Risk

Contractual Risk Transfer: Indemnities, Hold-harmless, and Additional Insureds

Read and negotiate the three provisions that move liability between companies (indemnity, additional-insured status, and waiver of subrogation) so that the transfer you thought you bought is actually collectable from someone who can pay.

  • Advanced
  • 12 min total
  • 14 chapters

What decision this helps you make: Which of the three parts your contracts are missing, what limits and endorsements to require from a counterparty, and when a clause that reads well is unenforceable where you actually operate.

What this topic is

Contractual risk transfer is moving liability from one company to another by agreement rather than by buying a policy. It runs on three provisions that must work together: an indemnity clause deciding who pays, additional-insured status deciding whose insurance responds, and a waiver of subrogation deciding whether their insurer can come back at you after paying. Most contracts contain one of the three and are treated as though they contain all of them.

Why it matters

In construction, logistics, property, and services, far more risk moves between parties through contract language than through anything anyone buys from a carrier. The clauses are usually drafted by whoever sent the template and signed by whoever wanted the work, and they decide who funds a serious loss years later. A transfer to a counterparty with no assets and no insurance is a transfer to a promise.

Who should learn it

Owners signing subcontracts, master service agreements, leases, or vendor terms; anyone who has been asked to name a customer as an additional insured; and operators who have accepted an indemnity clause because it looked standard.

What you will understand

  • The three provisions, what each one does, and why one alone leaks
  • Broad, intermediate, and limited form indemnity, and which one you just signed
  • What an additional-insured endorsement actually grants, and what a certificate does not
  • Where state law voids the clause you are relying on, and what to do instead

Prerequisites

Common misconception

"We are covered: they signed our indemnity and sent a certificate of insurance." A certificate is an informational summary issued by a broker, not a policy and not coverage; it usually says so on its face. It does not amend the policy, does not create additional-insured status, and the endorsement that actually grants that status is a separate document you have probably never asked for. Meanwhile the indemnity is worth exactly what the counterparty can pay plus whatever insurance genuinely sits behind it. Two pieces of paper, both real, neither of which is the thing you think you are holding.