Indemnify and Hold Harmless Clause
Indemnification clauses are a ubiquitous risk-shifting tool in commercial contracts. It is quite common to find the phrase “indemnify and hold harmless” in these clauses, but what is the effect of including the “hold harmless” provision? Is an "indemnify and hold harmless clause" redundant or does it add additional protections?
Indemnify and Hold Harmless Clause -- More than Just Indemnify?
The majority of courts and commentators across the nation agree that the phrase “indemnify and hold harmless . . . means nothing more than indemnify alone.” Bryan A. Garner, Indemnify A. and Hold Harmless; Save Harmless, 15 Green Bag 2d 17, 23 (2011). This belief seems to be supported by the great weight of history. The longstanding editor-in-chief of Black’s Law Dictionary, Brian Garner, traced the etymology of the word indemnify back from the 1600’s, when it was first defined in an English-language dictionary as “to save harmless.” Id at 18. At the end of his research, he concluded that the overwhelming evidence showed “indemnity and hold harmless are perfectly synonymous." Id at 21.
Trend is for "Indemnify" and "Hold Harmless" to have Separate Meanings
However, a growing minority of states are distinguishing indemnify and hold harmless as having separate meanings. For instance, the Ninth Circuit noted in dicta that “the terms ‘indemnify’ and ‘hold harmless’ refer to slightly different legal remedies." United States v. Contract Mgmt., Inc., 912 F.2d 1045, 1048 (9th Cir. 1990)). One court even held that indemnify grants an “offensive” right allowing a party to seek indemnification while hold harmless grants a “defensive” right, which shields a party from claims. Ken Adams, Revisiting “Indemnify”, Adams on Contract Drafting, July 27, 2012, http://www.adamsdrafting.com/revisiting-indemnify/ (quoting Queen Villas Homeowners Association v. TCB Property Management, 56 Cal. Rptr. 3d 528, 534 (Cal. Ct. App. 2007)). These holdings appear to be based on the judicial rule of construction of “giving effect to every word” in a contract, but they are inconsistent with traditional interpretations of this phrase. 15 Green Bag 2d 17, 22.
In light of this trend, attorneys should be cautious in drafting their indemnity clauses that they do not “unwittingly [create] additional rights by tacking a hold harmless onto indemnify.” Majkowski v. American Imaging Mgmt. Servs., LLC, 913 A.2d 572, 588 (Del. Ch. 2006). To avoid this problem, some commentators are now advising attorneys to abandon the hold harmless provision in their indemnity clauses altogether. See Ken Adams, Revisiting “Indemnify”, Adams on Contract Drafting, July 27, 2012, http://www.adamsdrafting.com/revisiting-indemnify/. They claim that an agreement to indemnify “against both losses and liabilities” will grant equal protection for clients without opening the door to interpretation issues. Id.
While this may be a more drastic response than is warranted, attorneys should at least be alert for changes in judicial interpretation of these crucial clauses. Given the disagreement, we do not expect to see an end to the indemnify and hold harmless clause any time soon.
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