Before You Break Ground: The Four Contract Clauses That Could Use a Second Look

When it’s time to expand, remodel, or repair your facility, the excitement of progress can overshadow the fine print. But before the first shovel hits the dirt, there’s one critical step that could protect your business from financial and legal disaster: reviewing your construction contracts. 

The Hidden Risk in Construction and Expansion Projects 

Construction projects often involve a flurry of activity—general contractors, subcontractors, electricians, and millwrights—all working on your site. Some may operate under formal contracts, while others might be there based on informal, handshake agreements due to personal, local, or industry connections. Even if you're not overseeing their daily tasks, you're still responsible for what happens on your property. And when something goes wrong, the consequences can be severe. 

Imagine this: a subcontractor falls from a leg tower during construction. One worker is killed, another critically injured. Emergency services respond, and soon after, OSHA, insurance adjusters, and possibly attorneys are calling. In the aftermath, you discover your contract lacks the legal protections that could shield your company from liability. 

Unfortunately, this isn’t a hypothetical scenario. Liability losses related to third party invitees like contractors have become one of the more common premise liability losses, driving claims severity and ultimately premiums. We've found that many construction contracts are reviewed only after an incident has occurred. In numerous cases, these agreements contain little more than a quote for labor and materials—missing the critical legal language needed to protect the facility owner. 

Contracts: More Than Just a Quote and the Fine Print That Protects You 

In our industry, construction agreements are often approached with a handshake-style mindset rooted in tradition and relationships. However, a well-drafted contract should clearly define each party’s responsibilities, specify insurance requirements, and include indemnification clauses to protect your company from legal risks.

Four Key Clauses Every Construction Contract Should Include:

1. Indemnification and Hold Harmless Language 
   The intent of this sample clause is to ensure that the contractor assumes responsibility for injuries or damages resulting from their work.
   “To the fullest extent of the law, the contractor shall indemnify, defend, and hold harmless [Your Company], its officers, agents, and employees from any claims, actions, liability, or costs, including attorneys' fees, arising out of or relating to the work performed.”


2. Insurance Requirements 
   Contracts should specify minimum coverage limits for general liability and workers’ compensation—for both the general contractor and all subcontractors. These limits should reflect the scale and risk of the project. For example, a $1 million liability policy may be insufficient for work inside a $25 million facility.


3. Contractor Safety Training and Documentation
   Require all contractors to complete your site-specific safety training and sign off on their understanding. This not only reinforces safety expectations but also provides documentation that can be critical in the event of an incident. 


4. Addendums for Missing Language 
   If a contractor’s standard agreement lacks key clauses, attach an addendum that includes indemnification and insurance requirements. Don’t assume these protections are implied—they must be explicit. 

What We’ve Seen in the Field

We’ve seen contracts from businesses like yours, and only a handful of them include robust legal protections. Many do not. When they do not, you need to consider adding an addendum that covers requirements for general and all subcontractors and an indemnification/hold harmless agreement.

We’ve seen companies face lawsuits from injured workers’ families, only to realize their contracts didn’t include hold harmless clauses. We’ve seen insurance claims denied or delayed because subcontractors lacked adequate coverage. These are preventable outcomes.

A Quick Contract Readiness Checklist

Before any work begins, ask yourself:

• Does the contract include indemnification and hold harmless language? Can an addendum be added to cover these items?


• Are insurance requirements clearly stated for all parties involved?


• Have you verified that coverage limits are appropriate for the project’s scale?


• Is there a process for contractor safety training and documentation?


• Have legal counsel and your insurance agent reviewed the agreement?

If you answered “no” to any of these, it’s time to revisit the contract. In nearly every case where an incident occurred, the absence of proper contract language can complicate the response—both legally and financially.