Hold Harmless Clauses and Indemnity Agreements

the one minute takeaway

When entering a contract, it’s important to understand hold harmless clauses and indemnity agreements. They are critical to ensuring the parties involved are protected and managing their risks.

What is a hold harmless clause?

A hold harmless clause, or a save harmless clause, is a part of the contract where one party (the releasor) agrees not to hold the other party (the releasee) responsible for any loss or damage. This usually refers to activities or risks related to fulfilling the contract.

What is an indemnity agreement?

An indemnity agreement, or indemnification clause, is like a hold harmless clause but goes further. It states that one party (the indemnitor) will protect or indemnify the other party (the indemnitee) from claims related to activities or risks related to fulfilling the contract.

What are the financial implications of these agreements?

By agreeing not to hold the other party liable, the releasor/indemnitor cannot claim damages from the releasee/indemnitee. This means the releasor/indemnitor may have to cover those costs themselves or rely on their insurance if possible. In an indemnity agreement, the indemnitor may have to pay for legal defenses or settlements.

What are the insurance implications of these agreements?

The effects of hold harmless clauses and indemnity agreements may not be covered by your current insurance coverage. You may need to revise your insurance to cover these risks, such as adding the releasee/indemnitee as an insured under the policy. Many insurance policies won’t cover liabilities agreed upon in a contract; however, there are several exceptions. It is best to talk to your insurance broker to make sure your insurance matches your contract obligations where possible.

What are some other ways to protect yourself?

It is worth having contract language reviewed by a lawyer to protect your interests. You can also sign up for HUB’s Contract Review tool to review and make contract revision suggestions. While many hold harmless and indemnity clauses are standard, some may miss important exceptions (such as negligence). It is usually best to have any exceptions to these clauses that benefit you included in the contract.

Disclaimer: This bulletin is intended to provide readers with general information only. Readers are urged not to rely solely on the content of the bulletin but to consult with appropriate professionals on a case-by-case basis.