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Hold Harmless Agreement Explained

Hold Harmless Agreement
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Hold Harmless Agreement def:

A hold harmless agreement is a provision in a contract that requires one contracting party to respond to certain legal liabilities of the other party. For example, a hold harmless agreement in construction contract typically requires the contractor to indemnify the owner with respect to the owner’s liability to members of the public who are injured or whose property is damaged during the course of the contractor’s operations. There are a number of types of hold harmless agreement clauses, differentiated by the extent of the liabilities they transfer. The most commonly used types of hold harmless agreement clauses are the “broad,” “intermediate,” and “limited” form hold harmless clauses.

  • Limited Form Hold Harmless Agreement—Where Party A holds Party B harmless for suits arising out of Party A’s sole negligence. Party B is thus protected when it is held vicariously responsible for the actions of Party A.
  • Intermediate Form Harmless Agreement—Where Party A holds Party B harmless for suits alleging sole negligence of Party A or negligence of both parties.
  • Broad Form Hold Harmless Agreement—Where Party A holds Party B harmless for suits against Party B based on the sole negligence of A, joint negligence of A and B, or the sole negligence of B. Broad form hold harmless agreements are unenforceable in a number of states.

What does a hold harmless agreement include?

Hold Harmless Agreement
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Depending on the details of the contract you’re signing, hold harmless agreements can look very different. However, some of the common features will typically include:

  • The name of the party who will provide protection in the event of a claim alleging negligence
  • The name of the party who will be held harmless
  • Information that specifies whether you’re looking at a limited form, an intermediate form, or a broad form harmless agreement

When not to use a hold harmless agreement template?

Even though there are many benefits to using a hold harmless agreement, there are some situations where you might need to change the template. These may include:

1. When the Terms Are Unclear

Whether you’re the party providing protection or the party who is being held harmless, it’s important to understand the exact parameters of the agreement you’re signing. Otherwise, it’s all too easy to end up in a situation where there’s a lawsuit going on and you and the other party have different understandings of what the hold harmless agreement says. If the agreement doesn’t specify the type of coverage, you may need to adjust the template for clarity.

2. The Agreement Doesn’t Reflect the Correct Liability Arrangement 

The appeal of hold harmless agreements is that they allow you to be specific about the person who’s expected to assume liability in the event that someone makes a claim. If the contract assigns liability to the wrong party or fails to indemnify the right person, you may want to make changes to the hold harmless agreement template.

3. You Don’t Need a Hold Harmless Agreement

Hold harmless agreements can be useful when you’re letting someone borrow your property or use your land. But if you’re building a small shed on your personal property and you’re expecting to be the one in charge of the project, it may not make sense to agree to a hold harmless agreement even if there will be multiple people assisting with the build.

Which documents do I need to create a hold harmless agreement?

Hold harmless agreements are often included in contracts. As such, you likely won’t need much more than the standard materials that you would normally use to sign a contract. 

What types of businesses use harmless agreements?

There are many business scenarios where a hold harmless agreement makes sense. Here are just a few:

  • Service providers who offer high-risk activities like bungee jumping or skydiving 
  • Car rental companies 
  • Contractors who hire subcontractors to work under them

What are some examples of hold harmless clauses?

The exact wording may need to be drafted in whole or in part by a licensed attorney, but here is an example of what a hold harmless clause could look like:

“The Client will indemnify and hold harmless the Property Owner from any claims for damages due to property damage, bodily injury, sickness, disease, or death arising from the Organization A’s use of the land.”

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See also Contractual liability; Contractual liability insurance; Contractual risk transfer; Indemnitee; Indemnitor.

A well structured contract can be a highly effective way to reduce risk in your business.  Speak to an ALIGNED Insurance Advocate for more details or connect with us at www.alignedinsuranceinc.com today.

More About ALIGNED Insurance

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