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?
- Basics to Cover in a Hold Harmless Agreement
- Types of Hold Harmless Agreements
- Examples of When Hold Harmless Agreements Are Used
- Benefits of Using a Hold Harmless Agreement
- How to Write a Hold Harmless (Indemnity) Agreement?
- Hold Harmless Agreement Sample
- Special Considerations for Construction-Related Hold Harmless Agreements
- Hold Harmless Agreement FAQs
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
The Promisor may also be called the Indemnitor, Indemnifier, or Indemnifying Party. The Promisee may also be called the Indemnitee or Indemnified Party.
Hold Harmless vs Indemnity Agreement
Hold harmless and indemnity agreements are popular tools that can limit the liability of one or more parties that are signing a contract. Even though they are similar, they are not identical.
A hold harmless agreement means that an organization or individual cannot be held liable for injuries or damages that the other party might experience in a certain situation. On the other hand, an indemnity agreement means that one party is going to insulate another party against those specific losses or damages. Essentially, an indemnity agreement will protect against potential losses while a hold harmless agreement will protect against both liabilities and losses.
Basics to Cover in a Hold Harmless Agreement
There are several important basics that you need to cover in a hold harmless agreement. Some of the most important examples include:
Identify the Indemnitor and the Indemnitee
First, you need to identify who is the indemnitor, which is the party providing protection for the other party in the contract. Then, you need to identify the indemnitee, which is the party receiving the protection in the contract.
Define the Activities Covered in the Agreement
Next, you need to define the activities under which the indemnitee will be held harmless. For example, if this is a business contract, then the indemnitee might be held harmless within the scope of business activities, but the protection might not extend outside of business activities. You need to specify what these activities are.
Explain Possible Termination and Severability
Finally, you need to explain when the contract will be terminated. For example, the contract might only be in effect for a certain length of time. Then, there might be certain situations where the contract will be severed early. This is generally referred to as severability.
In addition to the above introductory provisions, here are some additional terms you may want to include:
The Indemnity
- 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.
The Agreement
- 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
Legal Speak
- 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
Types of Hold Harmless Agreements
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.
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 | |
|---|---|---|---|
| Promisor's Negligence | X | X | X |
| Promisee's Negligence | X | X | |
| 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.
Examples of When Hold Harmless Agreements Are Used
There are several common examples of where hold-harmless agreements might be used. They include:
- Real Estate – If you are renting property to someone else, you might have this clause to protect you against damage that might be caused by a tenant.
- Construction – You might want protection if you are building another building, meaning that you are not responsible for certain types of damages.
- Amusement – If you provide a fun activity with some injury risks, you might want to specify that you are not responsible for someone who gets hurt.
- Sports – There is also a risk of injury when playing sports, so you may want to specify that you are not responsible for someone who gets injured while playing sports of his or her own free will.
- Venue Rentals – You might have a venue that you rent out for weddings, graduation parties, and corporate events. You might want to specify that you are not responsible for someone who gets hurt at the venue during the event.
- Service Providers – If you provide contracting services for a specific purpose, you may want to specify that you are not responsible for any damage to your property while the services are being provided.
- Pet Owner – If you have pets on your property, you might want people to sign an agreement saying that you are not responsible for injuries sustained while interacting with your pet.
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:
| Indemnitor | Indemnitee |
|---|---|
| Tenant | Landlord |
| Independent Contractor | Homeowner |
| Rental Car Driver | Rental Car Company |
| Employee | Business Owner |
| Pet Owner | Kennel or Dog Groomer |
| Subcontractor | Contractor |
| Company | Director or Officer of a Company |
| Client | Consultant |
| Supplier | Customer |
| 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.
Benefits of Using a Hold Harmless Agreement
There are several significant benefits you will enjoy if you have a hold harmless agreement in place. Some of the biggest benefits include:
- Reduce the Risk of a Lawsuit: With this type of agreement in place, you can reduce your risk of facing a lawsuit. A person signing the agreement will know that they will not be able to file a lawsuit against you in most circumstances because they have already agreed to hold you harmless.
- Reduce Possible Legal Expenses: If you can reduce your chances of facing a lawsuit, you can also reduce potential legal expenses. Because you can avoid having a lawsuit filed against you, you may not have to hire an attorney to represent and offend you.
- Reduce Negative Public Exposure: You can also reduce potential negative public exposure. If someone filed a lawsuit against you, it is generally public, which can harm your brand reputation even if you win. Protecting yourself against a lawsuit also means protecting your brand identity.
Here are some of the suffering using this agreement could help avoid:
| Promisor | Promisee |
|---|---|
| Lost Money - Unable to get a job or contract - Did not obtain proper insurance | Lost Money - Responsible for unanticipated losses and liabilities - Did not obtain proper insurance |
| Lost Time - Extended argument involving attorneys in a courtroom | Lost Time - Time spent fighting legal battles instead of building a business |
| Mental Anguish - Prolonged problem hanging over your head | Mental Anguish - Fear of hiring another contractor |
An insurance policy may help cover any liabilities owed under an Indemnity Agreement if something goes wrong.
