When you sign a contract with a client or property owner in Central New York, you're likely to encounter clauses about indemnification and waiver of subrogation. These aren't just legal formalities—they transfer liability and affect how your insurance responds after a loss.
Many business owners don't realize these clauses can leave them financially exposed if their insurance policy doesn't accommodate them. The worry isn't just about the liability itself (though that's significant)—it's about signing an agreement that your insurance won't honor, leaving you responsible for costs you thought would be covered.
At Horan insurance agency, we work with multiple carriers across Central New York, giving us insight into how different policies handle these contract requirements.
This article examines what these clauses do, how they interact with your coverage, and what questions to ask before you sign.
How Indemnification Clauses Shift Liability in Your Contracts
An indemnification clause transfers liability from one party to another. When you agree to indemnify a client, you're accepting responsibility for certain claims or damages—even those caused by the client's own negligence, depending on how the clause reads.
New York recognizes three types of indemnification agreements.
- Limited form indemnification holds you responsible only for damages caused by your negligence.
- Intermediate form adds shared negligence situations where both parties contributed to the loss.
- Broad form indemnification—the most expansive type—makes you liable even for damages caused solely by the other party's negligence.
Here's a Central New York scenario: A Syracuse roofing contractor signs a broad form indemnification agreement with a commercial property owner. During repairs, the building owner's employee walks into a work area despite posted warnings and gets injured.
Even though the contractor followed safety protocols and the injury stemmed from the employee's actions, the broad form clause makes the contractor responsible for defense costs and any settlement.
New York General Obligations Law Section 5-322.1 prohibits certain indemnification provisions in construction contracts, but many contracts still include broad language that pushes the legal limits. Understanding what you're signing matters because your general liability policy may have restrictions on which types of indemnification it will cover.
A licensed attorney can review indemnification language and explain what liability exposure each type creates for your specific situation.
The Connection Between Indemnification and Additional Insured Status
When a contract requires you to indemnify someone, it often requires you to add them as an additional insured on your policy. This isn't redundant—each serves a different purpose.
The indemnification clause creates your contractual obligation to defend and cover the other party. Additional insured status gives them direct access to your insurance policy's defense and coverage provisions. If they face a lawsuit related to your work, they can make a claim under your policy without first suing you.
Consider a Camillus landscaping company working on a commercial property. The contract requires indemnification and additional insured status for the property owner. A visitor trips on equipment the landscaping company left out and sues both the property owner and the landscaping company.
Because the owner has additional insured status, the landscaper's insurance defends both parties under one policy—streamlining the claims process and avoiding conflicts between separate insurers.
What Waiver of Subrogation Means for Your Insurance Claims
Waiver of subrogation clauses prevent your insurance carrier from seeking reimbursement from other responsible parties after paying your claim. Normally, if your insurer pays for damage another party caused, they can pursue that party to recover what they paid (this process is called subrogation). A waiver eliminates this right.
This matters because it increases your insurer's risk—they can't recover funds from negligent third parties. Some policies exclude coverage for damages when you've waived subrogation rights, or they require you to arrange the waiver with the insurer before you sign the contract.
Here's how this plays out: An Onondaga County electrical contractor works alongside a plumbing company on a Fayetteville office building renovation. The plumbing company's employee accidentally floods the electrical contractor's tools and materials. The electrical contractor's commercial property policy covers the loss, but the contract with the general contractor includes a mutual waiver of subrogation among all trades.
Without this clause, the electrical contractor's insurer could pursue the plumbing company (and their insurer) to recover the paid claim. The waiver of subrogation prevents this—even though the plumbing company caused the damage, the electrical contractor's carrier absorbs the entire loss. If the policy didn't accommodate this waiver, the electrical contractor might face a coverage denial.
Blanket Waivers Versus Certificate-by-Certificate Endorsements
Your insurance policy can handle waiver of subrogation in two ways. A blanket waiver of subrogation endorsement covers all contracts you enter where such a waiver is required—you don't need to notify your insurer each time.
A per-contract endorsement requires you to request coverage for each specific agreement, often by having your agent issue an endorsement or certificate before you sign.
Blanket waivers offer convenience for contractors and service providers who regularly sign contracts with these clauses. A Liverpool HVAC company that works with multiple property management firms throughout Onondaga County benefits from a blanket waiver because they don't need to coordinate with their insurance agent before accepting each new job.
