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Indemnification and hold harmless clauses and your insurance
What indemnify, defend and hold harmless promise, how broad, intermediate and limited clauses differ, and how TX, NY, FL and CA limit them.
An indemnity or hold harmless clause is a promise to pay for another party's losses, usually claims by third parties, and often to defend that party in court as well. It is a contract promise, not insurance. Your liability policy responds only to the extent the clause fits inside coverage, and state law may cut the clause back, so the wording of the clause and the wording of the policy have to be read together before you sign.
What the three verbs promise
Clauses usually combine three promises, and each can stand alone.
- Indemnify means to reimburse the other party for a loss, such as a judgment, a settlement or a bill it has paid.
- Hold harmless means the other party will not be held responsible for the loss. Courts in many states read it together with "indemnify," so treat the pair as one promise unless the wording separates them.
- Defend means to provide and pay for a lawyer when a claim is made. That duty can start at the demand letter, long before anyone knows who was at fault, and it can cost money even if the claim fails. See the insurer's duty to defend: what triggers it and when it ends for how it works in the policy.
The clause also names who is protected (the indemnitees, often with their officers, employees, affiliates and lenders), what is covered (claims, losses, damages, attorneys' fees and expenses) and what triggers the promise ("arising out of," "resulting from," "caused by").
Three forms of indemnity
The trade sorts clauses by how much of the other party's own fault they take on.
| Form | What it says in substance | Where it appears |
|---|---|---|
| Broad | You pay for everything, even losses caused solely by the other party's negligence | Customer and landlord forms drafted by the stronger party; heavily restricted in construction by state law |
| Intermediate | You pay for everything except losses caused by the other party's sole negligence, so you cover shared fault | Common in subcontracts and vendor agreements |
| Limited | You pay only to the extent your own fault caused the loss | Balanced contracts; the AIA A201 general conditions use this style |
The AIA A201 general conditions limit the contractor's indemnity to claims that are attributable to bodily injury or property damage but only to the extent caused by the negligent acts or omissions of the contractor and those for whom it is responsible, and, according to a Construction Executive comparison, that language was the same in the 2007 and 2017 editions. That is the limited form, and it is the usual place to land in a negotiation.
The trigger words matter. "Arising out of your work" reaches losses where your connection is remote. "Caused by your negligence" requires proof of fault. "To the extent caused by" prorates the obligation. A savings phrase such as "to the fullest extent permitted by law" helps the clause survive an anti-indemnity statute, though it does not save every clause.
Where your insurance fits
The clause creates a contractual liability. The commercial general liability (CGL) form excludes that liability unless it is an "insured contract," a defined term that includes the assumption of another party's tort liability to a third person. contractual liability coverage and insured contracts walks through the exclusion, the exception and the endorsements that narrow it. In short:
- The CGL can respond to your promise to pay a third party's bodily injury or property damage claim against the indemnitee.
- It does not respond to breach of contract, failure to buy the insurance you promised, or fines and penalties.
- Endorsements that narrow the insured contract definition can leave the indemnity partly or wholly uninsured, and the certificate will not say so.
Different exposures sit in different policies, so match each trigger in the clause to the policy that might answer it.
| Exposure the clause covers | Policy that may respond | Watch for |
|---|---|---|
| Third-party injury or property damage | CGL, through the insured contract exception | Narrowing endorsements; shared limits |
| Your employee injured, other party sued | Employers liability and the CGL insured contract exception, depending on the policy | State rules on employer indemnity; the comp exclusive remedy defense |
| Professional negligence, design or advice errors | Professional liability | Many professional forms exclude liability assumed by contract beyond what you would owe anyway |
| Data breach, privacy | Cyber | Contractual liability sublimits or exclusions |
| Intellectual property claims | Often excluded from the CGL; may need specific coverage | An IP indemnity can be effectively uninsured |
| Defense costs of the indemnitee | CGL supplementary payments, if conditions are met; otherwise damages that erode the limit | Whether defense sits inside or outside limits |
If a clause promises something no policy answers, you carry that risk on your balance sheet. See contractual risk transfer: shifting liability by contract and insurance for how the clause, the insurance requirements and the waivers fit together.
