Indemnification Agreement: Purpose and Common Protections
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What is an Indemnification Agreement?
An indemnification agreement, also called an indemnity agreement, hold harmless agreement, waiver of liability, or release of liability, is a contract that provides a business or a company with protection against damages, loss, or other burdens. This type of contract allows businesses to carry out their services and/or provide products without the risk of being held responsible for problems in the future.
An indemnification agreement provides additional protection for businesses by ensuring that they are not held liable for damages or losses that occur outside of their control. This agreement allows the company to continue its operations while protecting against lawsuits. An indemnification agreement could also be a clause in a longer contract rather than a separate contract.
Here is an article about what indemnity means.
Purpose of an Indemnification Agreement
This legal document will hold harmless the initial party, the business or company and ensure that they are able to continue its operations and continue providing high quality products and services to its customers. With an indemnification clause or agreement, the business does not have to worry about loss or damages that occur to a third party outside of their own control.
The benefits related to the indemnity agreement include a lack of reason requirement for an indemnified party to prove causation, loss mitigation for the indemnified party, and a decreased level of risk associated with the contractual obligations and supplying of goods or services by the indemnified party.
Here is an article about the purpose of an indemnification agreement.
Common Areas of Protection
Frequently, an indemnification agreement will be created in an insurance agreement between two parties. This could exist in any form of insurance including motor vehicle insurance, health insurance, life insurance, homeowners’ insurance, malpractice insurance, and others.
They are also frequently used in fields such as construction, where the indemnification agreement may protect a contractor or builder who uses specific materials with the purpose of providing specified protection for the property. These agreements or clauses can be found in or used with a construction contract .
Other examples could include waivers of liability from ‘risky’ experiences or businesses, such as amusement parks, gyms, skating rinks, and ski slopes. These types of businesses may also ask their clients to sign liability waivers .
Indemnification agreements can exist in other forms, however, and may be included provisions in many contracts made between two parties. It then covers nearly any loss potentially suffered by the company including court costs, fees, and any settlements reached.
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Examples of Indemnification
Indemnifications will provide protection in a number of different ways, such as:
- A manufacturer of hospital beds has a contract with a hospital where they will provide the beds the facility needs. They then enter into an indemnification agreement with the hospital that says they cannot be sued by patients of the hospital if they are injured in any way while using the beds. They are indemnified from liability for injuries.
- A manufacturer of carnival rides enters into a contract with a carnival to provide them rides for their traveling fair. They enter into an indemnity agreement with the carnival that says they cannot be sued by fair-goers if someone is injured while on one of their rides.
- An individual takes out a car insurance policy on her vehicle. The insurance company indemnifies them from liability for accidents or injuries that occur as a result of the vehicle. If the driver gets into a car accident the insurance company would take care of any claims that are made against the driver or the vehicle.
- Emily is having work done on her home and the entire area is a construction zone. There is debris and tools everywhere. She has all of her contractors sign an indemnity agreement, or hold harmless agreement , that says that will hold harmless the owner of the home in case of any injuries that happen from the mess at the job site.
Here is an article with several examples of indemnification agreements.
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What’s Included in an Indemnification Agreement?
While an indemnification agreement will vary from one situation and one business to another, there are a few different characteristics that will be the same or vastly similar between them.
- Named parties . The two parties to the indemnification agreement are also known as the indemnitee (person being protected) and the indemnifiers (the person doing the protecting).
- Contract . In order to have an indemnity agreement the two parties above must have some form of contract between them that lays out a product or service to be exchanged.
- Liability . The contract should otherwise create some implied liability from the indemnitee to the indemnifier and to third parties.
- Damages, loss, or burden . The indemnification agreement will typically state that it frees the indemnitee from responsibility or liability for ‘damages, loss, or burden.’
- Statement of ‘protection’. The agreement includes a statement that offers the protection, stating that the indemnifier ‘holds harmless,’ indemnifies,’ or ‘releases from liability’ the indemnitee.
