A hold harmless clause is a legal statement in a contract that defines exactly what a party will do if a lawsuit arises from the contract. It is a positive, proactive statement, stating that one of the parties will indemnify and agree not to sue if a negative or unexpected event happens in the course of carrying out the business outlined in the contract. The one party agrees to hold the other party harmless.
While the hold harmless agreement is legally enforceable and will generally be upheld in a court of law, there are exceptions to the agreements and instances where the hold harmless agreement may be nullified by the courts. If one of the parties was negligent, the hold harmless agreement probably will not apply, as the agreement assumes that the party is acting in a normal manner without being negligent. Matters of public policy are usually exempt from hold harmless agreements.
All of the hold harmless agreements and disclaimers may still not protect you from a lawsuit. Even if you are not liable for damages, someone can still sue you because they believe you are responsible. Liability insurance is critical for these situations. A general business policy should protect you if a lawsuit arises from business activities. Be certain to have enough coverage to protect all of your business assets, and consider an umbrella liability policy if you need further protection or your business activities place you at an unusually high risk.
NEC Insurance is one of the largest independent insurance brokers in Missouri offering business and personal insurance, financial services, and risk prevention. For more information visit www.necins.com or call 636.271.2481.