Indemnity Agreement Example
Brigitte Werfel October 18, 2021 Agreement
Indemnity is a risk shifting tool in which one party agrees to take responsibility for the liability of another party ,and the terms of the contract can actually define what the scope of that indemnity obligation is. For example, you can have an agreement that one party will pay for any claims, or lawsuits that arise out of a particular project, even if the negligence that is alleged in the claim, or lawsuit is the negligence of the party you are indemnifying. So, you can agree to limit that indemnity to only lawsuits, or claims that arise out of your work.
So, I will indeed agree to indemnify another party, if something I do is a cause of the lawsuit or the claim. You can also limit indemnity obligations by excluding certain kinds of claims and lawsuits. For example, a party could agree to indemnify another party for lawsuits or claims. However, they will not indemnify them for things that are caused by the sole negligence of the other party, which means you have control over exactly what you're going to cover, and what you're not going to cover. Depending on how you structure the indemnity obligation.
You can have an indemnity agreement that you will indemnify someone for their liability, which means if they end up having to pay a judgment, you will pay that judgment for them. You can indemnify someone for their damages. Which would mean that you pay, and reimburse them for whatever amount of damages they have to pay. You can have obligations that are limited to property damage. You can have obligations that are limited to injuries, or liabilities that arise out of someone's employees, or their contractors.
So, the big picture on indemnity agreement is it allows parties to shift risk away from themselves, and how they structure it determines how much actual protection that they have. There's a thing called past their indemnity where you agree to indemnify someone else's agreement to indemnify a third party. You may not know who the third party is. It's possible that you are indemnifying someone that you've never met a risk, that you have no control over, and it can be devastating, it can be very expensive.
Happily, there is insurance now that can cover those kinds of risks. But it's a sort of thing that if you don't read indemnity obligations, if you don't read the contracts thoroughly, you might find yourself in a position where you've bitten off much more than you want to choose. One of the things that we tell our clients with regard to any contracts, they sign any insurance that they believe they have. Is it until they take the time to read the entire document.
For purposes of reviewing an insurance policy, reading all the endorsements for purposes of a contract/agreement, making sure you read all the attachments and exhibits. All of those things are imperative, if you want to understand what the potential risk that you're either shifting, or is being shifted to you.
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