Contract audit playbook: reviewing indemnification in 5 days

Pull the executed subcontract, all amendments, change orders, and any purchase orders for each subcontractor involved in an active matter. A complete contract file also includes any project-specific exhibit or appendix that modifies the base agreement's insurance or indemnification terms.

If your organization uses a standard subcontract template, note whether the executed agreement matches the current template or an older version. Template language has changed over time, and older clauses may not provide the same protection as your current standard.

For each contract, locate the indemnification clause and write a one-paragraph summary that identifies: who is the indemnitor, who is the indemnitee, what categories of claims are covered, whether the clause is limited to third-party negligence or purports to cover the indemnitee's own negligence, and any conditions or limitations on the obligation.

Highlight any clause that contains "to the fullest extent permitted by law" language, which is the standard New York formulation designed to avoid running afoul of GOL Section 5-322.1. Also flag clauses that are silent on this limitation, as they may face enforceability challenges.

Locate the insurance requirements section of each contract. Document the specific coverage types required (commercial general liability, excess, workers' compensation, etc.), the required limits, whether the indemnitee must be named as an additional insured, and whether the additional insured status must extend to ongoing operations, completed operations, or both.

Compare the contract requirements to the certificate of insurance on file. Note every discrepancy: a lower limit than required, a missing additional insured endorsement, a policy type not reflected on the certificate, or an expired certificate with no renewal on file. Each discrepancy is a potential gap in your contractual claim.

For each active matter, use your contract review from days two and three to classify the available third-party claim. A matter with a clear indemnification clause and compliant additional insured coverage supports a contractual claim. A matter where the indemnification clause is weak or the insurance requirements were not met may support only a non-contractual claim, if any.

Document the basis for each classification in a matter memo. Outside counsel will use this memo to evaluate whether a third-party complaint is worth filing and on what deadline it must be filed. The memo also creates a record of your reasoned analysis if the timeliness of any filing is later challenged.

Compile your findings into a gap report: one page per matter identifying the contract file status, the indemnification clause assessment, the insurance compliance status, and the claim type classification. Attach the one-paragraph summaries from day two and the discrepancy list from day three.

For each gap identified, create an action item with a responsible person and a due date. Common action items include: obtain executed contract from project file, request additional insured endorsement from subcontractor's broker, confirm policy was in force on the date of the incident, and ask outside counsel to evaluate claim viability based on available record.

The AVOID Act is now the baseline for every new New York state litigation matter. Integrate the contract audit process into your standard response protocol so that it runs in parallel with your initial legal evaluation, not after it. By the time outside counsel has completed their preliminary assessment, you should have a contract gap report ready for them to use.

Review your subcontract template annually with outside counsel to confirm that your standard indemnification clause and insurance requirements reflect current New York law and the protections you need under the AVOID Act framework. Contract language that was adequate before the statute may need updating now that the filing window has been compressed.