Per-contract endorsements give insurers more control and may result in lower premiums, but they create administrative burden. You must remember to request the endorsement and wait for confirmation before signing the contract—failure to do so could void coverage for that specific job.
Verifying Your Policy Accommodates These Contract Requirements
Before you sign any contract with indemnification or waiver of subrogation clauses, you need answers to specific questions:
- Does your general liability policy include automatic additional insured coverage for contracts, and does it provide primary and non-contributory coverage?
- Does your policy allow for waivers of subrogation, and if so, is it blanket or per-certificate?
- What are the dollar limits on your coverage, and do they align with what the contract requires?
- Are there any exclusions in your policy that would limit coverage when these contractual provisions are in effect?
Many contractors in Central New York discover gaps in coverage only after they've signed agreements. A DeWitt building contractor might assume their standard general liability policy handles all contract requirements, but find out (after a claim) that their policy excludes coverage for certain indemnification obligations or doesn't extend additional insured status to subcontractors' clients.
The time to verify coverage is before you sign—not after something goes wrong.
Consider having an attorney review contracts that include complex indemnification or waiver provisions before you sign, particularly when the dollar amounts or scope of work are substantial.
When to Request Changes to Contract Language
Not every indemnification or waiver of subrogation clause works with your insurance coverage. When contract language exceeds what your policy provides, you have options:
Request modifications to the contract. Ask the other party to narrow broad form indemnification to intermediate or limited form. Propose mutual waivers of subrogation rather than one-sided provisions.
Obtain different insurance coverage. Some carriers offer broader contractual liability coverage or more flexible waiver provisions. Working with an independent agency gives you access to multiple options.
Negotiate the contract terms. You might propose alternative risk transfer methods, such as project-specific insurance policies or split-limit arrangements.
A Manlius general contractor recently reviewed a contract requiring them to indemnify a client for any claims arising from the project—regardless of fault—and waive all subrogation rights. Their insurer noted the broad form language exceeded policy limits for contractual liability.
Rather than walking away from the job, the contractor negotiated revised language limiting indemnification to their proportionate share of negligence, which aligned with their coverage.
Work with a licensed attorney when negotiating contract modifications—they can propose alternative language that balances the other party's concerns with your liability limits.
Coordinating With Your Insurance Agent Before Signing Contracts
The most reliable approach: review contract requirements with your agent before you agree to them. Your agent can:
- Confirm whether your current policy accommodates the specific indemnification and waiver provisions
- Issue certificates of insurance that accurately reflect your coverage (and don't promise coverage you don't have)
- Arrange for endorsements when your policy requires per-contract approval
- Recommend coverage modifications if gaps exist
This coordination prevents two common problems. First, it keeps you from signing contracts your insurance won't honor. Second, it ensures certificates of insurance your agent issues match your actual coverage—preventing situations where a certificate promises additional insured status or waiver of subrogation that your policy doesn't provide.
Understanding How These Clauses Affect Your Financial Exposure
When you sign a contract with indemnification and waiver of subrogation provisions, you're accepting both immediate and long-term financial exposure. The immediate risk: you might face defense costs and settlements for claims that wouldn't otherwise be your responsibility. The long-term impact: these claims can affect your insurance rates and claims history even when your policy covers them.
A Clay manufacturing company accepted broad form indemnification in a supply agreement. When the client faced a product liability lawsuit that involved (but wasn't caused by) the supplier's component, the indemnification clause required the supplier to cover defense costs exceeding $200,000. Their policy covered these costs, but the claim appeared on their loss runs, contributing to a 25% premium increase at renewal.
The financial exposure extends beyond the policy period too. Large claims can make it difficult to obtain coverage from other carriers or may result in exclusions for similar exposures going forward.
Getting Coverage That Aligns With Your Contractual Obligations
You require insurance that works with how you actually do business. If your contracts regularly include indemnification and waiver of subrogation clauses, your policy should accommodate these provisions without gaps or excessive restrictions.
We'll work to identify coverage that provides the contractual liability coverage and waiver flexibility your business requires. Because we're an independent agency working with multiple carriers in Central New York, we can compare how different policies handle these provisions and help you understand trade-offs in coverage, cost, and flexibility.
Click the Get a Quote button below to review your current coverage and verify it aligns with the contracts you're signing, or contact us to discuss specific contract provisions before you commit to an agreement that might exceed your policy's scope.
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