Indemnification Defense

The Attorneys of Cutler Smith, P.C. have over 95 years of Combined Construction Law Experience.

Indemnification Defense

What is indemnification?

Indemnification, sometimes known as indemnity, is an agreement in which one party (the indemnifying party) agrees to reimburse the other party (the indemnified party) for specific costs and expenditures incurred as a result of third-party claims. Direct claims, which are claims or causes of action that one contractual party has against the other, can also be covered by indemnification.

Why are indemnity clauses necessary?

Contracting parties can use indemnification provisions to:

  • Adjust the amount of risk it is willing to take on in each transaction and with each counterparty.
  • Protect itself from damages and litigation that the counterparty can more easily bear.

In a sale of products agreement, for example, the risk that a product would hurt a third party is more economically carried by the seller than by the customer. The seller has greater control over the items than the consumer, whose main responsibility is to pay. As a result, the seller is in a stronger position than the buyer to limit losses and liabilities associated to the items.


Any time you need to draft a contract, we highly recommend reaching out and having us help to ensure your contracts are structured correctly and protect both parties.

Both the indemnified and the indemnifying party profit from the effective drafting and negotiation of an indemnity arrangement. An indemnity clause may provide for:

Certain forms of losses, such as attorney’s fees, are recoverable by the indemnified party under a common law cause of action.
The indemnifying party will limit its obligation by including:

  • Liability basket
  • Liability cap
  • Materiality qualifiers


What does a standard indemnity clause look like?

A typical indemnification provision includes two different obligations: the responsibility to indemnify and the obligation to defend.


Indemnification obligation
The indemnifying party is required to: Reimburse the indemnified party for its paid fees and expenses, referred to as losses.
Payment in advance to the indemnified party for overdue charges and expenditures, such as:

  • Liabilities
  • Claims
  • Action Motives
The duty to defend

The indemnifying party’s responsibility to defend includes both:

Obligation- The person providing indemnification must:

  • reimburse paid defense costs and expenditures
  • Pay in advance for unpaid defense charges and expenditures.

A Right- The party providing indemnification has the right to assume and oversee the defense of the third-party litigation.


Because it applies regardless of the merits of the third-party complaint, the responsibility to defend is wider than the obligation to indemnify. The claims of the complaint, not the outcome of the case, trigger the need to defend.

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