Consider the following real-world example: a small Maine tree management company works to keep power lines clear—a critical job for safety and reliability. But to get the work, the company must sign a contract that makes it liable for the power company’s own negligence. If the power company makes a mistake, the tree company pays the price.
Or, take a Maine family-owned logging business bidding to log a large forest for a landowner with property across the county. The opportunity is significant, but the contract requires the logging business to assume responsibility for the landowner’s negligence anywhere in the world. It’s a take-it-or-leave-it deal, and the logging company feels backed into a corner because they need the work.
These examples expose how indemnification agreements highlight the imbalance of bargaining power, forcing small businesses to shoulder risks they cannot control. This is the problem that L.D. 1761 aims to address—but as drafted, it may create more issues than it solves.
The intent behind L.D. 1761
Maine’s L.D. 1761, An Act to Prohibit Indemnification Agreements, is intended to prohibit contract provisions that require one party to assume liability for the negligent or wrongful acts of another. Testimony noted that forty-five other states already have laws banning these covenants. Forty-one states have enacted statutes banning these types of agreements in motor carrier transportation contracts, including Maine. L.D. 1761 would extend this prohibition to construction and related industries, where indemnification provisions are routine parts of contracts.
Problems with the bill and concerns for the construction industry
While the bill is well-intended, as drafted the bill raises significant concerns for Maine businesses and contractors (as highlighted in testimony from the Department of Economic and Community Development). Among them:
- The bill in effect is a sweeping ban
- The bill’s broad language has a much wider application than is intended, and could have the effect of prohibiting most indemnification agreements that are currently standard in the construction industry. It would invalidate any agreement that “purports to indemnify or hold harmless” a party from “any negligence, claim or liability arising out of an intention act or omission.” This phrasing is very broad, and in practice would invalidate many standard agreements, including those in which a subcontractor agrees to be responsible for its own negligence or wrongdoing.
- The bill disrupts common risk-management practices
- The bill appears to prohibit a very common scenario wherein a subcontractor agrees to indemnify the general contractor for liability arising out of the subcontractor’s own conduct—even where the general contractor had no fault. Testimony also pointed out that sureties, who step in if a contractor fails to perform, might be prevented from seeking reimbursement. This would upend long-established bonding practices that keep projects moving. The bill’s vague language could introduce uncertainty in contracting, undermine risk management practices, and impose unnecessary burdens on Maine businesses and municipalities.
- The bill has uncertain economic impact
- The bill’s vague language could introduce uncertainty in contracting, undermine risk management practices, and impose unnecessary burdens on Maine businesses and municipalities.
Proposed fix: narrowing the scope
Since the public hearing, an amendment has been proposed to rename the bill “An Act to Prohibit the Transfer of Liability Relating to a Party’s Own Negligence or Liability in Contracts” and amend its language to limit the scope to provisions that “purport to transfer . . . to another party liability for negligence arising out of a party’s own negligence.” The amendment also expressly excludes surety bonds from agreements the law applies to. Finally, the amendment addresses many of the concerns raised at the public hearing and preserves many of the industry’s standard risk allocation practices.
What’s next?
L.D. 1761 and the proposed amendment have been sent to the Judiciary Committee and carried over to the new legislative session beginning January 7, 2026, when it will be considered. Indemnification reform can protect small businesses from unfair risk-shifting, but the law must be carefully drafted to avoid unintended consequences that disrupt common industry risk-management practices.
Maggie Shields is an associate attorney in Bernstein Shur’s Construction Law practice group, where she represents owners, contractors, and other construction professionals in contract drafting, negotiation, and dispute resolution. Drawing on her background in commercial litigation and experience with Maine’s highest court, Maggie brings clarity, precision, and practical insight to every matter. The Construction group combines deep industry knowledge with a collaborative, solutions-oriented approach to help clients avoid disputes, resolve challenges efficiently, and keep their projects—and bottom lines—on track.