Generally, parties are liable for their own negligent conduct. An indemnity provision in a contract reallocates this liability from one party to another. Viewed practically, an indemnity clause shifts insurance obligations from one party (“indemnitee”) to another party (“indemnitor”). Under an indemnity clause, the indemnitor agrees to pay the indemnitee for losses resulting from a claim brought by a third party. Absent explicit language assuming the obligation to defend, the party providing indemnity has no obligation to provide or assist in defending claims. Almost every contract includes an indemnification clause. It is important to read the clause carefully when entering into a contract of any nature, as the precise language of the clause can make a dramatic difference in each party’s financial obligations.
A typical indemnity clause looks something like the following:
To the extent caused by A’s negligence or willful conduct, A agrees to indemnify B of and from all reasonable claims, losses, causes of action, damage, lawsuits, and judgments, including attorneys’ fees and costs, provided that such claims, loss, or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property. Party A shall indemnify B only for the percentage of responsibility for the damage or injuries attributable to Party A. Nothing herein shall be interpreted as obligating A to indemnify B against its sole negligence or willful misconduct.