Common use of Contractual Indemnification Clause in Contracts

Contractual Indemnification. An indemnification agreement is essentially a contract under which one party (the indemnitor) agrees to assume the tort liability of another (the indemnitee) in connection with the claims of third parties stemming from the work performed on a particular project, from the services provided pursuant to a contract, from the indemnitor’s occupancy or use of particular property, etc. Such agreements generally provide not only for indemnification with respect to any damages owed by the indemnitee, but for its defense costs as well. There is Pennsylvania authority indicating that such agreements, although typically in writing, may be oral, need not be signed if they are written, and may even be found to exist based solely upon a course of prior dealings between the parties. For example, in Westinghouse Electric Company ▇. ▇▇▇▇▇▇, Inc., 228 A.2d 656 (Pa. 1967), it was held that a contractor which proceeded with a project without a signed contract and based only upon an unsigned “purchase order” might conceivably be obligated to indemnify the party which hired him based upon evidence relating to the past conduct and course of dealings between the parties, where indemnification clauses had appeared in their previous contracts. Generally speaking, indemnification agreements are enforceable in Pennsylvania. Although Pennsylvania has what is known as an anti-indemnification statute, it is very limited in its scope. The statute only invalidates agreements entered into by owners, contractors or suppliers under which architects, engineers, or surveyors are indemnified for damages or defense costs arising out of (1) their preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs or specifications, or (2) the giving or failing to give instructions or directions, provided that failure or giving of directions or instructions is the “primary cause” of the damage. 68 P.S. §491. Unlike some jurisdictions, there is no statutory prohibition with respect to indemnification agreements in connection with construction projects in general. Although considered contrary to public policy in some states, there is also no general prohibition against indemnification agreements calling for a party to be indemnified for its own acts of negligence under Pennsylvania law.