- Period of indemnity . The agreement must lay out the specific length of time for which the agreement is in place and payment would be required.
Here is a sample of an indemnification and hold harmless agreement .
Types of Indemnification Agreements
There are two different types of indemnification agreements, which include express and implied indemnity. These specify:
- Express Indemnity . A written indemnity agreement or contract which outlines terms and conditions that are required to be followed by both the indemnitee and the indemnifier. The indemnity is ‘expressly’ written/named.
- Implied Indemnity . An obligation that is not expressly named where the indemnifier can be held responsible to the indemnitee through a reasonableness standard.
We can also look at specific areas where indemnification agreements may be entered into. These can include:
- Construction . An example may be a builder making a claim about the quality or features of the products being used.
- Insurance . An example may be when an individual is involved in an accident that injures another person.
- Rental . An example may be a landlord requiring a tenant to be responsible for injury that occurs to others within their rental property.
- Pet boarding . An example may be a boarding facility being freed from liability if another pet injuries your pet during boarding.
- Licensing . An example may be when a third party uses a service that has been contracted out to another party.
Here is an article with several types of indemnification situations.
Who Signs an Indemnification Agreement?
The two parties of the contract will sign the indemnification agreement. This means the indemnitee, or the person/business/company providing the good/service, will sign the document. The indemnifier, or the person/business/company receiving the good/service, will sign the document as well.
A contract that is not signed by both of these parties may not be legally enforceable. There are exceptions to this rule as noted by the existence of implied indemnification agreements. The implied agreement means that there is no written contract between the parties, but a reasonable person would assume a similar agreement.
If no document is signed, however, it is possible for a suit to occur and then the burden of proof that an implied agreement existed would be on the party being sued.
Here is a sample of an indemnity and hold harmless agreement .
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Drew B.
Drew is an entrepreneurial business attorney with over twenty years of corporate, compliance and litigation experience. Drew currently has his own firm where he focuses on providing outsourced general counsel and compliance services (including mergers & acquisitions, collections, capital raising, real estate, business litigation, commercial contracts and employment matters). Drew has deep experience counseling clients in healthcare, medical device, pharmaceuticals, information technology, manufacturing, and services.
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Steven W.
Attorney Steven Wax is ardent about helping his clients. Whether creating personalized estate plans, drafting and negotiating contracts or other legal matters. Steven’s goal is to assist and counsel his clients to protect them and their loved ones. Steven grew up on Long Island, New York. He attended the University of Massachusetts in Amherst earning a BS in Sport Management. He earned his paralegal certificate at Duke University and earned his Juris Doctorate from North Carolina Central University School of Law in Durham, NC. Steven has an extensive legal career in the life science sector, working for some of the world’s largest Contract Research Organizations since 2013. Steven has negotiated a broad range of contracts for both businesses and individuals. Steven participated in the NCCU Elder Law Project, where he prepared wills, durable powers of attorney, living wills, and health care powers of attorneys for low/fixed income clients in Durham and surrounding counties. Steven finds meaningful ways to share his skills and passion with his community. Steven volunteers his time to Wills for Heroes, which provides no-cost estate planning documents to first responders and their families, through the NC Bar Foundation.
"Steven is amazing and helped with this so close to the holidays. Thank you Steven."
Jane C.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.
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At Barker Law, we provide clients with superior service in trust, probate, and estate matters and litigation, contract drafting and review, outside general counsel services, negotiation, commercial litigation, and regulatory navigation. We confidently handle transactional and regulatory matters for businesses and individuals. As our feedback shows, we excel at meeting and exceeding our clients needs.
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I am an experienced, well-rounded attorney with a background specializing in trusts and estates, contracts and business law. I have extensive experience working with simple contracts all the way up to multi-million dollar deals.
