“indemnify” means that, when a party has had to pay for certain costs or has accrued losses, the indemnifying party must compensate or pay them back for their out of pocket.

There is Ontario law to this effect

The difference is crucial when it’s a third party claim. The lack of clarity on this point in the citations you provided may just mean this wasn’t the issue before the courts.

However, I think the moral is NEVER use the term “hold harmless” wihout further explanation unless you are actively seeking to create some ambiguity in order to avoid something even worse.

Thanks

David Richie

AMAZING resource! Thank you. I encountered the very question about the distinctions between and precise meaning of “indemnity” versus “hold harmless.” Through the wonders of GOOGLE and a little luck, I found not just your series on this topic, but your BLOG as a future resource.

You attracted some well-researched, well-reasoned and erudite commentary, and displayed it all very nicely. It is instructive for me to see how real pros go about this business. Thanks again for your work and your site.

16. Indemnification
16.1 Client Defense Obligation
Client agrees to defend Vendor and its Affiliates and their Personnel against any claim brought by any third party that:
a. is brought by or on behalf of any customer of Client and is based on Vendor acting in accordance with Client’s written instructions or directions on how to interact with that customer; or
b. the services that Client provides to its customers or anything that Client provides to Vendor under this Agreement, as delivered by Client, infringes or misappropriates any patent, copyright, trade secret, trademark, or other proprietary or contractual interest of the third party.

16.2 Vendor Defense Obligation
Vendor agrees to defend Client and its Affiliates and their Personnel against any claim brought by any third party that:
a. is brought by or on behalf of any customer of Client and is based on Vendor failing to act in accordance with Client’s written instructions or directions on how to interact with that customer;
b. is brought by any Personnel or Contractor of Vendor; or
c. the Services, anything that Vendor provides to Client under this Agreement as delivered by Vendor, or anything that Vendor uses to perform the Services (other than anything described in Section 16.1(b)) infringes or misappropriates any patent, copyright, trade secret, trademark, or other proprietary or contractual interest of the third party.

16.3 Defense Procedures
Each party entitled to a defense under Section 16.1 or Section 16.2 (the “Indemnified Party”) agrees to notify the other party (the “Indemnifying Party”) within a reasonable time after receiving notice of a claim. If the Indemnifying Party defends any such claim, the Indemnified Party:
a. must allow the Indemnifying Party to control the defense and settlement thereof;
b. must consent to joint representation with each other Indemnified Party, if requested by the lawyers that the Indemnifying Party retains, but need not consent to joint representation with the Indemnifying Party;
c. must cooperate with the defense and settlement as the Indemnifying Party may reasonably request (e.g., by way of furnishing records, information and testimony); and
d. may employ lawyers separate from the lawyers employed by the Indemnifying Party in order to monitor and advise the Indemnified Party about the matter, but the Indemnified Party will bear all of the cost of those lawyers.

16.4 Restrictions on Defense and Settlement
Except with the Indemnified Party’s prior written consent, the Indemnifying Party may not:
a. admit wrongdoing, fault, or liability of the Indemnified Party;
b. consent to any injunction or similar relief binding the Indemnified Party;
c. enter any settlement that fails to contain reasonable confidentiality obligations protecting the confidentiality of the settlement;
d. enter any settlement that provides any relief other than monetary damages that the Indemnifying Party pays in full; or
e. enter any settlement that fails to unconditionally release the Indemnified Parties in full.

16.5 Indemnity
The Indemnifying Party will pay or otherwise satisfy any monetary obligation that both:
a. arises from a claim that the Indemnifying Party had a duty to defend (even if the Indemnifying Party failed to undertake the defense); and
b. is imposed on any Indemnified Parties as part of (1) a settlement approved by the Indemnifying Party; (2) a settlement not approved by the Indemnifying Party, but only to the extent that such settlement was reasonable under the circumstances; or (3) a final judgment from which no further appeal is taken or possible.

For one thing, the significance of a court’s holding in these cases would likely depend on nuances of contract language, making it difficult to apply a given holding to slightly different contract langage.

And I’ve found that as you shift to the microscale of contract language, what any given court thinks is going to be less useful, an there will be greater inconsistency from court to court and jurisdiction to jurisdiction.

So I’m inclined to stick with the recommendation I made in my post.

Ken

You can find support for either position in case law.

In U.S. v. Contract Management, Inc. 912 F.2d 1045 C.A.9 (Wash.) 1990 the court stated: “While the terms “indemnify” and “hold harmless” refer to slightly different legal remedies, we are concerned here with the condition that triggers such remedies.”

