Don’t get blamed for an accident you didn’t cause.
If someone is performing services for you (a contractor) or using your property (a tenant), it is possible you could be held legally liable for their negligent actions. A hold harmless-indemnification agreement allows you to limit your legal liability in these situations and is recommended for most business relationships and agreements. Additionally, it is recommended you require people you do business with provide proof of liability insurance and name you additional insured on their liability policy.
Know the differences
BROAD FORM – This form form of indemnification agreement may impose full liability on the you regardless of fault of the other party. Because broad form indemnity agreements do not adhere to the theory that one should be responsible for one’s actions, these types of agreements are looked upon with disfavor by the courts. In other words, you might be forced to pay 100 percent of the cost of the claim even if you have zero negligence and the other party is 100% negligent.
- Words to watch: “agree to hold harmless and indemnify against any and all liability for injuries and damages arising from …..”
INTERMEDIATE FORM – This form of indemnification may impose full liability on the you for joint negligence, even if the other party is majority at fault. In other words, you might pay 100 percent of the cost of the claim even if you are only 1 percent negligent and the other party is 99% negligent.
- Words to watch: “agree to hold harmless and indemnify against any and all liability for injuries and damages caused in whole or in part by any negligent acts or omissions of the indemnitor….”
LIMITED FORM – Also known as a comparative fault indemnity agreement, the purpose of this form is to allocate the loss among the proper, responsible parties. It restates the common law principal that one should be held liable for one’s own negligence and to the extent of that liability. The limited form indemnity is found in most contracts today and is standard in contracts published by Associated General Contractors of America (AGC) and American Institute of Architect’s (AIA). In other words, you would pay 20 percent of the cost of the claim if it was determined you were 20 percent at fault. The other party would then pay 80 percent of the claim.
- Words to watch: “agree to hold harmless and indemnify against any and all liability for injuries and damages caused by negligent acts or omissions of the indemnitor but only to the extent caused by negligent acts or omissions of indemnitor.”
Disclaimer: The Wheeler Agency recommends business owner utilize hold harmless/indemnification agreements in contracts, but we do not provide legal advice.
Source: Florida Association of Insurance Agents, “Contractual Risk Transfer,” – 2000