Indemnification
Indemnification is a promise by one party to cover another party's losses, costs or legal bills from specified claims, usually claims brought by someone outside the contract.
Updated November 5, 2026 · 1 min read
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How the clause works
A typical clause says one party will indemnify, defend and hold harmless the other against claims arising from its work, its breach or its negligence. Indemnify means pay for the loss. Defend means pay for or run the legal defense. Hold harmless means not seek recovery from the other party. A clause can run one way or both ways.
What to watch
- Scope: claims caused by the indemnifying party's negligence is narrow; any claim arising from the work is broad.
- Caps: a maximum, often tied to the contract price or the insurance limits.
- Insurance: whether the indemnifying party's insurer will actually cover the promise.
- State law: many states limit construction clauses that make one party pay for the other's own negligence.
An example
A tree service agrees to indemnify a homeowner against claims from its crew's work. If a falling limb damages a neighbor's car and the neighbor sues the homeowner, the tree service pays the claim and the defense. In SignMaster, put an Initials field beside a clause like this so the customer can't say they missed it.