Indemnification provisions and hold harmless agreements are critical. They are designed to shift responsibility back to the contractor if their work causes injury or damage. For example, these agreements typically require the contractor to “defend, indemnify, and hold harmless” the property owner and manager if they are named in a lawsuit.
That sounds straightforward, but in practice, it is anything but. Even the best contracts exist alongside another reality: you are still getting sued. And when a summons comes in, your exposure is immediate, regardless of what the contract says.
In New York especially, Labor Law makes this issue even more serious. Property owners (and often managers) can be held liable for job site injuries, even if they did nothing wrong.
That means:
- You can be named in a lawsuit simply because the work happened on your property
- Liability can attach regardless of fault
- The claim will proceed against you unless and until another party formally takes over your defense
In other words, you don’t get to sit on the sidelines and wait for the contractor’s carrier to step in.
A very common misconception is this: “We have indemnification and additional insured status, so the contractor’s insurance will just handle it.” Unfortunately, that’s not how it works. When you tender a claim to a contractor’s carrier, several things happen:
- The Carrier Reviews the Contract – Coverage is often contingent on a written contract requiring indemnification or additional insured status. If anything is missing, unclear, or improperly executed, the carrier may deny the tender outright.
- The Carrier Examines the Policy Language – Even when a contract exists, carriers will look for contractual liability exclusions, classification issues (was the contractor doing the work they were insured for?), endorsement limitations, and timing issues (policy in force at time of loss). If anything is off, even slightly, you can expect pushback.
- They Investigate the Facts of the Claim – The carrier will evaluate who caused the injury, whether the claim “arises out of” the contractor’s work, and whether the facts actually trigger additional insured coverage. This process takes time.
- They May Deny or Delay – Even in strong cases, it is not uncommon for carriers to delay accepting a tender or issue a denial initially. Sometimes, they will only agree to defend under a reservation of rights. Other times, they will refuse entirely.
While all of that is happening, you’ve been served with a summons, and legal deadlines are running. A response must be filed, and defense counsel needs to be appointed. If you do not report the claim to your own carrier promptly, you risk late notice issues, a denial of coverage from your own employer, and having to fund your defense out of pocket. And even if the contractor’s carrier eventually accepts the claim, you may already have incurred significant legal expenses.
Defense costs alone can be significant. This is a key point that’s often overlooked. Even if the contractor is ultimately responsible, someone has to pay to defend you until that determination is made. That includes:
- Hiring defense counsel
- Drafting answers and motions
- Handling initial discovery
- Attending court appearances
In New York Labor Law cases, especially, defense costs can escalate quickly.
Indemnification agreements are powerful, but not bulletproof. To be clear: indemnification agreements and risk transfer are absolutely essential. They are one of the most important protections you have. But they are not perfect, and they are often challenged. And sometimes, even when everything is done correctly, carriers still fight it. Issues that can derail a tender include:
- Improperly executed contracts
- Missing or vague language
- Work falling outside the contract scope
- Conflicts with insurance policy terms
- Public policy limitations under NY law
The safest and most professional approach is simple: If you receive a summons, report it immediately to your own carrier, every time. This ensures that your defense is protected from day one, you meet policy notice requirements, your carrier can assist in tendering to the contractor’s insurer, and you avoid gaps during the investigation process
Think of your carrier as your “first line of defense,” even if another party ultimately takes responsibility. Indemnification agreements are designed to shift liability, but they do not automatically transfer defense on day one. Until a contractor’s carrier formally accepts the tender, you are still in the lawsuit. You still need a defense, and you still have exposure.
Reporting the claim promptly is not just a technical requirement; it’s a critical risk management decision. Reach out to us with questions anytime.
