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 be unable to because of legal liability.
What is a Hold Harmless Agreement?
A Hold Harmless Agreement (also known as Indemnity Agreement) is a legally binding and enforceable document that transfers risk from one party, the Indemnitee, to another party, the Indemnifier. The entire purpose of a hold harmless agreement is to protect you against a potential lawsuit.
It 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.
Types of Hold Harmless Agreements
There are three main categories hold harmless agreements fall into:
General
A general hold harmless agreement is a broad agreement that covers a wide range of activities or situations. It establishes a comprehensive indemnification arrangement for various potential risks regardless of the nature of the activity.
Services
It is for situations where one party (the Indemnifier) provides services to another (the Indemnitee). The service provider is responsible for errors, omissions, or other risks associated with the services rendered.
Property Use
This type is specific to situations where a person or entity is granted permission to use someone else’s property for a certain purpose, such as events or rentals.
There are three types of hold-harmless agreements in the construction industry:
Broad Form
A subcontractor assumes responsibility for all liabilities, claims, damages, losses, and expenses arising from the specified activity. It offers full protection to the Indemnifier and is rarely used due to its one-sided nature.
Intermediate Form
A subcontractor (The Indemnifier) agrees to cover liabilities, claims, damages, losses, or expenses arising from the specified activity, but only if they are solely or partially responsible for the incident.
Limited Form
A subcontractor (The Indemnifier) agrees to cover only specific liabilities, claims, damages, losses, or expenses outlined in the agreement. This type of agreement is often used in situations where there are clear and foreseeable risks associated with an activity, and the Indemnifier is willing to take responsibility for those specific risks.
When to Use A Hold Harmless Agreement
All activities come with a certain amount of risk. A Hold Harmless Agreement allows parties to shift risk based on their needs and protect themselves against future lawsuits or losses. It acts as insurance and incentivizes parties to enter into contracts they wouldn’t otherwise enter into.
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 you are not responsible for certain 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.
Example Scenario
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.
Benefits of Using a Hold Harmless Agreement
You will enjoy several significant benefits if you have a hold-harmless agreement. Some of the biggest benefits include:
- Reduce the Risk of a Lawsuit: With this type of agreement, you can reduce your risk of a lawsuit. A person signing the agreement will know they cannot file a lawsuit against you in most circumstances because they have already agreed to hold you harmless.
- Reduce Possible Legal Expenses: If you 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 files 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 includes others such as employees or company owners.
Step 2 – The Agreement and Indemnification
Outline what the indemnitor agrees to, describing the activity or event giving rise to indemnity. Then detail what acts the indemnification is in relation to and 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
This section includes how 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:
The enforceability of your hold harmless agreement will depend on its intended use, your specific state laws, and how the courts interpret its application.
