Indemnity Agreements in the Workplace

It is important to ensure that your business takes preemptive legal steps to help protect your assets and finances in the case of an accident  Read further to learn more about indemnity agreements, types of businesses that use them and examples of how businesses use indemnity agreements.


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What is an indemnity agreement?

An indemnity agreement, also called a hold harmless agreement or waiver of liability, is a type of insurance contract that states that one party will pay for damages or other expenses for another party. Further, an indemnity agreement helps establish that the issuing party isn’t liable for damages caused to the purchaser or their property.


Types of businesses that might use an indemnity agreement

There are a variety of businesses across industries that can benefit from using an indemnity agreement. Here are some examples of the types of businesses, according to Surety Solutions:


Construction companies

Construction companies need indemnity agreements to protect their business against potential work-related liabilities. For example, construction workers and contractors may sign an indemnity agreement that makes them responsible for any injuries they incur on the site. 


Rental property

Landlords usually have new tenants sign an indemnity agreement that ensures tenants take responsibility for injuries they may have on the property, loss, or damages to the rental property on their behalf.


Rental car companies

Rental car companies use indemnity agreements to protect their business from legal action, should clients become injured in a car accident with their rental car. Typically, rental car companies require customers to sign an indemnity agreement before they provide them with a vehicle.


Pet kennels/hotels/daycare

When pet owners go on vacation or go to work for the day, they may decide to leave their pets in the care of a pet facility like a kennel or daycare. Upon arrival, staff may have pet owners sign an indemnity agreement that relieves the facility of any liabilities should their pet get injured or sick.


Entertainment or thrill-seeking services

This includes sky-diving, theme-parks, bungee-jumping, ropes courses, haunted house attractions and other events or activities with risk. In this situation, companies draft indemnity agreements for participants to sign that inhibits them from suing or holding the company accountable for an incident.



According to, corporations use indemnity agreements for a variety of scenarios. Most commonly, they use them to prevent their executives from getting sued by shareholders or other entities. Further, certain corporations may partake in indemnity agreements with government agencies should a major industry event occur that requires monetary action.


Examples of indemnity agreements in the workplace

According to Investopedia, here are a few ways that companies use indemnity agreements in the workplace to protect their business and its interests:

  • A vegetable farm enters into an indemnity agreement with the FDA, should a foreign pest or bacteria cause widespread illness or crop loss. This means that the FDA will be responsible for paying for solutions and public recalls.
  • A cargo ship enters into an indemnity agreement with an oil rig, should their ship sink or spill oil into the ocean. This holds the oil rig’s corporation liable for ecological damages and cleanup.
  • Board of director members enter into an indemnity agreement with a company, which relieves them of any legal or monetary issues on behalf of the company.


Frequently asked questions about the indemnity agreements


What is a cross indemnity agreement?

According to IRMI, a cross indemnity agreement is a type of indemnity that energy and chemical industries use. In this situation, both parties can "hold themselves harmless" in agreed-upon situations. For example, a chemical treatment plant enters into a cross indemnity agreement with a factory equipment manufacturer that holds them accountable for chemical leaks from new equipment. In contrast, the factory equipment manufacturer can hold the treatment plant accountable for chemical leaks caused by damages or misuse to factory equipment.


Is an indemnity policy transferable?

According to the United States Securities and Exchange Commission (SEC), an indemnity policy is typically transferable even after a business is sold to another corporation or individual. This information can be found under section 18 of the indemnity agreement form, entitled, "Binding Effect; Successors and Assigns."


How much is an indemnity policy?

According to Investopedia, the amount of money you pay for an indemnity policy and upkeep depends on the insurer you use, the type of policy and your company’s history. Review insurer information to find a reasonable payment plan for your business.


Who pays for an indemnity policy?

Levi Solicitors says that an indemnity policy is typically paid by the issuing party, but sometimes, both parties contribute to the payment.

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