A hold harmless agreement (also called an indemnity clause or save harmless clause) is a contractual provision in which one party agrees not to hold another party legally responsible for specified risks, losses, injuries, or damages that arise during a project or business relationship. It transfers financial liability — and often the duty to defend — from one party to another. Who this is for: contractors, subcontractors, property owners, vendors, and any business that signs contracts before starting work.
TL;DR — Key Takeaways
- A hold harmless agreement shifts liability from one contracting party to another in writing — it is a contract clause, not a standalone insurance policy.
- Three forms exist: broad form (one party absorbs all liability), intermediate form (the indemnitor assumes its own and shared negligence but not the indemnitee's sole negligence), and limited form (only the indemnitor's own negligence is transferred).
- Most commercial contracts require the indemnifying party to carry General Liability insurance and name the other party as an additional insured to back the promise.
- Many states have "anti-indemnity" statutes that void overly broad indemnity provisions — particularly broad-form clauses — in construction contracts, so the enforceability of your clause depends on where the work happens.
- Without proper insurance behind it, a hold harmless agreement is only as good as the indemnitor's ability to pay out of pocket.
What Exactly Is a Hold Harmless Agreement?
A hold harmless agreement is a risk-allocation tool embedded in a contract. When Party A (the indemnitee) requires Party B (the indemnitor) to sign one, Party B agrees to absorb certain legal and financial consequences that would otherwise fall on Party A.
The clause typically covers three things: 1. Indemnity — B pays A's damages. 2. Defense — B pays A's legal defense costs. 3. Hold harmless — B will not sue A for covered losses.
These three obligations are sometimes bundled and sometimes separated. Reading the contract carefully — or having an attorney review it — matters because the scope can vary widely.
The Three Forms of Hold Harmless Agreements Compared
| Form | What the Indemnitor Assumes | Common Use Case | Enforceability Risk |
|---|---|---|---|
| Broad Form | All liability, even if the indemnitee is 100% at fault | Large general contractors historically | High — voided by anti-indemnity statutes in 40+ states |
| Intermediate Form | Own negligence + shared negligence; excludes sole negligence of indemnitee | Commercial construction, vendor agreements | Moderate — widely enforceable with proper insurance backing |
| Limited Form | Only the indemnitor's own negligence | Most balanced; preferred by many attorneys | Low — generally enforceable in all states |
Practical note: Intermediate form is the most common in commercial construction contracts today, largely because broad-form indemnity has been legislatively restricted in most states.
Anti-Indemnity Statutes: Why the State Matters
Forty-two states have enacted anti-indemnity statutes that limit or void contractual indemnity provisions in construction contracts when they attempt to shift liability for a party's own negligence. The specific threshold varies by state:
- California (Civil Code §2782): Voids provisions that require indemnification for the indemnitee's active negligence in construction contracts.
- Texas (Tex. Ins. Code §151.102): Voids provisions in construction contracts that indemnify a party against claims caused by the indemnitee's own negligence or fault, with limited statutory exceptions.
- Florida (§725.06): Voids broad-form indemnity in construction unless the contract states a specific dollar limit for indemnity.
- New York: Does not have a blanket anti-indemnity statute for all construction, but General Obligations Law §5-322.1 voids clauses indemnifying against the indemnitee's own negligence in construction agreements.
Always have a licensed attorney in the project's state review indemnity language before signing. [verify state] for the most current version of each statute.
How a Hold Harmless Agreement Works in Practice (5 Steps)
- Contract drafting: The indemnitee (often a property owner, general contractor, or venue operator) includes an indemnity clause in the service agreement or subcontract.
- Review and negotiation: The indemnitor (subcontractor, vendor, service provider) reviews the scope — particularly whether it covers sole negligence — and negotiates if needed.
- Insurance requirement: The contract specifies the minimum insurance the indemnitor must carry (e.g., $1M/$2M General Liability, $1M Auto) and requires the indemnitee to be added as an additional insured on those policies.
- Certificate of Insurance (COI): The indemnitor delivers a COI plus an additional insured endorsement (CG 20 10 / CG 20 37 for ongoing and completed operations, respectively) before work begins.
- Claim trigger: If a covered incident occurs, the indemnitor's insurance responds first; the additional insured endorsement gives the indemnitee access to that policy's defense and indemnity.
Hold Harmless vs. Additional Insured: What's the Difference?
| Concept | What It Is | Where It Lives | Enforced By |
|---|---|---|---|
| Hold Harmless Agreement | Contractual promise to absorb liability | The contract itself | Contract law |
| Additional Insured | Status on another party's insurance policy | CGL policy endorsement | Insurance policy / carrier |
| Waiver of Subrogation | Insurer agrees not to sue the other party after paying a claim | Policy endorsement | Insurance carrier |
These three tools work together. A hold harmless clause creates the obligation; the additional insured endorsement activates insurance coverage to fund it; the waiver of subrogation prevents the paying insurer from seeking recovery against the indemnitee.
Real-World Example: Electrical Subcontractor on a Commercial Renovation
Scenario (illustrative — not a guarantee of outcome):
Bright Wire Electric, a licensed electrical subcontractor in Austin, TX, is hired by Summit General Contractors to rewire a 20,000 sq ft office building. Summit's subcontract contains an intermediate-form hold harmless clause requiring Bright Wire to indemnify Summit for losses arising from Bright Wire's work, and to name Summit as an additional insured on a $1M per occurrence / $2M aggregate Commercial General Liability policy.
During rough-in, a Bright Wire journeyman accidentally severs a water line. Resulting water damage costs $185,000 to remediate. A building tenant also files a $75,000 business interruption claim against Summit.
