Indemnification Clause

The Full Picture

Indemnification exists to decide, in advance, who pays when a third party is harmed. On a job site a worker gets hurt or a neighbor's property is damaged, and someone will be sued. The indemnity clause — often called a 'hold harmless' agreement — assigns responsibility for those claims between the contracting parties instead of leaving it to be fought out after the fact.

The clauses come in three standard forms distinguished by how much liability they shift. A broad-form clause makes the indemnitor cover losses even when the indemnitee was solely at fault; an intermediate form covers everything except the indemnitee's sole negligence; a limited form covers losses only to the extent of the indemnitor's own fault. Balanced contract families like ConsensusDocs favor limited, comparative-fault indemnity.

Enforceability varies by state. Many states have anti-indemnity statutes that void or restrict broad-form clauses that make a contractor cover the owner's or designer's own negligence, because that allocation is seen as unfair. A clause that reaches too far can be unenforceable, so the form chosen has to survive local law.

Indemnity and insurance are related but distinct. A duty to 'indemnify and hold harmless' is not the same as a duty to insure it, and well-drafted contracts keep the two as separate clauses. Contractors buy liability coverage and often add the owner as an additional insured to back up the indemnity — but the promise to indemnify and the insurance behind it are two different obligations.