Indemnification

Indemnification clauses require you to compensate the other party for losses, costs, and legal fees resulting from claims related to your conduct. In their broadest form, they can require you to cover losses even when you were only partially responsible, or even when a third party's negligence contributed to the harm. Broad indemnification is extremely common in service agreements, construction contracts, event rental agreements, and commercial leases. The danger is in the scope: 'arising out of or related to' language is far broader than 'caused by.' If the clause covers 'any and all claims,' you may find yourself liable for the other party's own negligence. Most states allow parties to contractually indemnify each other for negligence, but some states prohibit indemnification for gross negligence or intentional acts. These clauses can make you personally liable for very large sums.

Narrow the clause to losses 'directly caused by' your negligence or willful misconduct. Add 'proportional to fault' language. Exclude IP claims where the other party provided the allegedly infringing materials. Request that the clause be mutual. If you're a freelancer or small business, confirm your professional liability insurance covers the indemnification scope.