State law limits
Many states restrict indemnity in construction contracts. These statutes differ in scope, and the governing law may be the state where the work is, the state named in the contract or both. Four examples, each read from the statute's text in October 2026:
| State | Rule in brief |
|---|---|
| Texas, Insurance Code ch. 151 | Voids construction indemnity to the extent it covers the indemnitee's own negligence or fault, statutory violations or breach of contract (section 151.102). Section 151.103 excepts claims for bodily injury or death of the indemnitor's own employees. Section 151.104 voids additional insured requirements to the same extent. Section 151.151 says the chapter cannot be waived. Single-family house construction is outside it. See Texas |
| New York, General Obligations Law § 5-322.1 | Voids a construction clause that shields the promisee from liability for its own negligence, in whole or in part. It does not affect insurance contracts issued by admitted insurers. See New York |
| Florida, § 725.06 | Indemnity covering the indemnitee's own fault is void unless the contract has a monetary cap bearing a reasonable commercial relationship to the contract. For an owner's indemnity from a party in privity, the cap may not be less than $1 million per occurrence unless the parties agree otherwise. See Florida |
| California, Civil Code § 2782 | Voids indemnity for the promisee's sole negligence or willful misconduct. For private contracts on or after January 1, 2013, it makes shifting the owner's active negligence unenforceable. Residential construction defect indemnity is further limited. See California |
These statutes are mostly about construction. Leases, vendor agreements, software contracts and event contracts are usually governed by ordinary contract law, where a broad indemnity is more likely to be enforced as written. For other states, use workers' comp and benefits requirements by state and ask a construction or commercial attorney. This is general information, not legal advice.
Reading a clause line by line
Vendor shall indemnify, defend and hold harmless Customer and its affiliates, officers and employees from any claim, loss or expense, including attorneys' fees, arising out of Vendor's services, except to the extent caused by Customer's sole negligence.
- "Indemnify, defend and hold harmless" includes a defense duty. Check whether your policy treats the defense as a supplementary payment or as damages that erode your limits.
- "Affiliates, officers and employees" widens the protected group. Each is a potential claimant.
- "Any claim, loss or expense" covers more than third-party injury claims. It may include economic loss, which the CGL does not insure.
- "Arising out of Vendor's services" is broad. It can reach losses where you were not at fault.
- "Except to the extent caused by Customer's sole negligence" makes this an intermediate-form clause. If Customer shares fault at all, you still pay.
A limited-form rewrite would say "to the extent caused by the negligence or willful misconduct of Vendor or those acting on its behalf." Other asks that cost little: a dollar cap tied to the insurance you are required to carry, mutual indemnities, written notice and the right to control the defense, and an exclusion for the indemnitee's gross negligence and willful acts.
A worked example (hypothetical)
Say a caterer signs a venue's event contract that includes the intermediate-form clause above. At a wedding, a guest slips on a wet floor near the buffet. The caterer's crew spilled water earlier, and the venue's staff did not put out a warning sign. The guest sues the venue.
- The venue tenders the claim to the caterer in writing. The caterer's CGL may treat the indemnity as an insured contract, because it assumes the venue's tort liability to a third person, and may defend or reimburse the venue's defense under the supplementary payments provision if conditions are met.
- Both parties were partly at fault, but the clause excludes only the venue's sole negligence, so the caterer owes the venue's share too.
- If the caterer's policy carries an endorsement limiting insured contracts to injury caused in whole or in part by the caterer, coverage still applies here, since the caterer's spill contributed. If an endorsement removes the broad insured contract category, the policy may not respond at all.
- A limited-form clause would have shifted only the caterer's share of the loss.
The outcome would depend on the exact wording, the forms and the state's law. See tendering a claim to another party's insurer for how the tender works in practice.
Before you sign
- Highlight every verb, trigger and exception in the clause.
- Ask your broker whether the CGL has narrowing endorsements, and which other policies would answer for the exposures the clause covers.
- Negotiate toward limited form and mutual obligations.
- Check the governing state's anti-indemnity rules.
- Compare the clause with the insurance section; how to review the insurance requirements in a contract shows how.
- Keep the signed contract with the policy file, since the "insured contract" must exist before the injury or damage.
Key takeaways
- Indemnify, defend and hold harmless are separate promises. The defense duty can start long before fault is known.
- Broad, intermediate and limited forms decide how much of the other party's fault you absorb; limited is the most defensible position.
- The CGL responds to indemnity only as an insured contract, and endorsements can narrow it. Many indemnities, especially for professional errors, data breaches and intellectual property, are not covered by the CGL at all.
- State anti-indemnity statutes can void parts of a construction clause. Texas, New York, Florida and California each take a different approach.
- Match the clause, the insurance and the state law before you sign.