Indemnity Contracts: What Are They & Do I Need One?

Indemnity, or Indemnification, is the obligation of a third party to take responsibility for claims asserted by a first party against a second party. In short, a person or business who is sued (an ‘indemnitee’) will often implead a third party (the ‘indemnitor’) to the suit in order to make the third party “take the heat” for the alleged malfeasance. If a judgment is ultimately obtained against the indemnitee, the indemnitor may be liable for its satisfaction.

A common example of indemnification with which we are all familiar occurs when purchasing an insurance policy. Whether auto, life, general liability, or professional liability, an insurance contract is simply a promise for an indemnitor (the insurance company) to compensate a damaged party or a specific beneficiary who suffers a loss covered by the insurance policy. In addition, many insurance contracts also include an obligation to defend the insured in an action seeking damages against them. The duties to “defend and indemnify” an insured party are commonly included in most insurance products purchased by individuals and businesses alike in Florida.

Private indemnity and defense obligations are also often created by parties to a contract. For instance, in most construction scenarios, an owner of a property will engage a “prime contractor” for the performance of the entire project, and the so-called prime contractor will then delegate portions of the prime work out to several “subcontractors.” Because these subcontractors step into the shoes of the prime contractor to fulfill portions of the prime contractor’s work, naturally the prime contractor will want to ensure that the prime contractor is protected against claims as to defects or deficiencies in the subcontractors’ work. For more on indemnity obligations specific to construction contract, please visit our page below.

If you are engaged in a business which depends on other parties to perform obligations on your behalf, then you should seriously consider putting an indemnity agreement into place. Feel free to contact our office today to see how we can help.