Indemnification clauses are in every construction contract you sign. They determine who pays when something goes wrong. In New Mexico, some of these clauses are completely unenforceable–but you won't know that unless you read them before you sign.
An indemnification clause is a contractual provision where one party (the indemnitor) agrees to compensate another party (the indemnitee) for certain losses, damages, or liabilities. In construction, this typically means a subcontractor agrees to "hold harmless" a general contractor or project owner for claims arising out of the subcontractor's work.
At its core, indemnification is about allocating risk. The question is: when someone gets hurt on the jobsite, when property gets damaged, or when a third party sues–who pays? The indemnification clause in your contract answers that question, and the answer may not be what you expect.
Not all indemnification clauses are created equal. They fall into three general categories, and the differences between them are enormous.
A broad form indemnification clause requires one party to indemnify the other for all losses–including losses caused entirely by the indemnitee's own negligence. In plain terms: the GC could be 100% at fault for an accident, and you, the sub, would still be contractually obligated to pay for it.
An intermediate form clause requires one party to indemnify the other for all losses except those caused solely by the indemnitee's own negligence. This means if there's any shared fault–even 1% attributable to you–you could be on the hook for the entire claim. These clauses effectively require you to indemnify the other party for their own partial negligence, which raises serious enforceability questions under New Mexico's anti-indemnity statute.
A limited indemnification clause requires a party to indemnify only for losses arising from that party's own acts, errors, or omissions. This is the only type of indemnification that clearly aligns with New Mexico law. Each party bears the financial consequences of its own negligence–which is how it should work.
New Mexico has a statutory prohibition against certain types of indemnification in construction contracts. The key provision is NMSA 1978, § 56-7-1, which provides that any contract clause requiring a party to indemnify another for losses arising from the indemnitee's own negligence is void and unenforceable.
The purpose behind this law is straightforward: parties with greater bargaining power–typically general contractors and project owners–should not be able to shift liability for their own negligent acts onto subcontractors and lower-tier parties who have little power to negotiate the contract terms. The statute creates an incentive for every party to maintain a safe worksite, because each party bears the consequences of its own negligence.
Here's where many contractors get confused. New Mexico's anti-indemnity statute voids indemnification clauses that shift negligence liability. But NMSA 1978, § 56-7-1(B) explicitly allows parties to a contract to be named as additional insureds on another party's commercial general liability (CGL) insurance policy–even to cover the named party for its own negligence.
This means a GC can require you to add them as an additional insured on your CGL policy, and that requirement is valid even though a direct indemnification for the GC's negligence would be void. The practical difference: your insurance company bears the cost through premiums and coverage, rather than you bearing it directly as a contractual indemnification obligation. It's a critical distinction that affects how you evaluate your insurance needs for every project.
When you're reviewing a construction contract–or having an attorney review it–these are the indemnification issues that should trigger a closer look:
"Regardless of cause" or "whether or not caused by" language. These phrases are the hallmark of broad form indemnification. They signal an intent to shift all liability onto you, including liability for the other party's negligence. In New Mexico, this language is void–but its presence in the contract indicates you're dealing with a one-sided agreement that may have other problematic provisions.
"To the fullest extent permitted by law." This is a hedge. It acknowledges that broad indemnification might not be enforceable, so it tries to capture as much indemnification as the law allows. While not automatically unenforceable, this language is designed to push the boundaries and should be negotiated to clearly define the actual scope of your obligation.
Defense obligations separate from indemnification. Some contracts require you to not only indemnify (pay for losses) but also defend (hire and pay for lawyers) in any claim. A duty to defend can be triggered merely by an allegation–even a frivolous one–and the legal fees can be substantial. Make sure you understand whether your obligation includes both defense and indemnification, and whether your insurance covers the defense obligation.
No carve-out for the other party's negligence. A properly drafted indemnification clause in a New Mexico construction contract should explicitly exclude losses caused by the indemnitee's own negligence. If that carve-out is missing, the clause is overreaching even if a court would ultimately read the limitation in under § 56-7-1.
