A Hold Harmless Agreement template helps protect someone who hired a contractor from liability if they harm themselves while working for them. It acts as a form of insurance and lets people work together who might otherwise not be able to because of legal liability.
- What is a Hold Harmless Agreement?
- What to Include in a Hold Harmless Agreement
- When to Use a Hold Harmless Agreement
- What Happens if I Don’t Use a Hold Harmless Agreement
- Does a Hold Harmless (Indemnity) Agreement Have to be Notarized?
- How to Write a Hold Harmless (Indemnity) Agreement?
- Hold Harmless Agreement Sample
- Hold Harmless Agreement Examples
What is a Hold Harmless Agreement?
A Hold Harmless Agreement (also known as Indemnity Agreement) is a legal document that transfers risk from one party, the Promisee, to another party, the Promisor. The Promisor promises to indemnify or hold the Promisee harmless against future claims, losses, or damages related to a particular activity.
A simple Indemnity Agreement will identify the following essential elements:
- Promisor: the name and address of the person or corporation making the promise to indemnify
- Promisee: the name and address of the person or corporation receiving the indemnity
- Activity: the contract or agreement between the parties that might give rise to future losses or damages
- Indemnity: what will be covered under the indemnity[lt_source id=”1″]
The Promisor may also be called the Indemnitor, Indemnifier, or Indemnifying Party. The Promisee may also be called the Indemnitee or Indemnified Party.
What are the obligations?
The Promisor in an Indemnity Agreement promises to “indemnify,” “hold harmless,” and “defend” the Promisee. Below is a closer look at what each of these means.
The word “indemnify” means that the Promisor will reimburse the Promisee for any loss or damages the Promisee incurs.
To “hold harmless” the Promisee means the Promisor promises that they will not sue or hold the Promisee liable for any injuries or damages.
Duty to Defend
If the agreement includes the word “defend,” the Promisor promises to defend the Promisee against third-party suits.
The statute of limitations on an indemnity claim, which varies by state, begins to run on the date the Promisee pays out a claim.
As a reference, an Indemnity Agreement is known by other names:
- Hold Harmless Agreement
- Indemnification Agreement
- Contract of Indemnity
- Indemnity Contract
- No-Fault Agreement
- Reparation Agreement
- Assumption of Liability Agreement
- Agreement to Indemnify
What to Include in a Hold Harmless Agreement
A simple Indemnity Agreement should generally have at least the following:
- Who are the Promisor and Promisee
- What is the activity giving rise to the indemnity
- Where are the Promisor and Promisee located
- When is the effective date of the agreement
- Why might the Promisor not be obligated to indemnify the Promisee
- How broad is the indemnity being given
In addition to the above introductory provisions, here are some additional terms you may want to include:
- Limitations – identify any restrictions on the indemnity, such as only personal injury or death, and any cap limits on the amount of the indemnity.
- Notice of Claim – the Promisee must tell the Promisor about any claims within a certain amount of days
- Duty to Defend – the Promisor can take control of the defense of the claim; otherwise, the Promisee can pursue its security and seek reimbursement.
- Amendments – amendments must be in writing and signed by both parties
- Assignment – parties can only assign the agreement if the other party agrees in writing
- Notices – where notices about the agreement will be sent
- Governing Law – which state’s laws governs the agreement
- Disputes – how disputes regarding the agreement will be handled: litigation, arbitration, or mediation
- No Waiver – any waiver of any part of the agreement must be in writing
- Severability – if one part of the agreement is ruled invalid, the rest of the agreement will not be affected
- Counterparts – the agreement can be signed separately
- Entire Agreement – the agreement supersedes all prior agreements
When to Use a Hold Harmless Agreement
All activities come with a certain amount of risk. An Indemnification Agreement allows parties to shift risk based on their needs and protect themselves against future lawsuits or losses. It acts as a form of insurance and incentivizes parties to enter into contracts they wouldn’t otherwise enter into.
For example, suppose you wanted to remodel your kitchen. You may be reluctant to hire a contractor to come into your home. They might sue you if the contractor or one of his employees gets injured.
By having the contractor sign this agreement, you can protect yourself against such lawsuits.
The contractor promises not to sue if he gets injured. And suppose the contractor’s employee gets hurt and sues you. In that case, the contractor will have to defend the suit or reimburse you for your expenses in defending the claim.
Suppose the contractor accidentally drops your old kitchen sink onto the neighbor’s new car. This document can absolve you of any responsibility for the damage. It can also protect you against third-party claims.
