Indemnity clauses explained for contractors
Indemnity language can be hard to read, but it can create serious financial exposure. This guide explains what contractors should look for before signing.
Updated: May 8, 2026
What indemnity does
Indemnity can require one party to cover claims, losses, damages, or defense costs for another party.
Defense obligations
A duty to defend may require paying legal defense costs before anyone decides who is at fault.
Third-party claims
Narrower clauses often focus on third-party claims caused by breach, negligence, or misconduct.
Client-caused issues
Be careful if you must indemnify the client even when the client gave bad instructions or contributed to the problem.
Liability caps
Check whether indemnity is inside or outside the liability cap. Outside the cap can mean much larger exposure.
Checklist
Does it include defense costs?
Is it limited to third-party claims?
Does it require fault?
Are client-caused issues excluded?
Is indemnity capped?
Does insurance cover it?
FAQ
Is indemnity normal?
Some indemnity is common. Broad, uncapped, or no-fault indemnity deserves careful review.
What is a duty to defend?
It can require paying or managing legal defense costs, sometimes before fault is determined.
Should a lawyer review indemnity?
Yes for broad or uncapped language, high-value work, regulated industries, or claims you cannot afford.