A master services agreement arrived by courier at the offices of a mid-sized property management company in Edmonton, sent by a commercial building maintenance contractor seeking to formalize an arrangement that had operated informally for nearly 2 years. The property management company oversees 14 commercial and mixed-use properties across central Alberta on behalf of various institutional and private landlords, coordinating everything from routine cleaning to major mechanical repairs. The maintenance contractor, a regional firm with approximately 40 employees, had been performing HVAC servicing, plumbing repairs, and occasional rooftop work at these properties on a job-by-job basis, but the contractor now proposed a 3-year exclusive services contract covering all properties in the portfolio.
The proposed agreement ran to 47 pages and contained provisions that the property management company's operations director had not previously encountered in such detail. Article 8 set out an indemnification clause requiring the property management company to indemnify and defend the contractor against any claims arising from the condition of the properties, while Article 9 contained a reciprocal indemnity running from the contractor to the property management company for claims arising from the contractor's work. Article 11 included a hold harmless provision in favour of the contractor that appeared to extend beyond the contractor's own negligence to encompass claims arising from hazards present at the work sites. Article 14 capped the contractor's total liability under the agreement at the lesser of $250,000 or the fees paid in the preceding 12 months, and expressly excluded liability for consequential damages, lost profits, and business interruption losses regardless of cause.
The insurance provisions in Article 16 required the property management company to maintain commercial general liability coverage of not less than $5 million per occurrence and to name the contractor as an additional insured on that policy. The contractor's own insurance obligations were stated at $2 million per occurrence with no additional insured requirement running to the property management company. The property management company's existing policy carried a $2 million limit, and the operations director was uncertain whether the landlord clients would bear the cost of increased coverage or whether the company itself would have to absorb it.
Several of the properties in the portfolio presented particular exposures: one housed a chemical distribution tenant, another had documented asbestos in its mechanical room, and a third had experienced 2 slip-and-fall claims in the preceding 18 months. The operations director needed to assess whether the proposed risk allocation aligned with the company's actual exposure, whether the limitation of liability provisions would hold up if tested, and how the insurance requirements interacted with the indemnification and hold harmless undertakings to create a coherent or incoherent risk management framework.