Indemnification and Risk Transfer in Denver Construction Contracts: What You Should Include

In the construction world, risk is everywhere—delays, defective work, injuries, and even lawsuits from third parties. That’s why indemnification and risk transfer clauses are some of the most critical elements of any Denver construction contract. Whether you're a general contractor, subcontractor, property owner, or developer, understanding how to properly draft and enforce these provisions is essential to protecting your interests.

If you're not confident your current contracts are doing enough to shield you from liability, speaking with the best Denver construction lawyer can help you proactively manage risk before problems arise.

What Is Indemnification in Construction Contracts?

Indemnification is a legal agreement where one party agrees to compensate another for certain losses or damages. In construction contracts, indemnification clauses are used to shift the risk of claims—such as property damage, bodily injury, or construction defects—from one party to another.

For example, a subcontractor might agree to indemnify the general contractor if someone is injured on the job due to the subcontractor’s negligence. That means the subcontractor would cover the cost of defending the claim and paying any settlement or judgment.

Why Indemnification Matters in Denver Construction Projects

In Colorado—and particularly in Denver’s fast-growing construction market—projects often involve multiple layers of parties. You’ll commonly find:

Property owners

Developers

General contractors

Subcontractors

Design professionals

Material suppliers

Each of these players has different responsibilities and varying levels of control over the worksite. Without clear indemnity language, determining who pays for what can become a legal nightmare.

A properly drafted indemnification clause reduces uncertainty and helps allocate responsibility based on who is best positioned to control and prevent a given risk. This creates a fairer contract—and helps avoid disputes down the road.

The Three Types of Indemnity Clauses

When reviewing or drafting your construction contract, it’s helpful to understand the three types of indemnity clauses:

1. Broad Form Indemnity

This clause requires the indemnitor (usually the subcontractor) to indemnify the indemnitee (typically the general contractor or owner) for all liability—including claims caused by the indemnitee’s own negligence.

Important Note: Broad form indemnity clauses are unenforceable in Colorado for construction contracts involving personal injury or property damage. Colorado law prohibits agreements that indemnify a party for its own negligence in these situations. (See Colo. Rev. Stat. § 13-21-111.5(6)).

2. Intermediate Form Indemnity

This allows indemnification for claims partially caused by the indemnitee, so long as the indemnitor shares some fault. It’s more balanced and may be enforceable depending on the contract language and facts.

3. Limited Form Indemnity

This type only requires indemnity for claims directly caused by the indemnitor’s negligence or misconduct. It’s generally the safest and most enforceable structure under Colorado law.

Working with the best Denver construction lawyer ensures your indemnity clauses comply with local statutes and reflect your true intentions.

What Else Should Be Included in a Risk Transfer Provision?

Indemnification is just one part of a broader risk transfer strategy. A well-crafted construction contract should also address:

Additional Insured Requirements

One of the most effective ways to back up an indemnity obligation is to require the indemnitor to add the indemnitee as an additional insured on its liability insurance. This gives the indemnitee direct access to the indemnitor’s policy.

In Denver, it’s common for general contractors to require subcontractors to provide certificates of insurance showing that the GC is listed as an additional insured.

Insurance Coverage Minimums

Spell out the types and limits of insurance that each party must maintain—such as general liability, workers' comp, professional liability, and builder’s risk. Don’t just rely on standard language; be specific.

For example:

“Subcontractor shall maintain commercial general liability insurance with limits of not less than $1 million per occurrence and $2 million in the aggregate, and shall name Contractor as an additional insured on a primary and non-contributory basis.”

Duty to Defend

In addition to indemnifying the indemnitee, some clauses require the indemnitor to defend them in a lawsuit. This means paying for legal counsel and litigation costs from day one—even before a claim is resolved.

Colorado courts typically interpret “defend” and “indemnify” separately. You need to clearly state both obligations to enforce them.

Waiver of Subrogation

Include a waiver of subrogation clause to prevent insurance companies from seeking reimbursement from other parties after paying a claim. This clause helps avoid finger-pointing and unnecessary litigation between contractors and subcontractors.

Common Mistakes to Avoid in Risk Transfer Clauses

Even experienced contractors sometimes get tripped up when it comes to indemnity. Here are a few mistakes to avoid:

Using overly broad or vague language – Courts may strike down a clause that’s ambiguous or unenforceable.

Failing to comply with Colorado law – As noted above, indemnity for your own negligence is generally unenforceable in construction contracts involving injury or property damage.

Not matching indemnity obligations with insurance coverage – If the indemnitor doesn’t have the insurance to back up its promise, it’s not much protection.

Omitting defense obligations – If you want someone to cover your legal fees, you must say so clearly.

To avoid these pitfalls, it’s wise to consult the best Denver construction lawyer before signing or updating your contracts.

Why You Should Work with a Construction Lawyer in Denver

Denver’s construction laws, codes, and enforcement policies are always evolving. From multi-family housing to commercial buildouts and public infrastructure, every type of project brings unique legal risks. You need airtight contracts that reflect Colorado law and industry best practices.

A qualified construction lawyer will:

Draft or revise indemnity and risk transfer language

Review your insurance requirements and certificates

Advise on enforceability under Colorado law

Represent you in litigation if indemnity becomes a dispute

Final Thoughts

Indemnification and risk transfer clauses aren’t just legal boilerplate—they’re the foundation of your risk management strategy. By clearly allocating responsibility and requiring adequate insurance, you protect your company, your clients, and your bottom line.

Before your next project starts, have your contracts reviewed by the best Denver construction lawyer to ensure you’re covered, because the cost of doing it wrong could be much higher than doing it right.