A hold harmless clause, also called an indemnification or indemnity clause, is a sentence in a lease or contract where one side promises to cover the other side’s losses from certain claims. The usual wording is that you’ll “defend, indemnify and hold harmless” the landlord or client, which means you’ll pay for their lawyers, pay what they end up owing, and not come after them yourself.
These clauses decide who pays when something goes wrong, and they run from narrow and fair all the way to clauses that ask you to pay for the other side’s own mistakes. Your insurance may cover part of what you promise, though not necessarily all of it, and some states limit what these clauses can require. None of this is legal advice, and a lawyer should look at any clause you’re not sure about.
Key takeaways
- A hold harmless or indemnification clause shifts the cost of certain claims from one party to the other by contract.
- Clauses range from limited, covering only claims you cause, to broad, covering claims even when the other party is at fault.
- Your indemnity promise binds you when you sign, whether or not your insurance will pay for it.
- General liability policies often cover some liability you take on in an “insured contract,” subject to the policy’s terms, endorsements and exclusions.
- Many states limit these clauses by statute, especially in construction, so have a lawyer review any broad or unclear clause before you sign.
What the three verbs mean
The NAIC’s glossary describes a hold harmless agreement as a way of transferring risk, where one party takes on another party’s liability by contract, and in the clause itself that transfer usually comes in three parts.
To defend means paying for the other party’s lawyers when they’re sued over a claim the clause covers, which can be the biggest cost of all, since defense bills arrive whether or not the claim has merit. If your general liability picks up that defense, the standard ISO form reproduced in New York’s guidelines pays it outside your limits only when a list of conditions is met, so don’t assume it’s free. To indemnify means paying the other party back for what they have to pay, such as a settlement or a judgment. To hold harmless means agreeing that you won’t hold them responsible for the loss yourself.
A clause can be one-way, where only you make the promise, or mutual, where each side covers the other for claims it causes. Mutual is usually fairer, and you should ask for it whenever the other party controls part of the risk, like a landlord who maintains the parking lot.
Limited, intermediate and broad forms
Start with the clause to worry about. This one is written for this article as an illustration, like the others below:
“Tenant shall indemnify and hold harmless Landlord from any and all claims arising from or related to Tenant’s use of the Premises, including claims caused by Landlord’s sole negligence.”
That’s broad form. You’d be paying for claims connected to your space even when the landlord was entirely at fault, say a customer hurt by a stair rail the landlord never fixed, which makes it the most one-sided version; anti-indemnity laws restrict it in some states, especially in construction, and even where it’s allowed, as the next section explains, it’s the part of an indemnity your insurance is least likely to pay for.
Intermediate form covers claims caused in whole or in part by you, even if the other side shares the blame:
“Contractor shall defend, indemnify and hold harmless Owner from all claims arising out of Contractor’s work, caused in whole or in part by Contractor, regardless of whether caused in part by Owner.”
Even at 30% fault, you may be on the hook for the whole claim, depending on your state’s law.
Limited form covers claims only to the extent you caused them, with wording like “but only to the extent caused by the negligent acts or omissions of Contractor,” so 30% at fault means 30% of the bill. It’s the fairest version and often what a mutual clause looks like. Courts still read the actual words, of course, and the labels are just a way to see how much you’re carrying.
Your promise and your insurance are two different things
Here’s the common mistake. It’s tempting to assume that if you carry general liability, the indemnity clause is “covered,” and to sign whatever form the landlord or GC hands you. That’s only partly true, and the gap can be expensive.
Start with timing. New York’s state contracting guidelines point out that an indemnification clause takes effect automatically when the contract is signed, while insurance is a separate thing that has to be proven and kept in place. You owe the promise from day one. Whether an insurer helps you keep it is a different question, answered by your policy.
Now the policy. The standard ISO general liability form reproduced in those guidelines excludes injury or damage you’re obligated to pay because you assumed liability in a contract. That exclusion has two exceptions, and they carry the whole weight: it doesn’t apply to liability you’d have anyway, without the contract, and it doesn’t apply to liability assumed in an insured contract, as long as the injury or damage happens after the contract was signed.
So what’s an insured contract? The form’s definition covers a lease of premises, with a carve-out for promises to pay for fire damage to premises you rent, plus several narrow categories, plus one big catch-all: that part of any other contract or agreement pertaining to your business under which you assume the tort liability of another party to pay for bodily injury or property damage to a third person. Tort liability, the form says, means liability that would be imposed by law without any contract.