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:
Special Considerations for Construction-Related Hold Harmless Agreements
If you want to enforce a hold harmless agreement for construction-related activities, there are special considerations you may need to consider depending on your location. A few important points to keep in mind include:
California
There are specific laws in California related to a hold harmless agreement signed between a contractor and a general contractor. If a hold harmless agreement requires a subcontractor to indemnify a general contractor or property owner, it is void if it would indemnify the general contractor for willful misconduct or act of negligence.
This situation was reinforced by a case in 2017, California Court of Appeals Case, Oltmans Construction Company v. Bayside Interiors, Inc. In this case, a subcontractor was injured when he fell through a skylight opening that was not properly secured. The injured subcontractor filed a lawsuit against the general contractor and the first-tier subcontractor responsible for the skylight. The general contractor and first-tier contractor believed that they were protected by a hold harmless agreement, but the California Court of Appeals stated that the negligence of the first-tier contractor directly contributed to the injuries sustained.
Therefore, the general contractor and the first-tier subcontractor could be suited to a certain extent. There are a lot of intersecting laws in California related to hold harmless agreements in the construction industry, which is why it is always important to work with an attorney who can specify what is legally enforceable and what is not.
Florida
In Florida, a hold harmless agreement can be treated differently. A contractor on a construction project might be required to indemnify a contractor on another project even if that second contractor is negligent. Before this indemnification can be enforced, the indemnification must have a reasonable dollar limit. If there is no limit specified in the hold harmless agreement, or if the dollar limit is deemed to be excessive by the court system, then the entire agreement could be thrown out.
This exact situation played out in a case heard in Florida in 2012, Griswold Ready Mix Concrete, Inc. v. Tony Reddick, & Pumpco, Inc., 134 So. 3d 985, 987. In this case, a concrete contractor was hired by a subcontractor to pour concrete during a construction project. An accident happened, and a third party was injured. The subcontractor initially settled with the person who was injured, then they sought protection under the indemnification Clause signed with another contractor.
The subcontractor believed that he was protected, but the indemnification Clause did not have a dollar limit. As a result, the hold harmless agreement was deemed void under the law, and the indemnification was thrown out.
Texas
The Texas Insurance Code is an important part of a hold harmless agreement, specifically the Texas Indemnity Act, or TAIA. Under this law, a hold harmless agreement cannot require a subcontractor to protect a general contractor if the general contractor is also negligent.
There are exceptions to this rule for certain types of bodily injury, and it does not necessarily apply to construction taking place in the oil and gas sector. These fields are covered under a separate legal statute.
While the TAIA does not apply to claims of bodily injury, it can apply to other areas. Generally, this law applies to the duty that the general contractor owes to a subcontractor when the subcontractor is injured on a job site. Before drafting a hold harmless agreement in Texas, it is important to think about how this clause may impact the enforceability of the agreement.
Georgia
In Georgia, indemnity clauses in the construction industry are not allowed if they indent defy a contractor or subcontractor against his or her sole negligence and care. For example, if a general contractor were to be negligent on the job, resulting in serious property damage or injury, an indemnity clause would not protect him or her if his or her negligence or actions were the direct cause of the damages suffered.
In addition, Georgia adopted legislation that declares indemnity or hold harmless agreements signed by engineering, architectural, or land surveying services that go against public policy void and unenforceable. Therefore, if a project is deemed to go against public policy, and a contractor had an Indemnity agreement with an engineering or land surveying firm that was initially responsible for the project, a hold harmless agreement signed between the parties would not be enforceable in this case.
As in other situations, it is critical to work with a legal professional who has an understanding of hold-harmless agreements in Georgia. That way, contractors and businesses can ensure that the agreement is enforceable before they ask other parties to sign it.
Hold Harmless Agreement FAQs
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.
What is the purpose of a hold harmless agreement?
The entire purpose of a hold harmless agreement is to protect you against a potential lawsuit. Prior to a specific activity, the other party is agreeing not to hold you responsible for any damages they sustain.
Why you should not sign a hold harmless agreement?
You may not want to sign a hold harmless agreement if you are nervous about incurring damages, physical or otherwise, while participating in a certain activity.
Does a hold harmless agreement need to be notarized?
A hold harmless agreement generally does not need to be notarized; however, you need to look at the requirements in your specific location. There are situations where certain jurisdictions might require a notary agreement before a hold harmless agreement is legally enforceable. You may decide to get the document notarized anyway if you want to reinforce the validity of the signatures on the page.
How binding is a hold harmless agreement?
In the vast majority of cases, a hold harmless agreement is binding and legally enforceable. It is critical for the person drafting the hold harmless agreement to be as specific as possible. They need to stipulate that they are being released from all potential liability stemming from a lawsuit that might be filed alleging negligence or wrongdoing.
What is the difference between a waiver and a hold harmless agreement?
There can be a difference between a waiver and a hold harmless agreement, but it depends on the nature of the waiver. A hold harmless agreement is generally the same as a liability waiver, but there is also a waiver of subrogation that is different. A waiver of subrogation means that the party signing the waiver is giving up the right to allow an insurance company to step in and cover damages.
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.