Masonry Magazine January 1967 Page. 51
Purchase Order Agreements
Very few of us take time to read the fine print on the bottom or reverse side of routine purchase orders, where it is not unusual to encounter something to the effect that: "Seller agrees that seller shall be responsible for any injuries to persons (including death) and damages to property, including buyer's employees and buyer's property, that occur in the performance of this purchase order, and that seller shall save harmless and indemnify buyer from and against any liability or costs arising from such injuries and/or damages."
In the absence of Specific or Blanket Contractual Liability Insurance via endorsement, no coverage is provided by the standard policy.
Since there is nothing uniform about Indemnifying or Hold-Harmless Clauses, they are difficult to classify. To decide how much premium is required, insurance companies generally group them into one of the following categories:
Limited Form Indemnification- Contractor's Negligence
A limited form holds someone harmless against claims due to your operations, your negligence, or that of your subcontractors. For example: "The Contractor agrees to indemnify and save harmless the Owner, Architect and Engineer, their agents and employees, from and against all loss or expense (including costs and attorneys' fees) by reason of liability imposed by law upon the Owner, Architect, or Engineer for damages because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons or on account of damage to property, including loss of use thereof, arising out of or in consequence of the performance of this work, provided such injury to persons or damage to property is due or claimed to be due to negligence of the Contractor, his Subcontractors, employees or agents."
This is not giving them much; you were already responsible for your own negligent acts or omissions, as well as those of your subcontractors. Essentially, a limited form contract agrees to defend others if they are sued or incur expense because of something you did or should have done. If both you and you subcontractors are adequately insured, this means payment of legal fees.
Intermediate Form Indemnification- Joint Negligence
An intermediate form adds agreement to defend and pay where both parties to the contract may be negligent and therefore legally liable for a loss. For example: "The Contractor agrees to indemnify and save harmless the Owner, Architect and Engineer, their agents or employees, from and against all loss or expense (including costs and attorneys fees) by reason of liability imposed by law upon the Owner, Architect or Engineer for damages because of bodily injury, including death at any time resulting therefrom sustained by any person or persons or on account of damage to property, including loss of use thereof, arising of or in consequence of the performance of this work, whether such injuries to persons or damage to property is due or claimed to be due to the negligence of the Contractor, his Subcontractors, the Owner, Architect or Engineer, their agents and employees, except only such injury or damage as shall have been occasioned by the sole negligence of the Owner, Architect or Engineer."
Here, instead of splitting the bill for jointly caused injury or damage, you agree to waive the theory of contributory negligence and pay as if only you were responsible.
Broad Form Indemnification- Sole Negligence of Indemnitee
A broad form indemnifies the other party even where he is solely responsible for a loss. For example: "The Contractor agrees to indemnify and save harmless the Owner, Architect and Engineer, their agents and employees, from and against all loss or expense (including costs and attorneys' fees) by reason of liability imposed by law upon the Owner, Architect or Engineer for damages because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons or on account of damage to property, including loss of use thereof, whether caused by or contributed to by said Owner, Architect or Engineer, their agents, employees or others."
The ultimate, you agree here to pick up the bill for everything, including injury or damage in no way caused or contributed to by your employees or subcontractors. Some courts frown upon this legal passing the buck, but the agreements still stand.
Broad form contracts are not rare. They crop up every day, agreeing in any number of ways to defend everybody against everything, with the shortest, most innocent looking clause often being the most dangerous.
Certain clauses which make no reference to negligence at all have been interpreted in the same manner as one which spells out its intent to include sole negligence of the indemnitee, and most companies base their premiums accordingly.
Insertion of the phrase, "except that caused by sole negligence of the indemnitee" at the proper place in a contract before accepting it for signature may cut your specific contractual premium-and your exposure to loss-approximately in half. However, it is most important to keep in mind, even where coverage does exist either on a blanket basis or by specific endorsement, that it is still another's liability which is assumed. If there is a loss, it will be charged against your claim experience record, and it is not at all unusual to be charged for the same loss twice.
Example
A contractor, working under specifications which included a broad Hold-Harmless Agreement, learned that one of his employees was accidentally killed on the job solely because of the owner's negligence. The deceased's dependents first collected Workmen's Compensation benefits from his employer, then filed suit against the owner, whose Liability Insurance company defended the suit and settled with the estate. That company then secured a judgment for the full amount against the contractor because of his agreement to hold the owner harmless.
Let's consider the effect of this classic case for a moment. Many states do not ordinarily permit an in-