The Answer in 60 Seconds

"Indemnity to Principal" is a liability policy extension typically used in construction, fit-out, maintenance, and event services, where one party (the contractor / supplier / event organiser, the "Insured") agrees by contract to indemnify another party (the "Principal" - usually the client, employer, main contractor, or venue) against third-party liability arising from the Insured's work. The clause extends the Insured's policy to the Principal: the insurer indemnifies the Principal, as it would the Insured, against the Principal's liability arising from the Insured's work, but only as far as the contract requires. It is not the same as Additional Insured status, which the PSSCOC treats as a separate requirement. Singapore courts construe contractual indemnity clauses strictly, on their wording read in context: in HSBC Institutional Trust Services (Singapore) Ltd v DNKH Logistics Pte Ltd [2022] SGHC 248, a warehouse lease indemnity was held to cover only third-party claims, not the landlord's own fire loss.

The Sourced Detail

The clause does not cover the client for everything that happens on the job. Understanding what it actually does - and what it does not - is essential before signing any commercial contract that requires it.

The structure of the clause

A typical Indemnity to Principal extension reads something like:

"The indemnity granted by this Policy shall apply in like manner to any Principal, but only to the extent required by the contract between the Insured and the Principal, and only in respect of liability for which the Insured would have been liable under this Policy had the claim been made against the Insured."

Three things follow from that wording:

  1. The cover responds to the Principal's liability arising from the Insured's work, not to the Principal's general exposure.
  2. It is bounded by the contract. If the contract requires only indemnity for the Insured's negligence, the policy responds only on that basis - not for the Principal's own acts.
  3. Policy exclusions still apply. If the underlying loss is excluded under the policy (war, pollution, professional negligence carved out of PL), the extension cannot reverse that.

Why this is not the same as "Additional Insured"

An "Additional Insured" endorsement adds a named party as an insured under the policy, giving them direct rights to claim. The Principal can sue the insurer directly under their own contractual rights to indemnity.

An "Indemnity to Principal" extension works differently. The insurer indemnifies the Principal, subject to the policy's terms as if it were the Insured, but only against liability arising from the Insured's work and only as far as the contract requires. It does not cover the Principal's own activities beyond that.

The practical difference matters at claim time:

  • Additional Insured: Principal claims directly under the policy. Independent right of recovery.
  • Indemnity to Principal: the contractor's policy indemnifies the Principal against its liability arising from the contractor's work, to the extent the contract requires. Where the policy excludes third-party rights under the Contracts (Rights of Third Parties) Act 2001, as Etiqa's Public Liability wording does, a Principal that is not a party to the policy may have to rely on the contractor to claim.

If the contractor goes insolvent before the claim resolves, the Additional Insured route gives the Principal a path to the insurer; the Indemnity to Principal route may not.

Where Singapore courts have weighed in

In HSBC Institutional Trust Services (Singapore) Ltd v DNKH Logistics Pte Ltd [2022] SGHC 248, the Singapore High Court analysed contractual exemption and indemnity clauses in a logistics context. The judgment confirms that the legal effect of an indemnity clause depends heavily on its precise wording and the surrounding contractual matrix - courts will not rewrite indemnity scope, and ambiguity is construed contextually.

For Indemnity to Principal extensions, the same principle applies: the policy extension responds as the contract requires it to respond. If the contract indemnity clause is narrow ("for the Insured's negligence"), the extension is narrow. If broad ("for any loss arising from the works"), the extension may be wider - but only to the extent the policy itself can support that scope.

Where the clause typically appears

  • Construction subcontracts. The main contractor (Principal) requires the subcontractor (Insured) to carry PL insurance with Indemnity to Principal in the main contractor's favour. The PSSCOC (Public Sector Standard Conditions of Contract) takes a different route for public works: the contractor's insurances must note the Employer as "Principal" for employer's liability, or as an "Additional Insured" with a "cross liability" provision for third party liability (clause 27.1).
  • Landlord fit-out works. The landlord (Principal) requires the tenant or fit-out contractor (Insured) to carry insurance with the landlord noted as Principal for the duration of the works.
  • Event organising contracts. The venue (Principal) requires the event organiser (Insured) to carry liability cover extending to the venue as Principal.
  • Maintenance and FM contracts. The building owner (Principal) requires the maintenance contractor (Insured) to carry the extension.

Common drafting traps

  1. Contract requires "Additional Insured" status; policy only offers "Indemnity to Principal." These are not equivalent. The Principal may reject the Certificate of Insurance.
  2. Contract indemnity is broader than the policy can support. If the contract requires indemnity for the Principal's own negligence, but the PL policy excludes liability assumed by contract, there is a wording gap.
  3. Multiple Principals on a project; only one named. Common on multi-tier construction. The extension should accommodate all required Principals or be issued per Principal.
  4. Cross-Liability not added. Without a Cross-Liability extension, claims by one insured party against another insured party may be excluded as "claims between insureds." The Cross-Liability extension restores cover.
  5. Extension granted but excess applies separately. Some wordings impose a separate excess for Indemnity to Principal claims. Read the schedule.

The interaction with Cross-Liability

A Cross-Liability extension says that if there are multiple parties insured under the policy (or treated as insured), each is treated as if separately insured. Where it is added together with Indemnity to Principal, the intended effect is that:

  • A claim by the Principal against the Insured is treated as a third-party claim (covered by the policy)
  • A claim by the Insured against the Principal does not collapse the cover

Without Cross-Liability, a claim by one party covered under the policy against another may fall outside the cover, which can defeat the Indemnity to Principal cover at exactly the moment it matters.

What This Means for Your Business

If you sign a contract that requires you to carry insurance "with Indemnity to Principal in favour of [Principal]," do three things before the contract takes effect:

  1. Read the contract indemnity clause carefully. What scope of liability are you accepting? Is it limited to your negligence, or broader?
  2. Match the policy to the contract. Send the contract to your broker. Confirm the PL policy extension wording mirrors the contract scope. If there is a gap, request a wording amendment from the insurer.
  3. Get the Certificate of Insurance issued correctly. The COI should name the Principal, state the policy includes Indemnity to Principal in their favour, and (if required) confirm Cross-Liability is included.

For SMEs that sign multiple similar contracts (construction subcontractors, fit-out contractors, event organisers), the practical move is to standardise the policy wording up front - request a blanket Indemnity to Principal clause that responds to "any party the Insured is required by contract to so indemnify." This avoids per-contract endorsements and Certificate-issuance delays.

If a contract counterparty insists on terminology that your policy cannot match (for example, a demand for full Additional Insured status when your insurer offers only Indemnity to Principal), that is a negotiation point - not a paperwork issue. Either the contract wording flexes, or the policy is endorsed at additional premium, or the deal does not happen on the original terms.

Questions to Ask Your Adviser

  1. Does my Public Liability policy currently include an Indemnity to Principal extension as standard, or only on request?
  2. Is the extension on a blanket basis ("any party I am required by contract to indemnify") or scheduled (named Principals only)?
  3. Is Cross-Liability automatically included with Indemnity to Principal, or does it need to be added separately?
  4. How does the policy wording handle a contract that requires indemnity for the Principal's own negligence - does my cover respond, partially respond, or not respond?
  5. What is the Certificate of Insurance turnaround time when I sign a contract requiring this extension, and what information do you need from the contract?

Related Information

Published 4 May 2026. Source verified 4 May 2026.