What is a hold harmless clause?
A hold harmless clause is commonly added to contracts. The idea is to protect the company and transfer some of the company's liability to you in return for the business they are sending to you. The clause requires that you protect the company with whom you are contracting if they are sued. Depending on the state, these clauses are generally only enforceable if the suit was caused by your negligence. Most hold harmless clauses include language requiring that you hold the company harmless and indemnify (protect or insure) them. The party presenting the hold harmless agreement is asking you to protect the company if they are sued and buy an insurance policy to protect them (since you probably don't have the resources to personally protect them).
Do I have to sign the hold harmless contract?
No. You can refuse to sign the contract. Unfortunately, that is not always realistic, since you may lose the business associated with the contract. Most contracts with managed care groups, hospitals, state and county governments, schools or other entities that make up the majority of your business are making the hold harmless clause a mandatory part of all contracts. It is always worth asking if the company will remove the clause from the contract or have the language modified. It is preferable to have the clause limit your obligation to claims where your negligence was the cause of the claim. You should always have an attorney familiar with contracts review any contract you intent to sign or modify. The attorney can better advise you of your obligations and potential risk.
Is it in my best interest to sign a contract with a hold harmless clause?
No. It is never in your best interest to assume any liability, especially for someone else. Some hold harmless clauses are written to provide complete protection for the business. However, it may be impossible to comply perfectly with the terms of the contract. A hold harmless contract may ask you to provide insurance for all risk associated with a contract or protect them from all liability. Unfortunately, all insurance policies have coverage limits and exclusions. Some states put limits on how much liability you can assume by contract. It is up to you to determine if assuming the risk is worth the business the contract provides.
Will signing a contract with a hold harmless clause jeopardize my coverage with The Trust?
No. Your policy will still cover you for the same things if you sign a contract with a hold harmless clause. However, the policy may not cover everything the contract asks you to cover. There may be gaps in coverage. Where that occurs, you may be personally liable.
Is there anything I can do to protect myself?
You can add the company that has asked to be held harmless as an additional insured. The additional insured endorsement makes the party an insured on your policy and protects them if they are sued for your negligence. The endorsement helps you meet your obligation to either hold that party harmless or indemnify them. The endorsement, like all insurance, has its limits and may not cover every possible situation.
Are there disadvantages to listing an additional insured on my policy?
Yes. When you list an entity on your policy as an additional insured, they are also insured or protected by your policy. However, never insure someone else on your policy unless it is absolutely necessary. If the additional insured is sued, the money used from your policy to pay for their claim could reduce your coverage. Your policy, not the additional insured's, will defend and pay for the claim and you are left with a record of a claim. This could lead to later difficulties when applying to panels or getting future insurance.
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