Definition of Hold Harmless Agreement in Business Insurance

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Hold Harmless Agreement

In some contract arrangements, one party requests that they not be liable for bodily harm or property damage. They believe any injury or destruction is on the ownership of those who participate. In these situations, the party asks that a hold harmless agreement be added to a contract.

What a Hold Harmless Agreement Does

This clause absolves one or both parties in a contract from covering damage related to the other. In some cases, a business will request this if it believes it shouldn’t be financially or legally responsible for potential damage.

When the responsible party signs the contract, the clause prevents them from suing the business or taking other legal actions against them.

Agreement Examples

A hold harmless agreement is normally added for extreme sports businesses. These could include white water rafting, rock climbing, or skydiving. Here, customers agree not to seek legal action in return for participation.

Rental agreements for apartments or homes sometimes include a hold harmless agreement. In this scenario, the renter assumes responsibility for any damages that take place during their residency. Should the landlord discover these during an inspection or move-out, the onus is on the renter to pay for any repairs.

Types of Agreements

This clause can be either reciprocal or unilateral. The former means both parties who sign the contract hold each other harmless. This might be a situation where a third-party is responsible.

In a unilateral agreement, one party consents not to hold the other responsible. When someone signs an agreement to skydive, they unilaterally agree not to claim bodily damage liability should they break their leg on the landing.

Exceptions

There are some exceptions when it comes to holding harmless agreements. For instance, some states prevent hold harmless agreements from being applied in construction jobs. In this scenario, it’s the responsibility of the construction firm to maximize safety protocols.

States also have the primary say on the wording of a hold harmless agreement. If regulators believe the wording is unclear, they can void it from a contract. The same can happen if it’s too broad in scope. An example would be if a landlord declares they are not responsible for broken appliances that need to be repaired, even though they came with the home.

Additionally, a hold harmless agreement will be declared null and void if the second party declares they were coerced into accepting the clause. An example would be if a company forces a construction worker to sign a hold harmless agreement in exchange for employment. Not only will it be voided, but the business can be subject to fines or other legal issues.