A hold harmless agreement is a liability waiver that protects one party in the event that the other party gets injured during the working relationship between the parties. It is also referred to as a liability waiver and an indemnification agreement. One of the most common uses of a hold harmless agreement is in the construction industry. The subcontractor may agree to not sue the general contractor if they are injured on the job in some way. Sports organizations and fitness gyms also use hold harmless agreements to better protect themselves in the event that the participant or member is injured while participating.
A Hold Harmless Agreement (HHA) is used to protect one party from liability from the actions of another party. It is typically used in situations where services are being provided, a party is using the property of another, or when a party is participating in an activity hosted by another. When an HHA is completed, the party agrees not to hold the hosting party responsible for injuries, damages, and other losses and liabilities. HHAs are also referred to as indemnity clauses (or waivers), a waiver of liability, hold harmless release, hold harmless letter, and liability releases.
A printable Hold Harmless Agreement may not always be valid. It may be invalid because one of the parties engaged in negligent behavior, illegal activities, or committed fraud.
In addition to information about both parties, the terms of an indemnity agreement must be clearly defined. Both parties should sign the agreement after negotiating their contractual obligations and reviewing the terms carefully. These contracts typically do not require a witness or notary, but these can be used for an extensive HHA if desired.
In today’s litigation-heavy business environment, more and more companies use these agreements and clauses to protect themselves from lengthy and often financially devastating litigation. This document or clause within a document that releases one or both parties from any potential legal claims for bodily injury or property damage. This includes any injury, damage or other claim that might arise during or after the transaction or activity between Party A and Party B. Party A is the company using the HHA (which can be easily drafted using a sample hold harmless agreement). Party B is the person or business signing and agreeing to waive liability in some way.
The agreement may be used alone or as part of a more involved liability waiver. This document is a form of legal contract.
It is important to note, however, that the agreement does not make a business invincible, nor does it free them from standard, reasonable legal responsibilities. These responsibilities include following local governing law to ensure an environment that is as safe as possible. If they do not follow these procedural and safety requirements, an HHA will likely offer little or no protection to Party A as the creator of the form.
For instance, sports clubs and gyms often include hold harmless clauses in their membership contracts. These clauses help protect them from litigation and personal injury claims that arise from the action or actions of a member, such as a runner who trips and falls off of a treadmill. Individuals have, and will likely continue to, sue businesses for injuries that weren’t the fault of the business; and, sometimes, they win a settlement that can cripple or destroy the business. This is why a hold harmless template is so important for a business to use. It provides some measure of protection from malicious litigation.
Again, though, it’s important to note that it does not free businesses from basic, common sense responsibilities. If the business has knowledge of a faulty piece of machinery or faulty equipment and does not use a sign to notify others about it not properly working or fix it in a timely manner, they may be liable for any injury resulting from its use. The same can be said for poor maintenance habits. If the previously mentioned runner falls off the treadmill and breaks their leg because of a faulty mechanism that the business knew about or should have known about, it is possible that no authorization of indemnification would mitigate their liability.
HHAs are simple to draft. Once a hold harmless template is written for a business, it generally only requires the participant’s signature to become legally binding. The participant would be Party B.
As you learned above, HHAs protect a party from legal claims or damages by another person. HHAs, in other words, transfer all legal risk from the party identified in the HHA to the person who signed the documented.
Many states have implemented anti-indemnity laws that limit the scope of HHAs.
Not all HHAs are the same even if they share some of the same general provisions. There are different types of them that have various forms of indemnity. They vary in legal scope and application.
With general liability insurance, on the other hand, insurance companies may remove coverage from contractual liability through a Contractual Liability Limitation Endorsement (Form CG 21 39). There are also often significant differences in coverage and scope between liability insurance plans and HHAs.
It is vital to keep HHAs and insurance coverage separate. Having both in place provides owners with two ways to pay a claim (often referred to as a notice of claim).
Want to write your own HHA? Here is a brief rundown of what to include:
As mentioned earlier, there are many variations of legal protection possible in an HHA. These include specific protections that cover injury to a person providing services (e.g. real estate construction labor) at your home, and more general protections, such as protecting an apartment complex's property owner from liability pertaining to any accidents or injuries incurred while using the complex’s pool. They also can cover the use of someone else’s property. For example, if someone allows a group of friends to have a party at their house, the attendees might sign a hold harmless protecting the owner from any liability in the event of an injury.
Laws vary by state. Make sure any HHA you draft is legally compliant with your individual state to protect yourself from potential losses. For example, some states will not uphold an HHA if the language is too broad. Others do not allow HHAs for construction sites. Because of these state-specific nuances, we recommended you consult an attorney to make sure your agreement is valid.
HHA clauses pertaining to intellectual property generally cover issues related to patent, trademark, copyright infringement, or other risk.
Intellectual property HHAs can be burdensome to vendors because of the costs related to defending an intellectual property claim often exceed payments to the vendor under the agreement.
HHA clauses often include representation and warranties to protect the main party to the fullest extent.
Due to the typically high costs of intellectual property liability, HHAs for intellectual property often cap liability. Licensing contracts may include a limitation of liability clause in the agreement and that also applies to the hold harmless clause.
It is important to note, however, that many purchasers/licensors will negotiate earnestly for uncapped intellectual property indemnification.
In business, insurance is the standard way to transfer risk, but including an HHA or indemnification clause in contracts is also common. HHAs can serve as a liability release in a situation where a customer injures themselves, or can offload liability in the event of third-party legal action.
Note: Situations like the example above can be complicated. It is difficult, for example, to offload all liability if the entertainment offered is used primarily by children (e.g. indoor play spaces, bounce houses, etc.).
HHAs are also common on online dating sites. The terms of use for these sites typically include a waiver that states that the user indemnifies the website from legal responsibility for the actions of any of its members. As a result, lawsuits against dating websites typically have difficulty earning standing in court.
Note to consumers: Even if you sign a HHAr, gross negligence on the part of business still allows a consumer to seek a legal remedy.
HHAs are commonly used in divorce to transfer financial obligations to a particular spouse. These obligations include credit card debts, student loan debt, and bankruptcy related financial obligations.
Landlords typically include HHA clauses in their rental property agreements. HHA clauses in these agreements indemnify the landlord in the case of injury in or near the unit or sometimes if the tenant’s property is burglarized. In other words, the HHA stipulates that renters are responsible for acquiring their own renter’s insurance.
HHAs for a construction project between a contractor and a subcontractor typically cover any damages or legal actions brought forth, including attorneys' fees and settlements. HHAs in this scenario usually stipulate that the clause does not take effect until restitution is due.
If a contractor has an HHA with a subcontractor and a lawsuit is brought by a third party, the subcontractor must hire a lawyer and assume the defense of the contractor. Subcontractors are obligated to indemnify the contractor and pay the judgement, if one is awarded. If there is no judgement, the subcontractor must still pay theirs and the contractor’s legal fees.
Rental car companies use HHAs to protect themselves against lawsuits involving rental car drivers in the event of an accident.
Conclusion
Although rather simple, HHAs are an incredibly consequential part of business contracts. They define and allocate legal liability between two parties entering a contract. We hope this guide gives you the tools and background you need to manage HHAs in your businesses.
Anti-indemnity statutes help to prevent a party with greater bargaining power in a contract or agreement (such as an owner or contractor) from taking advantage of a party with inferior power. Our team cumulated the anti-indemnity statutes of all 50 states. We noted whether or not the state prohibits broad or intermediate indemnity, and whether it allows additional insured clauses. Note that this an overview of public contracts only, and restrictions apply to a mix of construction, engineering and residential contracts and agreements.
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