Florida Statute 725.06 governs indemnification clauses in construction contracts, voiding any such clause unless it carries a monetary cap that bears a reasonable commercial relationship to the contract and appears in the project specifications or bid documents. For parties in direct contract with the property owner, that cap cannot be set lower than $1 million per occurrence unless both sides agree otherwise.1Florida Senate. Florida Code 725.06 – Construction Contracts; Limitation on Indemnification
What an Indemnification Clause Does in a Construction Contract
An indemnification clause is a promise by one party to cover another party’s legal liability for injury or property damage arising out of the project. In construction, these clauses typically run downhill. An owner wants the general contractor to shoulder exposure for claims connected to the work; a general contractor wants its subcontractors to do the same for their trades. Without limits, these promises can shift catastrophic liability onto parties with far fewer resources than the party being protected.
Section 725.06 is Florida’s response to that imbalance. The statute does not forbid construction indemnification, but it refuses to enforce it unless specific protections are built into the contract itself.
The Monetary Cap Requirement
Under Section 725.06, any indemnification provision in a construction contract is void unless the provision includes a monetary limitation on the indemnifying party’s exposure.2Florida Senate. Florida Code 725.06 – Construction Contracts; Limitation on Indemnification Two conditions attach to that cap.
First, the cap must bear a reasonable commercial relationship to the contract. A dollar figure plucked from thin air does not satisfy the statute; the number has to make sense next to the scope and value of the work being performed.
Second, the cap has to appear in the project specifications or the bid documents. Burying the figure in a side agreement or revealing it only after award does not meet the statute’s placement requirement. The idea is that bidders see the number up front and can price the risk accordingly.
If both conditions are met, the indemnification clause stands. If either is missing, the clause is void.
The $1 Million Floor for Direct Contracts With the Owner
When the indemnifying party is in direct contract with the property owner, the statute sets a floor on how low that cap can go. The monetary limitation cannot be less than $1 million per occurrence.1Florida Senate. Florida Code 725.06 – Construction Contracts; Limitation on Indemnification A general contractor signing with the owner cannot cap its indemnity obligation at $100,000 and call it a day.
The floor is not absolute. The statute allows the parties to agree otherwise, meaning a lower cap is possible if both sides accept it. Absent that mutual agreement, the $1 million per-occurrence minimum applies by default to any indemnity promise flowing from a party in privity with the owner.
The floor is written to the owner-contractor relationship. The statute’s general cap requirement still governs indemnification further down the chain between contractors and subcontractors, but the specific $1 million minimum keys to that direct-with-owner tier.
What Happens If the Clause Doesn’t Comply
The statute’s enforcement mechanism is simple. A noncompliant indemnification provision is void. Not voidable, not reformable, not subject to a court writing in the missing cap. If the drafter leaves out the monetary limitation, puts it somewhere other than the specs or bid documents, or sets a cap under $1 million per occurrence for a direct-with-owner contract without the counterparty’s agreement, the clause has no force.
The practical consequence is that the party that thought it was protected by the indemnity has no contractual indemnity to invoke. Liability for the underlying injury or property damage claim falls where the common law and other contract terms leave it, which is often back on the party that drafted the failed clause in the first place.
For owners and upstream contractors, that puts the drafting burden squarely on the party seeking protection. Including a cap, pricing it against the contract, and surfacing it in the bid materials are not formalities. They are the statute’s conditions for the clause existing at all.
How to Draft a Clause That Holds Up
A compliant Section 725.06 indemnification clause does three things on the face of the contract. It names a specific dollar cap on the indemnifying party’s exposure. It sets that cap at a figure that can be defended as commercially reasonable given the contract value and scope. And it lives in the project specifications or bid documents so prospective bidders see it before pricing the job.
Where the indemnifying party contracts directly with the owner, the cap also has to clear the $1 million per-occurrence minimum, unless the parties have expressly agreed to a lower number. Documenting that agreement matters; silence on the point will leave the statutory floor in place.
Nothing in the statute requires the cap to be identical to any insurance limit the indemnifying party carries, but aligning the two is a practical move. An indemnity obligation that outruns available coverage is an indemnity obligation the indemnified party may have trouble actually collecting on.
What Section 725.06 Does Not Cover
Section 725.06 is often mistaken for the law that governs pay-if-paid and pay-when-paid clauses in Florida construction contracts. It is not. Those contingent payment clauses are controlled by Florida Supreme Court case law, Chapter 713 of the Florida Statutes (the Construction Lien Law), and the Construction Contract Prompt Payment Law in Chapter 715. If the question is whether a general contractor can withhold payment from a subcontractor because the owner has not paid, Section 725.06 has no answer.
The statute’s reach is also limited to indemnification clauses in construction contracts. It does not regulate insurance procurement provisions, additional insured endorsements, waivers of subrogation, or the broader allocation of project risk through performance and payment bonds. Those pieces sit in other statutes and in the parties’ separate insurance arrangements.
For the specific question of whether an indemnity promise in a Florida construction contract will be enforced, though, Section 725.06 is the first stop. A clause without a properly placed, commercially reasonable monetary cap, respecting the $1 million per-occurrence floor where it applies, is a clause the courts will not honor.