What is an Anti-Indemnity Statute?

An anti-indemnity statute is a legal agreement in construction contracts that states the degree of liability that can be transferred between the parties involved in the contract, such as a contractor and subcontractor. An anti-indemnity statute offers protection to a subcontractor against risks and liabilities that might take from the contractor. According to this statute, there is a limit to the risk of liability that one party can transfer to another in a contract.

How is an Anti-Indemnity Statute Used?

An anti-indemnity statute is often used in construction contracts, the insurance industry and in the financial context. This statute regulates the transfer of risk between parties in a contract. In the construction industry, the anti-indemnity statute came as a response to imbalances that occur between contractors and subcontractors in terms of who takes the higher risk. In the absence of this statute, subcontractors incur significant liabilities even when they weren’t the cause of the problem or liability. For instance, without the anti-indemnity statute, a contractor may transfer liabilities to subcontractors even when the damages were a result of negligence or incompetence of the contractor. In the insurance industry, risks are transferred to insurers by policyholders in exchange for the payment of premiums.

Indemnity Provisions

Many states have enacted the anti-indemnity statute which prevents parties in a contract from enforcing indemnification agreements. There are other ways through which states deal with indemnity agreements if an anti-indemnity statute is not a place. Ultimately, many states frown at indemnity agreements and find ways to curb it.