Q: I am looking at a contract and need to know what this means?
Except to the extent paid in settlement from any applicable insurance policies, and to the extent
permitted by applicable law, each Party agrees to indemnify and hold harmless the other Party,
and its respective affiliates, officers, agents, employees, and permitted successors and assigns
against any and all claims, losses, damages, liabilities, penalties, punitive damages, expenses,
reasonable legal fees and costs of any kind or amount whatsoever, which result from or arise out
of any act or omission of the indemnifying party, its respective affiliates, officers, agents,
employees, and permitted successors and assigns that occurs in connection with this
Agreement. This indemnification will survive the termination of this Agreement.
This is what is commonnly referred to as a hold harmless and indemnity clause and can be found in most business contracts as well as sales of LLCs, corporations, businesses, and even asset purchase agreements. I also include this type of clause in consulting agreements and independent contractor agreements.
What Does it Mean?
The key language in the holdharmless and indemnity clause is
" . . which result from or arise out of any act or omission of the indemnifying party, its respective affiliates, officers, agents, employees, and permitted successors and assigns that occurs in connection with this Agreement."
So each party to the agreement is agreeing that if they do and "act or ommission" that causes damage that is not covered by insurance, they will pay the other party the cost of those damages.
Example 1: One party is negligent and it causes damage in the amount of $4,000 to a third party's property. Insurance pays for the damages but there is a $500 deductible, so the negligent party has to be responsible for that $500.
Example 2: One party is negligent and it causes damage in the amount of $4,000 to a third party's property. Insurance does not cover the damages, so the negligent party has to be responsible for that $4,00.
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