Indemnity clauses can require an engineer to compensate another party for certain losses arising from the project.
The concern is that some indemnity clauses can make the engineer responsible for more than their normal professional liability.
Insurers may pay particular attention to wording that:
- applies regardless of fault
- includes another party’s negligence
- extends to indirect or consequential losses
- has no financial cap
- continues for a long period after completion
- applies to matters outside the engineer’s normal scope
Professional Indemnity Insurance does not automatically cover every contractual indemnity.
An engineer can therefore have a valid contractual obligation that is broader than the cover available under their PI policy.
Where an indemnity is broad or unusual, legal review may be appropriate before the contract is signed.
Consult Australia also provides industry guidance on managing contractual risk, including indemnities and their interaction with Professional Indemnity Insurance, through its Centre for Contracting & Risk.
