Nov 04


Indemnity, in very simple words, means protection or security against any damage, loss or injury in a legal way. For example: An indemnity would be an amount offered by X to Y (as reparation) for a specific damage or loss borne by the latter. Here, X may or may not be responsible for the loss borne by Y. Indemnity could be in the form of repair or cash or replacement.

Indemnity is interchangeably used with reparation. Both mean the same; that is to act on a sufferer’s behalf provided that the cause has been mentioned earlier in the contract. For e.g.: Car insurance is a good example. If the car insurance buyer meets with an accident and in this case the responsibility of the accident is of the car driver, then the insured buyer is obligated to indemnify the car driver. Thus, indemnity is a legal concept.

An indemnity waiver, however, is a legal document. This states that a person who takes part in an activity may sign to acknowledge the risks involved in his or her participation. The aim of doing this is to remove the legal liability from the person responsible for the activity. This waiver is signed mostly to waive liabilities for potential personal injuries. They are often signed for recreational activities such as skate parks, ski slopes or even amusement parks. In this, if someone gets injured, then as per the liability waiver, they cannot go ahead with pursuing charges against the facility.

Indemnity clauses

 Clauses related to indemnity are about a risk-transfer between two parties to prevent any loss or damage that takes place because of a cause mentioned. This is based on a contract. The most common idea is to look for an indemnity, for protection of a party to the maximum extent against liabilities because of actions of another party. The types of indemnity clauses are stated as under:

  • Bare indemnities
  • Proportionate or Limited Indemnities
  • Reverse or reflexive indemnities
  • Third party indemnities
  • Financing indemnities
  • Party/Party indemnities

 Indemnity clauses can go beyond risk transfer, some people use it for additional insurance coverage without premium or administrative costs involved.

It is important that before signing the contract, you consider to get the contract reviewed by your legal counsel for language that widens your exposure as well as by your insurer to identify exposures that fall outside of your coverage. Ultimately, government action is needed.

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