As any agreement between two parties, PPP contracts will include clauses that define liability, indemnification obligations, and insurance requirements for both the public and private sectors. It is expected that these clauses are crafted such that the interests of each party entering the agreement are protected.
The FHWA PPP website describes some of the provisions that limit liability and the indemnity obligations of each party for some PPP projects, including the Chicago Skyway, the Pocahontas Parkway, and Texas SH-130, and the PPP legislation survey describes how these are addressed by state.
Private investors are concerned about tort liability, because the private sector is not protected by sovereign immunity as is the public sector. The risk of tort liability can be mitigated by using state maintenance and police service, public sponsorship, and insurance. The latter however can add a significant cost to the project, affecting its financial feasibility (U.S.DOT 2004). From the public sector perspective, governmental liability may not be fully transferable in a PPP, and the public sector may still be subject to lawsuits if deteriorating conditions of the roadway cause any harm to individuals (Fitch Ratings 2006).