Indemnification of design professionals. New Mexico's statute at § 56-7-1 applies to indemnification of design professionals (architects, engineers) as well. Be cautious of contract language that requires you to indemnify a design professional for design errors–that exposure doesn't belong on a contractor.
Indemnification doesn't exist in a vacuum. It interacts with several other contract provisions that together determine your total risk exposure on a project:
Insurance requirements. Your indemnification obligations and your insurance coverage should align. If you've agreed to indemnify for certain categories of loss, your CGL policy should cover those same categories. Gaps between your indemnification obligations and your insurance coverage come directly out of your pocket.
Limitation of liability clauses. Some contracts cap total liability at the contract value or some other amount. If you have an indemnification obligation but also a limitation of liability, the interaction between the two determines your actual maximum exposure. These provisions need to be read together.
Waiver of subrogation. A waiver of subrogation prevents your insurance company from going after a third party to recover what it paid on a claim. If your contract includes both an indemnification clause and a waiver of subrogation, you need to confirm your insurer is aware of and consents to the waiver–otherwise, the waiver could void your coverage for the very claims the indemnification clause covers.
Dispute resolution provisions. If an indemnification dispute arises, the contract's dispute resolution clause determines where and how it gets resolved–arbitration, litigation, mediation, and in what jurisdiction. New Mexico law requires that disputes arising from construction contracts for work performed in the state be resolved in New Mexico. NMSA 1978, § 57-28A-1.
Indemnification clauses are one of the most dangerous provisions in a construction contract–and one of the easiest to fix with a review before signing. Schedule a free 15-minute consultation to discuss your contract or your contract suite.
Schedule Your Free ConsultationThe indemnification clause is just one provision in a larger agreement. When I review a construction contract, I look at how the indemnification interacts with your insurance requirements, payment terms, dispute resolution provisions, and scope of work. Often, the indemnification clause is a symptom–if it's overreaching, the rest of the contract probably is too.
I offer flat-fee contract reviews and complete contract suite rebuilds that address every provision exposing you to unnecessary risk–indemnification, payment terms, change order procedures, insurance requirements, and dispute resolution. If your indemnification clause is overreaching, the rest of the contract probably is too. View services and pricing →
It depends on the clause. Under NMSA 1978, § 56-7-1, any provision requiring a party to indemnify another for losses caused by the indemnitee's own negligence is void. Limited indemnification–where each party is responsible for its own acts–is enforceable. The enforceability turns on the specific language of the clause and the type of indemnification it creates.
It's NMSA 1978, § 56-7-1. The statute voids contract provisions that require indemnification for a party's own negligence. It applies to construction contracts and is designed to prevent parties with superior bargaining power from shifting liability for their own negligent acts to subcontractors and lower-tier parties.
Broad form requires indemnification for all losses regardless of fault–void in New Mexico. Intermediate form requires indemnification for all losses except those caused solely by the other party–enforceability is questionable under § 56-7-1. Limited form covers only losses caused by the indemnitor's own acts–this is enforceable in New Mexico and is the standard that aligns with the statute.
Yes. NMSA 1978, § 56-7-1(B) explicitly allows parties to be named as additional insureds on another party's CGL policy, even for coverage of the named party's own negligence. This requirement is enforceable even when a direct indemnification clause for the same negligence would be void.
No. Indemnification clauses determine who pays when something goes wrong. An unclear or overbroad clause can expose you to liability for incidents you didn't cause and costs you can't predict. Have a construction attorney review the language before you sign. A contract review is far less expensive than defending an indemnity claim after the fact.
Attorney Advertising. The information on this page does not constitute legal advice. Past results do not guarantee future outcomes, as each case must be decided on its own merits. The responsible attorney is Matthew J. Bouillon Mascareñas, Albuquerque, NM. © 2026 Law Office of Matthew J. Bouillon Mascareñas LLC.