Can a contract transfer liability in the case of a lawsuit?

[John D.]

Hi everyone! 

I am drafting a contract agreement between my property management company and a new contractor who will be responsible for some of the day to day runnings of the company such as working with tenants who have questions and ensuring rent is paid on time, etc. The agreement requires the contractor to have adequate liability insurance. 

However, I am curious about how liability is shifted around (if at all) in a situation with a lawsuit against my PM company, if the lawsuit is regarding something that the contractor did or said. 

For example, let's say this contractor is dealing with tenants and starts to harass a particular tenant for not paying rent. The tenant then takes a lawsuit against my PM company for harassment. Now, the contract agreement between my PM company and the contractor specifically says that the contractor will hold adequate liability insurance for their duties as a contractor and that they will indemnify and hold my PM company harmless in the case of a lawsuit resulting from work performed as part of their duties outlined in the agreement. 

But how does this hold up in court?  The tenant doesn't know about this contract agreement and may not even know that this person was a contractor and not a direct employee of my PM company. 

Does the signed agreement I have with this contractor shift the liability to them in the court room, and are they now responsible to pay damages (if the judgement is in favor of the tenant) even though they were not named in the lawsuit directly? Or does my PM company have to pay out first and then we have to go after the contractor separately to recoup the money?

Thanks for the help!