“ Insurance policies often don’t cover liabilities from overly broad indemnity clauses. Before signing a contract, verify that your coverage aligns with the indemnity terms to avoid gaps that leave you personally liable.”
The Risks of an Unfavorable Indemnity Clause Agreeing to an unfavorable indemnity clause can create significant risks for your business: 1. Financial Liability: You could be forced to cover damages caused by others, leading to unexpected financial strain. 2. Insurance Gaps: Many insurance policies do not cover liabilities arising from overly broad indemnity clauses, leaving you personally exposed. 3. Legal Disputes: Poorly drafted or ambiguous clauses often result in costly litigation. How to Protect Yourself How to protect yourself from unfair clauses: 1. Push for Limited Indemnity Clauses: Ensure the clause ties liability to your actions, not someone else’s. 2. Clarify Responsibilities: Make sure the contract explicitly states who is responsible for legal defense costs and under what circumstances indemnity applies. 3. Understand Your State’s Laws: Use anti-indemnity statutes to negotiate favorable terms. 4. Consult a Lawyer: Before signing a contract, have it reviewed by an attorney. 5. Check Your Insurance Coverage: Verify that your policy aligns with the indemnity terms in the contract. Final Thoughts Indemnity clauses may seem like standard legal language, but they carry significant risks. Understanding these provisions and the laws that govern them is critical to protecting your business. By carefully reviewing contracts, negotiating fair terms, and seeking legal guidance when necessary, you can avoid unnecessary risks and ensure that your business is protected from undue liability.
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