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What is an Indemnity Agreement?

People on roller coaster.
Health insurance usually covers hospital stays.
Wheelchair makers may require hospitals to indemnify them against any accident a patient may have while using their product.
Sometimes an indemnity agreement is signed when people use a company to invest in stocks or bonds trading.
Skydivers usually have to sign an indemnity agreement.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 24 September 2014
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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.

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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.

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Discuss this Article

anon178524
Post 5

I am assigning to a remaining seven years' lease of a business the landlord wants to release the present lessee of all his obligations and wants me to indemnify the lease. I am reluctant to do that.

anon59598
Post 4

I have two indemnity accounts which are in my children's names but I am the trustee. I have been told I cannot withdraw funds on it as there is a clause to be held for the child til age 25.

Is there any way of getting around or out of this as I need funds due to economic situation? Thanks.

anon36719
Post 3

does a signed indemnification agreement expire at any point?

anon2083
Post 2

Hi, I am in the process of buying a property and the building permission for an extension and removal of a supporting wall have been lost. The owner has taken out an indemnity against any problems, could you tell me if this is a safe option or is there as better option.

kaytiealice
Post 1

i am selling my house and it is due to be exchanged in 7 days, but now they have said they want me to take out an indemnity policy, i am legally required to do so

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