We could spend hours and hours on indemnification provisions. And sometimes we do. But when I have to do a concentrated review in a short amount of time, I focus on a few things for each provision. What I focus on depends on whether my company is the indemnifying or indemnified party.
Quick disclaimer (I’m a lawyer after all.) This list contemplates a simple indemnity provision. It does not include all the features of claim-specific indemnities (such as intellectual property infringement or data breaches). And of course there are other advanced indemnification nuances and approaches outside the scope of this general checklist.
The full sample provision in the chart below:
Seller will indemnify, defend, and hold harmless Buyer, its Affiliates, and their directors, officers, contractors, and customers ("Indemnified Parties") from and against all costs, fees, expenses, damages (including attorneys' fees and court costs) ("Losses") arising out of any claim, action, proceeding asserted or threatened against an Indemnified Party (including any settlements) ("Claims") by an unaffiliated third party to the extent that such Claims arise from or relate to: (a) injury to people (including death) or damages to property and (b) the negligence of the Indemnifying Party, its Affiliates, or their employees, contractors, or customers. Indemnified Parties shall notify the Indemnified Party of any Claim immediately after receiving notice. Failure to notify shall not affect the indemnification obligation unless it prejudices the Indemnified Party's ability to defend the Claim. Indemnifying Party will control the defense, including any negotiations, settlements, and appeals. The Indemnified Party must provide reasonable cooperation to the Indemnifying Party. The Indemnified Party may engage its own counsel at its own expense.
My quick advice on the 14 typical parts of an indemnification provision:
Seller will indemnify, defend, and hold harmless | Indemnifying parties may want to (1) delete hold harmless as it may expand scope in some jurisdictions and (2) make subject to the indemnity process. |
Buyer, its Affiliates, and their directors, officers, contractors, and customers ("Indemnified Parties") | Consider who should be included. Indemnifying parties may prefer to narrow. |
from and against all costs, fees, expenses, damages (including attorneys' fees and court costs) ("Losses") | Indemnified parties may want to add in broader categories (e.g., any liability whatsoever). |
arising out of any claim, action, proceeding asserted or threatened against an Indemnified Party (including any settlements) ("Claims") | Consider adding other other types of claims. Indemnified Parties can broaden by saying "relating to" or "allegation." |
by an unaffiliated third party | Confirm indemnity only covers third party claims. Indemnifying party can evaluate whether to exclude claims by an affiliate. |
to the extent that such Claims arise from or relate to: | Limit scope by removing "relate to." Broaden scope by removing "to the extent" and adding "allege that." |
injury to people (including death) or damages to property | Indemnifying parties can narrow it by referencing "tangible" property and limiting to "caused by Indemnifying Party's gross negligence" or the like. |
the negligence of the Indemnifying Party, its Affiliates, or their employees, contractors, or customers | Indemnifying parties can narrow by removing other entities and adding "in the performance of the Services or work done at Indemnified Party's location." |
Indemnified Parties shall notify the Indemnified Party of any Claim | Indemnified parties make sure this is a covenant, not a condition precedent to the indemnity obligation. |
immediately after receiving notice. | Consider how the timeline would work for the different types of claims. Options include promptly, immediately, or within X days. |
Failure to notify shall not affect the indemnification obligation unless it prejudices the Indemnified Party's ability to defend the Claim. | Address how to phrase the prejudice (to the extent it materially prejudices) and how any delay affects the indemnity obligation (excuses, not excuse). |
Indemnifying Party will control the defense, including any negotiations, settlements, and appeals. | The indemnified party may include consequences if it doesn't step up to defend and limits on settlement terms. |
The Indemnified Party must provide reasonable cooperation to the Indemnifying Party | The indemnified party may add "at indemnifying party's expense." The indemnified party may want to be excused if there is not adequate cooperation. |
The Indemnified Party may engage its own counsel at its own expense. | Address how to phrase the prejudice (to the extent it materially prejudices) and how any delay affects the indemnity obligation (excuses, not excuse). |
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