The Pitfalls of Hold Harmless Agreements

Increasingly more of your customers are asking – or insisting – that you sign a hold-harmless agreement in order to maintain a business relationship. While it might be necessary in order to get or keep a client, be aware that you assume someone else’s liability when you sign. Don’t be mistaken, this has an impact on your business.

A Sample Hold Harmless Agreement:

To the fullest extent permitted by law, the vendor agrees to defend, indemnify, and hold harmless the entity, its elected and appointed officials, employees and volunteers and others working on behalf of the entity against any and all claims, demands, suits or loss, including all costs connected therewith, and for any damages which may be asserted, claimed or recovered against or from the entity, its elected and appointed officials, employees, volunteers or others working on behalf of the entity, by reason of personal injury, including bodily injury or death and/or property damage, including loss of use thereof, which arises out of or is in any way connected or associated with this contract.

Once you remove the gobbledegook, the clause reads:

You are responsible for any injury or damage claims made against the other party or anyone working for the other party because of the existence of the contract.    

Clear? You’ve now agreed to:

• Take responsibility whether or not you are negligent
• Assume an unlimited dollar amount of liability
• Cover claims associated with the contract, whether or not they have anything to do with you

Further, unless you submit the contract to your insurer, AND they agree to cover it as part of your commercial general liability policy, you have no insurance available to protect you for your contractual obligation.

What should you do?

Have all contracts reviewed by competent legal counsel who can identify the liabilities you might assume. Your insurance broker and insurer can then work with you to determine what can be covered by existing insurance, what exposures require additional coverage, and what risks cannot be insured. At Roanoke Trade, we specialize in serving the insurance needs of transportation and logistics providers and would be happy to assist you in determining whether your coverage would respond based on the contracts you have in place. Please contact us at 1-800-ROANOKE (800-762-6653).