HOLD HARMLESS & INDEMNITY AGREEMENTS. ARE YOU AWARE OF THEIR IMPACT?

Contributing Editor: Jim Gray, CPCU

There are few areas more misunderstood and or ignored than hold harmless and indemnity agreements commonly used in contracts today. At one time or another we are all subjected to signing legal agreements that include hold harmless and indemnity agreements. On the other hand, you and your attorney have probably used this risk transfer tool to protect your interest and asked others to sign one in your favor. Construction contracts, purchase orders, and leases are some examples where these are used. Under a hold harmless agreement, one party agrees not to attempt to recover payment for damages from the other party. The intent of an indemnity agreement is to transfer the liability for risk to another party, usually the party in control of the risk of loss, and protect the innocent party. But, the misuse and abuse of these clauses is common. Ohio law provides some protection for misuse of hold harmless agreements.

The most common questions we get as insurance agents are,

ARE THESE AGREEMENTS INSURABLE?

WILL MY INSURANCE COMPANY DEFEND THE PARTY I AGREE TO INDEMNIFY?

DO I VIOLATE ANY PROVISIONS OF MY LIABILITY INSURANCE BY SIGNING THE AGREEMENT?

SHOULD I AGREE TO ADD ANOTHER PARTY TO MY POLICY AS AN ADDITIONAL INSURED?

Space and time in this blog do not allow me to address all the issues involved with this subject. Seminars that we’ve attended addressing this subject last six to eight hours and just scratch the surface. But, we can help you in making informed decisions about hold harmless/indemnity agreements. We recommend that you allow us to review these agreements so that we can evaluate them as they relate to your insurance coverage. We are not a substitute for your attorney, and many times we have recommended that our customers discuss the specific agreements with legal counsel. Next time you encounter one, give us a call. Your agent will be most happy to help.

PS: I hope you have been finding this blog of some use. I hope to get some feedback as to your opinions, criticisms, or practical examples. At the end of each blog is a link to “comments.” Please let me know you’re there. It’s lonely out here!