Hold Harmless Agreement

A hold harmless agreement is a contractual promise by one party (the indemnitor) to absorb the liability that would otherwise fall on the other party (the indemnitee) and to protect it from specified claims and losses. It is essentially a form of indemnity, and the two terms are frequently paired in the same contract clause. Hold harmless language comes in three flavors — limited (each party covers its own fault), intermediate (the indemnitor covers everything except the indemnitee's sole negligence), and broad (the indemnitor covers even the indemnitee's own negligence) — and the flavor dramatically changes who pays.

For a small-business owner, the hold harmless agreement is where risk gets transferred long before an insurance claim is ever filed. A general contractor's subcontract, a landlord's lease, and a venue's rental contract all typically require you to hold the other party harmless. Signing a broad-form hold harmless can obligate you to pay for losses you did not cause, so it is critical that the liability you assume by contract lines up with what your policy will actually back. That link runs through the contractual liability coverage in your general liability policy.

The essential nuance is that a hold harmless promise is only as good as the money behind it. That is why contracts pairing hold harmless language also require additional insured status and a waiver of subrogation, so the promise is funded by insurance rather than the indemnitor's bare balance sheet. Some states also have anti-indemnity statutes that void broad-form clauses in construction contracts, so a signed hold harmless is not always enforceable as written.