Indemnification vs Hold Harmless: Understanding the Distinction

You've probably seen contract language that says one party will "indemnify and hold harmless" another. Many people use these terms interchangeably, but in legal contexts they can have distinct meanings—and the difference can significantly affect your liability.

Basic Definitions

Indemnification

Indemnification is a promise to reimburse or compensate another party for losses they suffer. It kicks in after a loss occurs. Think of it as: "If you get sued because of something I did, I'll pay your damages and legal costs."

Hold Harmless

Hold harmless is a promise to prevent another party from being liable in the first place. It attempts to transfer responsibility so the other party is never considered at fault. Think of it as: "You won't be held responsible for this at all."

The Practical Difference

Aspect	Indemnification	Hold Harmless
When it applies	After loss occurs	Before liability attaches
What it does	Compensates for loss	Prevents liability
Type of protection	Financial reimbursement	Legal immunity

Why Courts Treat Them Differently

Some courts view "hold harmless" as broader than "indemnify":

• Indemnify only: The protected party might still be named in a lawsuit and have to defend themselves initially, then seek reimbursement
• Hold harmless: The protected party argues they shouldn't be liable at all, potentially allowing earlier dismissal from lawsuits

However, many courts treat the terms as synonymous. The distinction depends heavily on your jurisdiction.

Why Contracts Use Both Terms Together

The phrase "indemnify and hold harmless" is so common because lawyers want to cover both bases:

• If the jurisdiction treats them as different, using both provides maximum protection
• If the jurisdiction treats them the same, no harm done
• Belt and suspenders approach to drafting

Types of Indemnification Clauses

Broad Form Indemnification

The indemnifying party covers losses even if they're partially caused by the other party's negligence. These are often unenforceable or heavily restricted.

Intermediate Form Indemnification

The indemnifying party covers losses except for those caused solely by the other party's negligence.

Narrow Form Indemnification

The indemnifying party only covers losses directly caused by their own actions or negligence. Most fair and common.

What to Look For in Your Contract

Scope of Coverage

• Does it cover the other party's negligence?
• Are there caps on liability?
• What types of claims are covered?

Trigger Events

• What has to happen for indemnification to kick in?
• "Arising out of" vs "caused by"—these have different meanings

Defense Obligations

• Must you pay for lawyers during the lawsuit?
• Do you control the defense strategy?
• What about settlements?

Negotiation Tips

• Push for mutual indemnification—both parties protect each other
• Resist indemnifying for the other party's negligence
• Add caps on total indemnification liability
• Require notice and opportunity to participate in defense
• Limit to third-party claims (not direct disputes between parties)