What is an indemnity to principal clause?

How it works in Ireland

In a building contract the person who hires the contractor is called the principal. If the contractor’s work injures a passer-by or damages a neighbour’s wall, the injured person may claim against the contractor, and may also try to claim against the principal, because it is the principal’s site. An indemnity to principal clause deals with that second claim. It extends the contractor’s liability policy so that the principal is treated as an insured for liability arising from the contractor’s work, rather than being left to pay out of their own pocket.

You can see how this is treated in a published self-build wording. Its liability section makes it a condition that every genuine subcontractor the policyholder uses has public and products liability insurance in force for the whole of the contract, with a stated minimum limit, and that those policies contain an Indemnity to Principals Clause. The policyholder must also get and keep written evidence of that insurance. Failing to do so can put the cover at risk, so the condition matters for the person who hired the subcontractor.

If you hire a main contractor, the same logic applies one step up. Your contract should require the contractor to hold public liability and employers’ liability insurance with an indemnity to principals clause and to show you the evidence before work starts. “They are insured” is not enough: a contractor can be insured and still have a policy that does not extend to you.

Ask for a certificate or the policy schedule from the contractor’s insurer or broker, check the dates cover the whole build, and diarise the renewal date, because policies run for a year and a build can run longer. Your own cover as site owner remains separate. The clause shifts some risk onto the contractor’s insurer. It does not stop a claim being made against you, and it does not insure the house works.

The public liability insurance page explains your own cover as site owner, and the main contractor page explains the contract this clause sits in.

A common mistake

Accepting a verbal “we are fully insured”. Ask for written evidence that names the clause, covers the whole build period and states the limit. If the contractor’s policy ends during the build, ask for the renewed certificate before it lapses.