What Is a Hold Harmless Agreement?
A hold harmless agreement (HHA) lets one party get protection if they accidentally caused physical harm, damage, or financial loss to the other party during the cooperation or service provision.
The parties are called “Indemnitee” (the person or entity who is held harmless) and “Indemnifier” or “Indemnitor” (a person or entity who will be providing agreed protections).
Hold harmless agreement is an essential document for any business that organizes events that involve physical activities. It can be applied to both customers and employees and helps businesses shield from possible lawsuits.
When Are Hold Harmless Agreements Used?
It is a necessary element of most waivers used by industries where a certain degree of safety and health or financial risk is present.
Here are some of the most common scenarios when a hold harmless agreement needs to be signed.
Sports and Fitness
In fitness gyms, clients are usually asked to sign a hold harmless agreement (as a separate agreement or as a clause of a broader contract). This makes the gym, the Indemnitee, not liable for any harm visitors may do to themselves when working out on its territory.
Or, for instance, organizers of marathons ask their participants to sign a release of liability agreement to secure themselves from potential lawsuits in case participants get injured when taking part in the sports activity.
Rental agreements
It is very common for landlords to include a hold harmless clause in the rental agreement that would indemnify them if the renter injures themselves in or close to the rental unit. The clause might also free the landlord from any liability in case the renter gets burglarized.
The same applies to car rental businesses. The car company will most likely want renters to sign HHA to avoid possible lawsuits against them in case there is an accident involving the rental car.
Construction
Hold harmless agreements are widely used in this field. For example, when ordering house remodeling services, the owner of the building might want to protect themselves from liability if the worker hurts themselves while being on their property. HHA can be mutual if the worker wants to protect themselves too, for example should the owner’s pet wander in the construction area and accidentally injure itself.
Entertainment
Companies that provide various amusements such as balloon rides, shark feeding, rope jumping, white water rafting, or ATV rides, usually require a client to sign HHA to make them aware of the risks involved.
Types of HHA by Breadth and Scope
There are 3 forms of indemnity based on the breadth and scope of liabilities transferred to another party in the contract. They are most often used in contracts in the construction industry.
Broad form
Such a provision states that regardless of the type of fault, the Indemnitor takes an unqualified obligation to hold harmless the Indemnitee for any liability that arises from the agreement. The entire risk of loss is shifted to the Indemnitor even if the other party is solely at fault for the losses.
However, not all states allow using this form as a lot of them have enacted anti-indemnity statutes. This way, they limit the breadth and scope of indemnity clauses that parties can include in their contracts. An improper level of indemnity can lead to the clause being void.
Intermediate form
Under an intermediate form of the indemnity provision (which is the most common form in the construction industry), the Indemnitor is held liable for all losses arising out of the agreement if both parties are in one way or another at fault. The indemnifying party might be just 1% at fault but the Indemnitee still receives 100% indemnity.
The Indemnitee is not held harmless only in cases where the accident or damage was a result of their sole negligence.
Limited form
Such a form allows limiting the Indemnitor’s liability only to the extent of the Indemnitor’s fault. It is usually calculated as a percentage of their fault.
Hold Harmless Agreement and Other Similar Agreements
It is easy to not notice the difference between HHA and similar agreements considering that one way or another they have to do with liability release. That’s why we are going to remove some ambiguity and clarify why the following documents slightly differ.
HHA and indemnity agreement
In an indemnity agreement, one party agrees to protect another party from liability. For instance, with the use of an indemnity agreement, a renter of land can protect the landowner against any harm that might occur during the use of such land for a business meeting.
Essentially, both indemnity agreement and HHA have a similar purpose of shifting the liability to one of the parties (or both of the agreement is mutual). The difference between those two is debatable, but some law experts assume the major difference is that in HAA, both liabilities and losses can be covered, while an indemnity agreement covers losses in the first place.
In practice, these two clauses are often used together in contracts.
HHA and waiver of liability
While HHA is about releasing from responsibility, a waiver of liability implies giving up a legal right. For example, a person or entity to whom a debt is owed can waive a late penalty right if payment is overdue.
HHA and insurance policy
Those two clauses are usually kept separately in an agreement as they have significant differences in coverage and scope of liability.
In a policy agreement, the risk is transferred from the policyholder to the insurance company in exchange for a premium.
In the case of HHA, the risk is transferred through a non-insurance agreement, that is, not in exchange for payment. It does not transfer the cause of the liability but does transfer the financial responsibility for the liability, which is why the indemnitee is essentially not relieved from liability.