According to Wikipedia, Indemnity is a contractual obligation of one party to compensate for the loss incurred to the other party due to the acts of the Indemnitor or any other party. The duty to indemnify is usually, but not always, coextensive with the contractual obligation to “hold harmless” or “save harmless.” And defined by Black’s Law Dictionary as “a duty to make good any loss, damage, or liability incurred by another.” Indemnity has a general meaning of holding one harmless; that is to say, that one party holds the other harmless for some loss or damage.

Indemnification is a comprehensive form of insurance compensation and is one of the most frequently used provisions when negotiating contracts, but is not understood by many parties when negotiating contracts. It is a critical provision and referred to as a contractual agreement in which one party agrees to pay for losses or damages caused by another party. A typical insurance contract states that the Indemnitor(insurer) agrees to compensate the Indemnitee(insured) for any damages or losses with premiums paid by the indemnitee. 

Indemnity insurance is a way for a company (or individual) to obtain protection from indemnity claims by protecting the holder from having to pay the full sum of an indemnity, even if the holder is responsible for the cause of the indemnity.

The Indemnity Process

An indemnity provision is standard in most insurance agreements. However, each specific agreement covers different things to different extents. Many contracts contain a letter of indemnity guaranteeing both parties will meet contract stipulations, or compensation will be paid. It is important to note that indemnity agreements have a period of indemnity, which is a specific time frame for which payment is valid. 

Depending on the indemnity agreement, indemnity can be paid by cash or by way of repairs or replacement. Home insurance agreements have homeowners pay premiums to an insurance company, so if there are damages from fire or other disasters, the insurance company will pay out cash or hire authorized contractors to make repairs. 

Because lawsuits are standard, many companies and people in the medical field make indemnity insurance mandatory to protect the company and its employees against claims made by clients. Some companies invest in deferred compensation indemnity to protect money the company expects to receive in the future.

Indemnity insurance covers the costs of an indemnity claim but is not limited to court costs, fees, and settlements. The amount covered by insurance depends on the specific agreement.

Acts of Indemnity

According to Wikipedia, an Act of Indemnity is a statute passed to protect people who have committed some illegal act, which would otherwise cause them to be subjected to legal penalties. International treaties may contain articles that bind states to abide by similar terms, which may involve the parties to the treaty passing domestic legislation to implement the indemnity laid out in the treaty. An act of indemnity protects those who have acted illegally from being subject to penalties. This exemption typically applies to public officers, such as police officers or government officials, who are compelled to break the law to carry out the responsibilities of their jobs. Often, such protection is granted to a group of people who committed an illegal act for the common good, such as the assassination of a known dictator or terrorist leader.

Paul J. Burkhart

Paul J. Burkhart can help if you are seeking indemnification. Paul J. Burkhart is an experienced business attorney who can draft an indemnity agreement and help both parties understand what it covers. 

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