Does indemnification leave me exposed?

Sep 22, 2017 | Contract Tips

Q: The indemnification section of my contract places the majority of responsibility on me. How can I manage this exposure?

A:  Your Be wary of references to damages or obligations beyond those that are proximately caused by the negligent rendering of your professional services; these may impose obligations that are not insurable. Any contractual assumptions of liability that would not exist in the absence of a contract are not covered by RLI’s liability insurance policies.

There are various other claim situations to which coverage may not extend, including but not limited to fraud, misconduct, intentional acts, and costs that are not the result of your negligence.  The obligation to defend another party is a contractual liability that would not exist in the absence of a contract, and therefore not covered by insurance.  It helps if you remember that the duty to defend is broader than the duty to indemnify.

To learn about our Insurance Offerings and our Risk Management program, visit our website or Contact us today at 713-552-1900. Be sure to have a lawyer or licensed Risk Manager review your contracts for insurability and other risk implications.

What does Indemnification mean?

  1. In policies written on an indemnification basis, the insurer reimburses the insured for claims and claim costs already paid by the insured. Technically, the insured must not only suffer a loss but must also pay the loss before being indemnified by the insurer.
  2. The agreement of one party to assume financial responsibility for the liability of another party. Hold harmless agreements are typically used to impose this transfer of risk. To read more, visit International Risk Management Institute

What is a Duty to Defend?

According to International Risk Management Institute, “duty to defend” is term used to describe an insurer’s obligation to provide an insured with defense to claims made under a liability insurance policy. As a general rule, an insured need only establish that there is potential for coverage under a policy to give rise to the insurer’s duty to defend.