Definition
What is Contractual indemnity (hold harmless)?
A contractual indemnity is a clause in which one party (usually the contractor) agrees to cover specified losses, claims, or defense costs of another party (the association) arising from the contractor’s work.
What it means in practice
Indemnity — often paired with a “hold harmless” and a duty to defend — is the contract half of risk transfer; additional-insured coverage is the insurance half. Together they aim to place the financial consequences of the contractor’s work on the contractor and its insurer. A signed indemnity in the contract should exist before the contractor mobilizes.
Enforceability and permitted breadth vary by state, and some jurisdictions limit or void indemnities that shift liability for the indemnitee’s own negligence (anti-indemnity statutes). The wording, the duty to defend, and how it interacts with the insurance requirements matter, so boards typically have counsel review the clause.
Key points for boards
- Indemnity is the contractual counterpart to additional-insured coverage.
- Look for a duty to defend, not only a duty to reimburse after the fact.
- State anti-indemnity laws can limit how far liability may be shifted.
- Have the clause in place and signed before work begins.