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What Is Indemnification?

  


IndemnificationFine print. Seems like contracts are full of it. The clauses and provisions that make up a contract each have a specific purpose, though. Indemnification, for example, is often used to protect a party to a contract. That may sound simple, but can be complicated and costly if entered into lightly.

Indemnify means to compensate an individual or entity for a specific loss or damage. In some contracts, you might be the person being indemnified. In other contracts, you may be the party indemnifying another. Indemnity agreements are common in contracts between businesses and even between governments.

Indemnification in Action

An insurance policy is technically a contract where an insurer agrees to cover the losses of an insured, but only for specific losses. Your automobile insurance won’t pay to fix the roof of your house if it collapses during a blizzard.

Property leases of all types typically include indemnification language that usually falls into three types: broad form, intermediate form, and limited form. As the names imply, broad indemnification protects from any and all liability, intermediate covers only some liability, and limited indemnity covers liability on a percentage basis.

Corporations use indemnification to protect current or former directors, officers, or employees of the corporation from potential losses from judgments, penalties, and fines resulting from a lawsuit against the corporation.

Business contracts often include indemnification provisions. A company that buys another company may want its employees, customers, facilities, and intellectual property – but not it’s potential liability.

Agreements not to sue, or hold harmless clauses, are a form of indemnification. When you go to a ski lodge or an amusement park, you may have to sign a form saying you won’t sue if you’re hurt. Exceptions to indemnification might occur due to an owner’s deliberate negligence.

Insurance Against Indemnification.

Companies and individuals may buy insurance to cover potential losses from indemnity claims.

Indemnification Clauses Are Serious Business.

Indemnity can be express or implied. Whether it’s in writing or not, though, an attorney should review business dealings that involve indemnification.

At Virtus Law, we know how to analyze contracts and make sure they work for you. We urge you to consult with one of our attorneys as soon as possible. To set up an appointment, call us at 612.888.1000 or send us an email at info@virtuslaw.com

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