"Michelle drafted an excellent and unique Post Nuptial agreement which outlines a very specific "process" that will be used to divide assets in the event of divorce. Since assets can change value daily, traditional "splitting an asset list" methods are often outdated within a week of signing. Michelle rose to the challenge at a very reasonable price. Other, "meter man" attorneys would have charged at least 5x more. I highly recommend Michelle!"
October 5, 2023
Melody P.
I have been practicing law since 2005 and am licensed in the state of Pennsylvania. I started in Pittsburgh, PA and then moved to Williamsport in 2007 where I have practiced family law almost exclusively since. I am the managing partner /owner of Protasio & Jasper, P.C. I have had multiple Pennsylvania Supreme Court family law cases that have changed the law in Pennsylvania. I pride myself on being able to arm clients with information so that they can make informed decisions about their case.
October 10, 2023
Jessica G.
Nevada Attorney with experiences in outside general counsel representation, contract drafting, and civil litigation.
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Is an indemnification agreement enforceable if it was signed under duress?
I signed an indemnification agreement with my employer after being threatened with termination if I didn't comply, and now I am facing potential liability for a work-related accident. I am wondering if the agreement is enforceable since I signed it under duress, and if I can be held responsible for the damages despite the circumstances surrounding the signing of the agreement.
Randy M.
An indemnification agreement signed under duress may not be enforceable, but whether it can be voided depends on the specific facts of your case and the law in your jurisdiction. Contract law requires voluntary consent. If consent is obtained through coercion, the agreement is generally considered voidable by the party placed under duress. Legal Standard for Duress Courts recognize two main forms of duress. Physical duress involves threats of bodily harm and is the clearest ground to void a contract. Economic duress occurs when someone is pressured into signing due to wrongful or coercive economic threats. The threat of termination can sometimes qualify, but courts apply a high standard. They will look at factors such as whether you had any reasonable alternatives, whether the employer acted in bad faith, and whether the circumstances left you with no meaningful choice but to sign. For example, if you were told you’d be fired unless you signed immediately, with no chance to review the document or seek advice, that kind of artificial urgency could support a duress claim. On the other hand, if you were given time to consider the agreement and could have reasonably sought other employment, courts are less likely to find duress. Employment-at-Will Context Most states follow the at-will employment doctrine, which allows employers to terminate employees for almost any reason that is not illegal. Because of that, courts often treat workplace ultimatums as business pressure rather than wrongful coercion. However, the doctrine doesn’t give employers unlimited power. If the termination threat was used specifically to force you to assume liability for risks the employer is legally responsible for, that can be considered improper and may render the agreement voidable. Shifting Liability to Employees Indemnification clauses in employment contracts are closely scrutinized because employers generally bear the legal duty to maintain safe workplaces. Federal law under the Occupational Safety and Health Act requires employers, not employees, to ensure workplace safety. Courts in many states have refused to enforce agreements that shift liability for workplace accidents from the employer to the employee, especially if the employer is in a better position to insure against those risks. For example, California Civil Code §1668 voids contracts that exempt a party from responsibility for violations of law or duties owed to the public. Similar public policy principles apply in other states. Practical Challenges Even if duress can be established, you may still need to demonstrate that the indemnification terms themselves were unreasonable or unconscionable. Courts will often look at whether the agreement was one-sided, whether you had a meaningful opportunity to negotiate, and whether the employer sought to impose obligations that are inconsistent with public policy. Next Steps If you’re facing liability based on this indemnification clause, it’s important to preserve all evidence of how the agreement was presented to you. Keep records of emails, conversations, or witnesses that can confirm the circumstances of the signing. An employment or contract attorney in your state can evaluate whether the clause is enforceable, raise duress or unconscionability as defenses, and, if necessary, argue that public policy prevents shifting liability to you. On Contracts Counsel, you can connect with experienced contract attorneys who can review your agreement, consider the circumstances surrounding it, and guide you on your next steps.
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