Indemnity Clauses: Understanding the Basics

Signing liability waiver legal contract

We may not always read or understand the waivers we sign, but businesses owners need to brush up. Making sure your liability waiver is fully enforceable can make a big difference in the case of a lawsuit!

An indemnity clause is one of the most important aspects of any liability waiver. It dictates the responsibility for risk and protects you against loss-related legal issues.

The language in an indemnity clause can be confusing to anyone who doesn’t have a legal background. However, it’s important to understand the ins and outs of an indemnity clause, so you can ensure your business is protected at all times. If your indemnity clause isn’t strong enough or is too confusing for clients to understand, you risk making your waiver unenforceable.

You should always have a lawyer or attorney look over your liability waiver to make sure that it’s enforceable. However, being able to understand the details of your business’s waivers is important. The legal language is complex, but it helps to have a basic understanding of what your customers or clients are signing.

Today, we’re going to explore the basics of what defines an indemnity clause, as well as the variations that are used by various businesses to protect themselves.  

What is an indemnity clause?

An indemnity clause, also known as an indemnification clause, is a standard waiver clause that states that one party won’t hold the other liable for damages, losses, or costs associated with incurred legal issues. For liability waivers, these potential costs are typically the loss, damages, or other legal costs that would arise from a lawsuit.

For example, a waiver used by a skydiving business would have an indemnity clause that protects the business from any responsibility or costs associated with the client becoming injured while taking part in the skydiving activity.

The indemnity clause is an integral part of any liability waiver. For companies whose activities involve some level of danger or risk, it’s understandable why this clause is so necessary.

However, these clauses are still important for companies that offer activities that aren’t visibly risky. Accidents happen all the time, and someone engaging in something as casual as a massage or an escape room challenge can still be harmed. It’s always better to be protected instead of leaving your business vulnerable to lawsuits.

Why and when do I need an indemnity clause in my waiver?

Businesses with services involving risk, injury, loss or property damage to the client need to have an indemnity clause in their liability waiver. These waivers protect you and your business from any financial or legal consequences as a result of your actions.  

However, keep in mind that using a liability waiver with an indemnity clause isn’t a substitute for commercial liability insurance. Customers who sign an indemnity clause can still sue you. These clauses and waivers also don’t protect your business against gross negligence or intentionally harmful acts.

What does “Hold Harmless” mean?

Typically, the phrase “hold harmless” appears in an indemnity clause, or as a separate clause, as a way to indicate that the person signing the waiver agrees not to hold the business or organization liable for any damages. In the case of injury or damage to their property, the signee would hold the business harmless.   

There are two different types of “hold harmless” clauses – reciprocal, and unilateral. In most waiver situations, you would use a unilateral clause, which involves one party agreeing that they won’t hold the other party liable. In some contract situations, a reciprocal clause is used, but this isn’t as relevant to liability waivers.

It can be confusing when trying to determine whether to use the phrase “indemnify”, or “indemnify and hold harmless” in your liability waiver. Many lawyers joke that a lot of the time, double-barreled phrases like “identify and hold harmless” or “terms and conditions” are actually just saying the same thing twice.

However, the “indemnify and hold harmless” phrase is one situation where using both offers extra protection. Your lawyer or attorney will be able to advise you on the right language to use. You should always have an attorney or lawyer look over your liability waiver before giving it to your staff to use.  

What language needs to be included in my indemnity clause?

Like any other part of a liability waiver, the language that you use in the indemnity clause should be clear and direct. If you’re offering it to customers to sign, all parts of your liability waiver need to be clearly understandable by the average person. Stay away from dense legalese. 

The indemnity clause also needs to be clearly visible. It can’t be buried at the bottom of the form or written in a way that’s hard to see.

Here’s a simple indemnity clause example:

“Each party agrees to indemnify, defend, and hold harmless the other party from and against any loss, cost, or damage of any kind (including reasonable outside attorneys’ fees) to the extent arising out of its breach of this Agreement, and/or its negligence or willful misconduct.”

Once you’ve had a lawyer draft the essential language of your indemnity clause, make sure you can understand it, and it makes sense given what you’re offering clients. By keeping the language effective and understandable, you’ll ensure your liability waiver remains enforceable. 

Make Sure Your Liability Waiver Works For Your Business 

Indemnity clauses can seem confusing, but they’re absolutely essential to any effective liability waiver. Now that you understand the basic needs, you’ll be ready to work with a lawyer to craft an indemnity clause that protects your business from liability or lawsuits. 

Once you have a clearly-written liability waiver that works for the needs of your business, make signing liability waivers a breeze with WaiverForever. Our easy-to-use service quickly saves signed waivers to your secure account. Then you can access them at any time. This convenient service makes protecting your business easy.

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