Hold Harmless Clause Insurance Definition

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A hold harmless agreement is entered into by two parties as part of a legal contract between them. The hold harmless clause is a way to determine who is responsible in case of a certain action, such as a lawsuit or other claim. Often, people use insurance policies to provide protection if they have executed a hold harmless agreement.

Function

  • A hold harmless clause is a legal statement in a contract that defines exactly what a party will do if a lawsuit arises from the contract. It is a positive, proactive statement, stating that one of the parties will indemnify and agree not to sue if a negative or unexpected event happens in the course of carrying out the business outlined in the contract. The one party agrees to hold the other party harmless.

Uses

  • With a business that provides information to other companies, such as background information about criminal records used in pre-employment screening, hold harmless agreements are common. In this case, the agreement may say that the user of the information agrees that the company providing the report did their best to give accurate information. However, the company using the information agrees to hold the provider harmless if any problems arising from using the information that was provided.

Exceptions

  • While the hold harmless agreement is legally enforceable and will generally be upheld in a court of law, there are exceptions to the agreements and instances where the hold harmless agreement may be nullified by the courts. If one of the parties was negligent, the hold harmless agreement probably will not apply, as the agreement assumes that the party is acting in a normal manner without being negligent. Matters of public policy are usually exempt from hold harmless agreements. If a common carrier executed a hold harmless agreement with people for whom it transports property---exempting it from all liability---the agreement would probably overturned as against public policy.

Insurance Considerations

  • All of the hold harmless agreements and disclaimers may still not protect you from a lawsuit. Even if you are not liable for damages, someone can still sue you because they believe you are responsible. Liability insurance is critical for these situations. A general business policy should protect you if a lawsuit arises from business activities. Be certain to have enough coverage to protect all of your business assets, and consider an umbrella liability policy if you need further protection or your business activities place you at an unusually high risk.

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