How the hold harmless agreement responds: - Bright Wire's CGL policy (with Summit as additional insured) responds to both claims. - Summit tenders defense to Bright Wire's carrier under the additional insured endorsement. - Because the loss arises from Bright Wire's own work, indemnifying Summit is permitted under Texas law (§151.102), which voids indemnity only for the indemnitee's own negligence — the clause holds. - Bright Wire's insurer pays $260,000 in combined damages, subject to Bright Wire's $5,000 deductible. - Summit's own CGL is not accessed; its loss runs stay clean.
Typical insurance cost context: A small electrical subcontractor in Texas with $750K annual revenue might pay $3,500–$7,500/year for a $1M/$2M CGL policy. Additional insured endorsements for specific projects are typically included in standard commercial policies at no additional premium for ISO-standard endorsements.
Frequently Asked Questions
Q: Is a hold harmless agreement the same as an indemnity clause?
Yes, in practice. "Hold harmless," "indemnity clause," and "save harmless clause" all describe a contractual promise by one party to absorb another party's legal liability. Some attorneys distinguish the terms slightly — "indemnity" covers financial reimbursement while "hold harmless" also prevents filing suit — but in most commercial contracts they appear together and are treated as a single obligation.
Q: Does my General Liability insurance automatically cover hold harmless agreements I sign?
Most standard Commercial General Liability (CGL) policies include a contractual liability coverage provision (Coverage A) that covers bodily injury and property damage liability assumed under an "insured contract," which the ISO policy form specifically defines to include hold harmless provisions in construction and service agreements. However, the clause must be in writing before the loss occurs, and some policies contain exclusions for certain types of indemnity. Always review your policy's definition of "insured contract" with your broker before signing.
Q: Can I be required to sign a hold harmless agreement even if I'm not at fault?
Yes. Particularly in broad-form and intermediate-form clauses, you can be required to indemnify another party for losses that were partially or entirely their fault. This is why anti-indemnity statutes exist — and why reviewing both the contract language and your insurance coverage before signing is critical.
Q: What happens if I sign a hold harmless agreement but don't have adequate insurance?
The contractual obligation still exists. If a covered loss occurs and your insurance is insufficient (wrong limits, wrong endorsements, lapsed policy), you are personally responsible for the gap. Courts can — and do — enforce indemnity obligations against an indemnitor's business assets and, in some cases, personal assets.
Q: Do hold harmless agreements appear outside of construction?
Yes. They are common in event venue rentals, commercial lease agreements, equipment rental, staffing/temp agency contracts, franchise agreements, software licensing, and transportation/logistics. The same principles apply: the scope of the indemnity, insurance backing requirements, and state law enforceability all matter.
Q: What is a mutual hold harmless agreement?
A mutual (or reciprocal) hold harmless agreement requires both parties to indemnify each other for their respective negligence. It is common in joint venture agreements, commercial leases, and software vendor contracts where both parties have exposure. Each party typically must carry adequate insurance and name the other as an additional insured.
Q: Does a hold harmless agreement protect me from workers' compensation claims by my own employees?
No. Workers' compensation is a statutory system; employees injured on the job file claims through your workers' comp carrier regardless of any hold harmless agreement. However, if a subcontractor's employee is injured and sues the general contractor, the general contractor can invoke the hold harmless clause against the subcontractor (to the extent permitted by state law).
Q: How long should I keep records of hold harmless agreements?
Best practice is to retain signed contracts — including indemnity clauses — for at least the applicable statute of limitations in your state plus two years. For construction projects, this often means 6–12 years given latent defect claims. Consult a business attorney for your specific situation.
Why Morrow for Hold Harmless and Contractual Liability Coverage
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Independent agency, multiple carriers: Morrow is an independent P&C agency, not captive to a single insurer. When a contract's hold harmless requirements call for specific endorsements (CG 20 10, CG 20 37, waiver of subrogation), we shop across multiple admitted and surplus lines carriers to find a policy that actually includes them — not one that excludes them in fine print.
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Fast COI and endorsement turnaround: Contract deadlines don't wait. Morrow's team is set up to issue Certificates of Insurance and confirm additional insured endorsements quickly so you can start work on schedule without holding up the project.
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Construction and trade specialization: Whether you are a general contractor managing stacked hold harmless obligations across 20 subcontractors or a specialty trade sub being asked to sign your first indemnity clause, Morrow's producers understand the contractual liability language in CGL policies and can tell you what your current policy actually covers before you sign.
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Pre-signing contract review support: We will read the insurance requirements section of any contract you're evaluating and tell you whether your current coverage satisfies them — and what gaps exist. This is a standard part of working with Morrow, not an upsell.
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Real claims advocacy: When a hold harmless obligation is triggered and you need your carrier to respond, Morrow advocates on your behalf — following up with adjusters, documenting tender of defense requests, and making sure your additional insured endorsements are activated correctly.
Get a Quote or Review Your Contract Requirements
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Related Pages
- Commercial General Liability Insurance — Complete Guide
- Additional Insured vs. Certificate Holder: What's the Difference?
- Waiver of Subrogation Explained
- Commercial Insurance for Contractors
- How Much Does General Liability Insurance Cost?
About This Page
Author: Morrow Editorial Team, reviewed by a licensed P&C insurance producer
Published: June 2026
Last updated: June 2026
Sources: - Insurance Services Office (ISO) Commercial General Liability Coverage Form CG 00 01 - ISO Additional Insured Endorsements CG 20 10 and CG 20 37 - National Association of Insurance Commissioners (NAIC) — contractual liability guidance - American Institute of Architects (AIA) — standard construction contract indemnity provisions - California Civil Code §2782 (anti-indemnity) - Texas Insurance Code §151.102 (anti-indemnity) - Florida Statutes §725.06 (anti-indemnity) - New York General Obligations Law §5-322.1 (anti-indemnity) - Insurance Information Institute (III) — commercial liability resources