In Kitchens of the Oceans, Inc. v. McGladrey & Pullen, LLP 832 So.2d 270 Fla.App. 4 Dist. 2002 the court said, “Although there is a difference between contracts of indemnification and hold-harmless agreements, we deem the central holding of the above cases to apply as well to a hold harmless agreement that, as here, functions much like an indemnification agreement.”

Rooz v. Kimmel 55 Cal.App.4th 573, 64 Cal.Rptr.2d 177 Cal.App. 1 Dist., 1997 the court wrote: “Both parties cite to cases that construe contractual indemnification provisions. We note that, strictly speaking, this case does not involve interpretation of an indemnification provision. Indemnity involves “the obligation resting on one party to make good a loss or damage another party has incurred.” (Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 864, 41 Cal.Rptr.2d 519, italics added (Maryland Casualty).) Here, North American is not seeking indemnification. Instead, North American relies on the general “hold harmless” provision in the indemnity and hold harmless agreement to prevent Rooz from directly recovering against North American for damage he incurred as a result of North American’s own negligence.FN4 Thus, in this case, the pertinent agreement is best viewed as a “release of liability” as opposed to an indemnity agreement… Although we note this distinction, the cases have held that the general rules for construing indemnity provisions apply to exculpatory clauses as well. (See Ferrell v. Southern Nevada Off-Road Enthusiasts, Ltd., supra, 147 Cal.App.3d at pp. 318-319, 195 Cal.Rptr. 90 [applying cases interpreting indemnification agreements to a release of liability contract]“.

In Crawford v. Weather Shield Mfg., Inc. 38 Cal.Rptr.3d 787 Cal.App. 4 Dist., 2006 the court wrote: “As one can see, Vinnell wasn’t a typical “indemnity” case in the strict sense of paying liability to a third party. While the hold harmless agreement in Vinnell used the verb “indemnify” and was even characterized as an “indemnity clause” by the court (see Vinnell, supra, 52 Cal.2d at p. 414, 340 P.2d 604), it functioned essentially as a two-way exculpatory contract. A and B had agreed that A would release B for any injuries B caused A.”

In Zetek v. U.S. 516 F.Supp. 1260 D.C. Pa., 1981 the court noted: “Although Cuisine suggests that little, if any, significance be attached to either the absence or presence of a “hold harmless ” clause, such an interpretation of the Court’s language is unwarranted. While neither the absence nor presence of such language is conclusive, the presence of such language certainly warrants considerable weight in construing the parties’ intent.”

There is also support for your position. In Complaint of Sun Schiffahrts G.m.b.H. & Co., K.G. 608 F.Supp. 51 D.C.Pa.,1984 wrote: “This Paragraph is obviously directed to indemnification rather than exemption from liability but Oxy contends that the use of the conjunction “and/or” preceding “hold harmless” makes it more than an alternative or synonym and adds exemption from liability to the indemnification provisions of the paragraph. Sun argues that “hold harmless” has never had any meaning other than as a synonym for “indemnify;” the cases support its contention that “and/or hold harmless” results from the excess caution of a scrivener of the document. When construed against the proferens, as the law requires in the case of ambiguity, there is no justification for interpreting “and/or hold harmless” as anything other than a synonym for “indemnify.””

In Wilson Leasing Co. v. Gadberry 437 N.E.2d 500 Ind.App., 1982 the court wrote: “It has been held that a hold harmless clause, a form of indemnification, covers the cost of defending a claim and is intended to fully compensate an indemnitee for all loss and expense of defending a claim or litigation.”

So I agree with your initial comment that both are sides are right. That makes it all the more important to clearly draft one’s intentions.

Best regards,

Lee

The concept of hold harmless includes the idea that the duty arises from the outset: “A contractual arrangement whereby on party assumes the liability inherent in the situation, thereby relieving the other party of responsibility.” It has some times been interpreted as an exculpatory clause. In contrast, indemnity means “Reimbursement.” This could make a significant difference in the remedy. If you are adverse to using hold harmless, how do you overcome the concept of reimbursement in the meaning of indemnity?

For example, if we agree that you will hold me harmless and you live up to that agreement, then I need not do anything because you will jump to the plate and pay any obligation that is the subject of agreement. But if you only agree to indemnify me, whether it be against loss or liability, then I might have to bat first and seek reimbursement from you. I am sure we could draft around that, but hasn’t “hold harmless” done that for us already?

Thanks,

Lee