Every construction contract is, among other things, a machine for moving risk. Long before a loss occurs, the indemnity clause, the additional-insured endorsement, and the waiver of subrogation have already decided who will pay for it. On a Tennessee project, the outer boundary of that machine is set by statute — Tennessee Code Annotated section 62-6-123 — and a contractor who signs without knowing where that boundary sits can agree to assume risk the law will not let it transfer, or give away protection it never needed to.
Start with what the statute does. Section 62-6-123 declares void, as against public policy, any provision in a construction contract that purports to indemnify or hold a party harmless for damages caused by that party’s own sole negligence. In plain terms, an owner or general contractor cannot use a subcontract to make the subcontractor pay for a loss the owner or GC alone caused. Tennessee’s rule is narrower than the intermediate-form bans in some neighboring states — it voids only sole-negligence indemnity, which means broad and intermediate indemnity for shared fault generally survives. That narrowness is exactly why the statute is misread so often.
The practical consequence sits in the drafting. A clause requiring a subcontractor to indemnify the GC for “any and all claims arising out of the work, including claims caused by the indemnitee’s own negligence” reaches too far under Tennessee law — to the extent it captures the GC’s sole negligence, that portion is unenforceable. Courts will not always rewrite the clause to save it; the offending language can simply fail. A contractor relying on indemnity the statute voids discovers the gap at the worst possible moment — after the loss, when the transfer it counted on evaporates and its own policy, or its own balance sheet, absorbs the claim.
This is where insurance-based risk transfer earns its place, because it does work the indemnity clause cannot. Additional-insured status under the subcontractor’s commercial general liability policy transfers the defense and indemnity of the upstream party directly to the sub’s carrier, within the endorsement’s terms — a mechanism that operates alongside, not through, the anti-indemnity statute. The current ISO additional-insured forms tie that coverage to the extent permitted by law and to the named insured’s ongoing or completed operations, so the endorsement edition and the underlying contract language have to be read together. A certificate of insurance naming the GC proves nothing about whether the endorsement actually responds; the endorsement itself is the document that matters.
Waiver of subrogation is the quieter half of the structure, and the more misunderstood. Subrogation is the right of an insurer, after paying its insured, to step into that insured’s shoes and pursue whoever caused the loss. A waiver of subrogation — standard in the AIA and ConsensusDocs families and common in property and builders risk programs — is the parties’ agreement, before any loss, that their insurers will not chase each other. It keeps a builders risk carrier from paying the owner and then suing the subcontractor whose work caused the fire — the circular litigation that turns one covered loss into years of cross-claims. Tennessee courts enforce these waivers as written, but a waiver binds a carrier only if the policy permits it; most do, provided the waiver is executed before the loss.
The three mechanisms are meant to interlock, and the failures happen at the seams. An indemnity clause drafted for another state’s law, an additional-insured endorsement a generation out of date, and a waiver of subrogation the property policy never actually authorized can each look fine on paper and fail together in a single claim. Reviewing them as one system — against the actual statute, the actual endorsement editions, and the actual policy conditions — is the difference between a risk-transfer structure that holds and one that only appears to.
PFTN’s 4-Step Strategic Process is built for exactly this seam-work. Strategic Discovery gathers the contract templates a contractor actually signs, upstream and down, and locates where the indemnity, additional-insured, and waiver language live. Risk Assessment reads that language against Tennessee Code 62-6-123 and the endorsement forms in force, surfacing the sole-negligence overreach and the stale additional-insured editions before a loss does. Solution Design aligns the contract requirements with coverage that can actually deliver them, so the certificate and the policy say the same thing. Ongoing Optimization revisits the templates as forms and case law evolve, because a risk-transfer clause that worked five years ago may not survive the next one.
Risk transfer on a construction project is not a single clause but a chain, and a chain is only as strong as the link no one inspected. Illuminating how Tennessee’s anti-indemnity statute, additional-insured coverage, and waiver of subrogation actually operate — before the contract is signed — is what keeps a jobsite loss from becoming a contract dispute layered on top of it.
— Ryan Mefford, President & Risk Advisor
Sources
- Justia — Tennessee Code Annotated Section 62-6-123 (Indemnify or Hold Harmless Agreement Invalid)
- Matthiesen, Wickert & Lehrer — Anti-Indemnity Statutes in All 50 States
- Watt, Tieder, Hoffar & Fitzgerald — Tennessee 50-State Construction Law Survey
- Tennessee Court of Appeals — Rentenbach Constructors Inc. v. CM Partners (Section 62-6-123)
- LawServer — Tennessee Code 62-6-123: Indemnify or Hold Harmless Agreement Invalid
- Matthiesen, Wickert & Lehrer — Tennessee Subrogation Law and Waiver of Subrogation