If you agree to similar language in your design contract, then you are agreeing to hire the project owner’s lawyer to defend a lawsuit filed against the project owner. You must be careful to distinguish between duties to defend within your insurance policy and duties to defend within your own contracts for professional services. If you agree to defend your client, then that defense cost will likely be coming out of your own pocket. Your insurance policy requires the insurer to defend you, but not necessarily your client.
So, what claims must the contracting party defend? The answer lies in the scope of what that party has agreed to “indemnify,” meaning the loss that the party has agreed to reimburse. For example, if you are an A/E and your client alleges errors and omissions in your professional services, then your professional liability insurer will defend your claim. The insurer has already agreed to “indemnify” a judgment arising from errors and omissions in your professional services, so they will also defend such a claim.
As with the duty to defend, you must be thoughtful about what you are agreeing to indemnify for the project owner. If you are not careful, you might find yourself on the hook even if everyone agrees you performed your services properly.
This leaves the term “hold harmless,” which would probably be interpreted to mean the same thing as “indemnify.” For example, Black’s law dictionary defines both “hold harmless” and “indemnify” by cross-referencing the other term. This is an example of a legal “couplet” of words that have historically been stated together, such as “cease and desist” or “aid and abet.”
This is just one example of why it is important to discuss contracts for professional services with a lawyer before signing. You do not want to unknowingly agree to terms that risk taking money out of your own pocket.
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