Effective August 1, 2013, a new Minnesota law will go into effect that forbids general contractors from forcing subcontractors/suppliers to include insurance coverage to cover the negligence or intentional acts or omissions of others on a project. Currently, many subcontract agreements include requirements that force subcontractors/suppliers to purchase extra insurance coverage to cover the negligence and intentional acts of others, relieving the general contractor of liability and passing that liability to the subcontractors/suppliers.
Best practice has dictated that subcontractors/suppliers attempt to negotiate such a deep pocket risk away. Unfortunately, the competitive balance between general contractors and subcontractors often makes it difficult for subcontractors to negotiate out a broad-form indemnification. When reviewing contracts between today and August 1, negotiate out any broad-form indemnification clause on the grounds that effective August 1, 2013, the practice is unlawful in Minnesota. When reviewing new contracts after August 1, 2013, look closely at the insurance requirements to assure the contract does not include broad-form indemnification or similar clauses.
Broad-form indemnification is just one of the deep pocket risks of concern to a subcontractor/supplier in a construction contract. Contact a WFJ attorney for strategies on avoiding broad-form indemnification and other deep pocket risks that are present in most construction contracts.
For your information, here is a link to the MN Statute that takes effect August 1, 2013.