Indemnity Agreement Coverage: A Guide for Businesses
An indemnity agreement is a legally binding contract between two parties that protects one party from financial loss in case of a specified event, such as a lawsuit or breach of contract. Indemnity agreements are common in many industries, including construction, manufacturing, and service sectors, and are often used to shift liability from one party to another.
If you are a business owner, it is essential to understand indemnity agreements and their coverage. Here is a guide to indemnity agreement coverage and what you need to know:
Types of Indemnity Agreements
There are two types of indemnity agreements: broad form and limited form. A broad form indemnity agreement provides coverage for all claims and damages arising from the specified event, while a limited form indemnity agreement provides coverage only for certain types of claims or damages.
For example, a construction company may require a subcontractor to sign a broad form indemnity agreement that covers all claims and damages arising from injuries on the job site. In contrast, a limited form indemnity agreement may only cover claims for damages caused by the subcontractor’s negligence.
What Does Indemnity Agreement Coverage Include?
Indemnity agreement coverage typically includes legal fees, court costs, and damages awarded to the injured party. This coverage can protect your business from financial losses resulting from a lawsuit or other legal action.
Indemnity agreement coverage can also include defense costs if the injured party sues both your business and the party you indemnified. In this case, the indemnity agreement would require the indemnifying party to pay for the costs of defending both parties.
How to Ensure Adequate Indemnity Agreement Coverage
To ensure adequate indemnity agreement coverage, it is essential to review the terms of the agreement carefully. Ensure that the agreement covers all potential liabilities and that the language is clear and unambiguous. It is also crucial to ensure that the indemnifying party has adequate financial resources to cover potential losses.
If you are unsure whether an indemnity agreement provides adequate coverage, consult an attorney experienced in indemnity agreements. They can review the agreement and advise you on any potential gaps or areas of concern.
In conclusion, indemnity agreements are vital to protecting your business from financial losses resulting from legal action. However, it is essential to understand the types of agreements available and their coverage to ensure that your business is adequately protected. Consult an attorney experienced in indemnity agreements to review your agreement and advise you on any potential areas of concern.