That’s generous, but it has edges, and two of them matter most.
The definition can be narrowed by endorsement. An ISO endorsement that New York’s guidelines reproduce, the CG 24 26 Amendment of Insured Contract Definition, rewrites that catch-all so it applies only where the injury or damage is caused, in whole or in part, by you or people acting for you. With that endorsement on your policy, a broad-form promise to cover the landlord’s or GC’s sole negligence may fall outside your coverage entirely, which leaves your business paying for it.
The law can narrow it too. The same endorsement says a contract counts as an insured contract only to the extent your assumption of the tort liability is permitted by law. If your state voids part of your promise, that part generally isn’t insured either, though it also generally can’t be enforced against you.
And there’s a limit no endorsement fixes. The catch-all is about bodily injury and property damage to third parties, so a promise to cover the other side’s lost profits, their breach of contract or their fines falls outside it, and a consultant’s promise to indemnify a client for bad advice is a question for professional liability, whose terms vary. In many cases, general liability can help pay for a limited or intermediate indemnity for bodily injury or property damage, subject to the policy’s terms, limits and exclusions, but the only way to know how your policy treats a given clause is to ask before you sign. With Corgi, those questions go to underwriters, not a broker. What business insurance doesn’t cover explains how exclusions and their exceptions work.
Where state law steps in
New York’s General Obligations Law § 5-322.1 is a clear example of what these statutes do. It makes void and unenforceable, as against public policy, any promise in a contract for the construction, alteration, repair or maintenance of a building or structure that tries to indemnify or hold harmless the other party for injury or damage caused by that party’s own negligence, whether in whole or in part.
Other states have their own anti-indemnity laws, and construction is a common target, but the details vary a lot from state to state: which contracts they reach, which forms they void, and how they treat insurance arrangements. We can’t summarize all of them accurately here, and you shouldn’t assume a clause is enforceable, or unenforceable, without checking your state’s law with a lawyer.
Why do contracts ask for indemnity and additional insured status?
They sound like the same protection twice, but contracts ask for both because each covers a weakness in the other.
Indemnity is your promise, so the other party’s protection depends on the contract’s wording, your state’s law, your insurance and, in the end, your ability to pay. Additional insured status puts the other party directly on your policy for certain claims, so they can go to your insurer instead of to you, subject to the endorsement’s terms. A landlord will often claim as an additional insured first and lean on the indemnity for whatever’s left over. Additional insured vs. certificate holder explains the endorsement side.
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Questions to ask before you sign
Indemnity clauses are easy to skip, because they sit in the boilerplate between the payment terms and the signature page. Don’t skip them. Ask these six questions:
- Is it one-way or mutual? Ask for mutual if the other party controls part of the risk.
- Is it limited, intermediate or broad? Look for “to the extent caused by,” “in whole or in part” and “sole negligence.”
- What claims does it cover? Bodily injury and property damage only, or “any and all claims,” including financial losses?
- Does my insurance respond? Check your policy’s insured contract definition and endorsements, and ask your insurer.
- Does state law limit it? Especially for construction work.
- Is there a cap? Some contracts limit indemnity to the insurance you’re required to carry, or to the contract value.
Bring in a lawyer when the clause is broad form, when it covers “any and all” claims, when the job is large next to the size of your business, or when you simply can’t tell what it means. The insurance exhibit and the indemnity clause should be read together, and how to read insurance requirements in a client contract covers the exhibit.
Frequently asked questions
Is a hold harmless agreement the same as an indemnification clause?
In everyday contracts they’re used together and mean much the same thing, a promise to cover the other party’s losses from certain claims. Some lawyers and courts draw distinctions between the terms, so read what the clause actually requires and ignore the label.
Does general liability cover hold harmless agreements?
It may cover some of them, since many general liability policies cover liability you assume in an “insured contract,” which can include taking on another party’s tort liability for bodily injury or property damage, though coverage depends on the policy’s terms, exclusions, endorsements and limits, and on state law.
Are hold harmless clauses enforceable?
Often, but not always, because many states have anti-indemnity laws that void certain clauses, especially broad-form clauses in construction contracts, and enforceability depends on the wording and your state’s law, so have a lawyer review clauses that matter.
When does an indemnity clause take effect?
It generally binds you as soon as the contract is signed, and New York’s contracting guidelines describe it that way. Your insurance has to be in place separately, and a standard general liability form covers assumed liability only for injury or damage that happens after the contract was signed.
