Many indemnity clauses require one party to “indemnify, defend, and hold the other party harmless.” Are these magic words? To some extent, yes.
Most contracting parties assume that if the other party is at fault in causing damages or injury to a third person, then the at-fault party will not only pay any loss (indemnify) but will also pay an attorney to defend any claim or lawsuit. However, if the contract does not include an obligation to “defend”, there may be no requirement to provide an attorney or experts. If you intend for the at-fault party to provide an attorney to defend a claim, make sure that the indemnity clause includes the word “defend” in the list of requirements. If, on the other hand, you are being asked to provide indemnity and the clause is not favorable to you after negotiation (like you are agreeing to indemnify the other side for your breach of contract!), you might want to leave the word “defend” out. The costs of defending a claim can often be more daunting than the actual claim itself.
There are other large litigation costs to consider including in your indemnity provisions. For example, expert costs can be quite expensive. You should also consider other court costs and expenses – a single deposition transcript can easily exceed $500.00. Construction cases often involve extensive destructive testing to determine the cause of a failure (or to prove that no defect exists).
You might include something like this:
“Contractor will indemnify, defend and hold Owner harmless from and against any and all claims asserted by any third-party arising from or relating to a negligent act, error, or omission in performing its Work pursuant to this Agreement. Contractor’s indemnity obligation shall include all costs in defending such claims, including, but not limited to, attorney’s fees, court costs, cost of expert witnesses, and testing.”