Parties can negotiate how broad or limited the Promisor’s indemnification obligation will be.
Types of Indemnity
There are three general types of indemnity clauses:
Type 1 – Broad Indemnification
A Type 1 indemnity clause is the broadest form of indemnification. The Promisor promises to indemnify the Promisee against the negligence of all parties, including third parties, even if the third party is solely at fault.[lt_source id=”2″]
In most states, broad form indemnity provisions are invalid in construction contracts.
Type 2 – Intermediate Indemnification
A Type 2 indemnity clause is an intermediate form of indemnification. The Promisor promises to indemnify the Promisee against the negligence of the Promisee and the Promisor. The indemnity does not extend to the actions of third parties.
Type 3 – Limited Indemnification
A Type 3 indemnity clause is the most limited form of indemnification. The Promisor promises to indemnify the Promisee only against the negligence of the Promisor. The indemnity does not extend to the actions of the Promisee or third parties.
Below is a chart illustrating who is covered under the different types of indemnity clauses:
|Type 1||Type 2||Type 3|
|Third Party's Negligence||X|
In most states, including California, the Promisor cannot be held liable for damages caused solely by the Promisee.
Be sure you have carefully read the document and understand the extent of the contractual obligations.
What is negligence?
A person is negligent when they do not act with the level of care an ordinarily prudent person would under the same circumstances.
There are two types of negligence – passive negligence and active negligence:
- Active negligence occurs when a person performs an action that causes damage – for example, improperly installing floorboards causing one to become loose.
- Passive failure occurs when a person fails to act, such as failing to discover a loose board on the floor. Many states prohibit indemnity for active negligence in commercial contracts.
What Happens if I Don’t Use a Hold Harmless Agreement
This agreement allows all parties to a contract to know who will bear the responsibility if something goes wrong and prepare accordingly. Without it, you may get sued or be responsible for damages that were not your fault. Or you may have no incentive to do your job with reasonable care.
Here are some of the suffering using this agreement could help avoid:
- Unable to get a job or contract
- Did not obtain proper insurance
- Responsible for unanticipated losses and liabilities
- Did not obtain proper insurance
- Extended argument involving attorneys in a courtroom
- Time spent fighting legal battles instead of building a business
- Prolonged problem hanging over your head
- Fear of hiring another contractor
An insurance policy may help cover any liabilities owed under an Indemnity Agreement if something goes wrong.
Does a Hold Harmless (Indemnity) Agreement Have to be Notarized?
A hold harmless agreement does not need to be notarized in order to be valid. However, some institutions, such as banks, could refuse the document if it’s not notarized due to having their own signing requirements in place. Check with the institution where the document will be used to ensure it doesn’t need to be notarized.
How to Write a Hold Harmless (Indemnity) Agreement?
The easiest way to write a Hold Harmless (Indemnity) Agreement is to use a well-drafted template, which you can download here. Follow these steps when writing your agreement:
Step 1 – Initial Information
Start your hold harmless agreement out by including the date on which the agreement is being made, the names of the indemnitor and indemnitee, and whether the agreement is including others such as employees or company owners.
Step 2 – The Agreement and Indemnification
Outline what the indemnitor is agreeing to, describing the activity or event giving rise to indemnity. Then detail what acts the indemnification is in relation to, as well as any indemnity limits.
Step 3 – Exceptions and Notice of Claim
Next, you will want to outline any exceptions in relation to the indemnity and if there’s a cap on the indemnity amount. You should also include how much notice of any claim the indemnitee must prove to the indemnitor.
Step 4 – Disputes
In this section include how any disputes arising from the agreement will be resolved, such as through court litigation or mediation.
Step 5 – Signatures
Finally, both the indemnitor and indemnitee need to sign the agreement.
Hold Harmless Agreement Sample
The sample Hold Harmless Agreement below shows what a typical agreement looks like:
Hold Harmless Agreement
Hold Harmless Agreement Examples
An Indemnity Agreement is often used when two parties enter into an agreement where there is a potential for legal liability.
Here are some examples of when you might use one:
|Rental Car Driver||Rental Car Company|
|Pet Owner||Kennel or Dog Groomer|
|Company||Director or Officer of a Company|
|Homeowner Refinancing Home||Title Company|
|Thrillseeker||Skydiving Company or Amusement Park|
Common law indemnity or equitable indemnity allows a party to file a cross-complaint against a third party who is in whole or in part responsible for any losses or damages, even if there is no Indemnity Agreement. Laws regarding equitable indemnity vary by state.