What is an Indemnity Agreement?

An indemnity agreement is one in which financial responsibility is decided. For example, a contract for medical insurance is an indemnity agreement. In it, the insurer agrees to pay certain medical costs as defined by the contract. Thus some financial responsibility for medical bills now belongs to the insurer. The insured on the other hand, is indemnified, or exempt from paying certain costs as outlined by his or her policy.

Indemnification is the act of being held not liable or being protected from costs by shifting them to another party. Certain actions almost always include an indemnity agreement. Tenants signing a lease often agree to indemnify the owner of the property from costs or damages associated with being harmed on the property. This indemnity agreement normally has an additional clause that states the property owner must fix anything that could be potentially dangerous.

Thus a landlord would be indemnified from damages if a tenant tripped and fell down the stairs. However, if the stairs were in disrepair, and this matter had been brought to the attention of the landlord, an indemnity agreement would not prevent the renter from suing for damages if the disrepair caused the accident.

Tenants usually further agree to be held responsible for costs if the property is damaged. Agreeing to clean the carpets or flea bomb an apartment upon vacating the property is an indemnity agreement that protects the property owner. Deposits may be not be returned when a tenant fails to meet obligations stated in an indemnity agreement.

Sometimes an indemnity agreement is signed when people use a company to invest in stocks or bonds trading. In order to use the company’s services, the investing person agrees to hold the company not liable for any money losses that might be incurred by investing.

Occasionally one uses an indemnity agreement when intellectual property is leased. This is much like the tenant indemnification agreement. The holder of the intellectual property seeks exemption for any damages incurred by the person using the property. The leaser also agrees to take on any lawsuits that result from his or her use of the property.

Another type of indemnity agreement is harder to enforce. If you have ever been to an amusement park, you might note the ticket contains fine print about you riding rides at your own risk. The goal, of course, is to indemnify the park against a person suing for damages if injured on a ride. This seldom works, because technically, you have not signed an agreement. Most people hurt on an amusement park ride are able to sue for damages quite successfully.

Other leisure activities that might have you signing an indemnity agreement are things like skydiving and parasailing. Most companies will not allow you to participate in such activities unless you actually sign an indemnity agreement that holds them not liable for injury to yourself or death. In truth, most companies that offer somewhat dangerous leisure activities could not remain solvent without such an agreement.