Indemnification & Hold Harmless Agreement: Fill & Download for Free

If I had a document that incriminated me, but also incriminated Donald Trump Jr I sure would not destroy it. I would hide it and safeguard it as my get out of jail free card. If prosecutors ever got enough evidence to prosecute me I would trade my secret document for indemnification.

Oh, yes. Very standard.A corporation normally indemnifies board members, officers, and employees automatically by operation of state law and/or its organizational documents. So it almost goes without saying that they're indemnified. Advisors by contrast aren't ordinarily covered by either, so their indemnification would come via a separate indemnification agreement, pledge, or insurance policy by the company.Consider who a company's advisors are: successful and often wealthy individuals with a personal net worth many times greater than the value of the company. They are "deep pockets" in the event trouble leads to a lawsuit from a third party and their reward is relatively small. Without solid indemnification it may not be worth the personal financial risk of litigation to dabble in startups.You don't often see seed level advisors demanding indemnification. That crowd might be a kid who just sold their company for a wad of cash is now paying it back by helping colleagues get companies off the ground. Unless they have a personal financial manager, fleet of lawyers, or public company CEO for an uncle, they just don't know to ask. But more established executives who tend to sign on post-funding, the kind with families, trusts, estate planning, personal wealth managers and personal lawyers, are always watching out for their personal risks. Those people may well ask for an indemnification agreement and/or insurance, and it is good business to honor a reasonable request like that. Not a red flag.As far as I know D&O insurance starts at about $5,000 yearly for a million dollars of coverage. If available but not included in the basic D&O package, adding a rider for advisors should not add significantly to cost. Their exposure is a lot lower than actual board members, as they don't have fiduciary obligations of loyalty and avoiding conflicts of interest that would subject them to shareholder lawsuits, nor do they have direct responsibility for any action by the company that might harm members of the public.

If paid to design software to specifications, yes, an indemnification clause of some sort in favor of the client is nearly universal. However, it is worth reviewing the specifics to see if it is fair, and if you can afford to bear that much risk.If it is a by the hour project, particularly a solo contractor working as part of a team with the client, the prevalence and scope of indemnification is often less. The idea is that you are being paid by the hour, whether that is development time, design and specification time, debugging time, fixing time, or remediation time.For employees, almost never. In fact, by law in most places the company has to cover all these losses and cannot withhold pay or demand to be paid for any good faith work an employee does, even if they cause harm due to negligence.Here are some typical limits. Whether a developer can get these or not depends on relative bargaining power and the nature of the project.Indemnification does not cover lost profits, lost opportunities, consequential damagesIndemnification only covers lawsuit damages due to third party legal claims, not any losses by the clientIndemnification is reduced or eliminated to the extent the client contributed to the problem, including by failed remediation or attempts, settling a case without your permission, or employed a poor litigation strategyIndemnification does not apply if client has not paid, is terminated early for convenience of client, or is terminated for the client’s breachOnce infringement or any other indemnified loss is discovered, client has to immediately stop using it, perform remediation steps if reasonable, and in some contracts, must accept any fix or substitute version the developer offers. They cannot compound the damages by continuing to use a project that is known to be infringing, reaping the benefits while the developer covers the losses.Indemnification covers only client’s use of software, not third parties to whom they sell or provide the software, and not to a larger organization if the client is acquiredIndemnification covers only functionality of the software, not its operation or interaction with the client’s business — for example, if you design a color test meter and the client applies it to blending cosmetics, you are not responsible for infringing a patent covering using color testers to blend cosmetics.To trigger indemnification the indemnitee must tender a claim to the indemnifying party and give them a chance to mitigate and to control litigationNo indemnification with respect to decisions made by the client such as specifications, designs, or functionality they insist onA dollar limit for indemnification, or from damages of all sorts, sometimes as low as the total dollars paid out or the total size of the contractNo indemnification for third party or public domain materials, sometimes as limited to those the client has approved. If you code something in Javascript, and Javascript itself is found to infringe an IBM patent, that is not indemnified.Indemnification is often not just limited to intellectual property. It can include other things like data breaches, security vulnerabilities, errors, etc.It is also fair to make the indemnification reciprocal. If a third party sues the developer due to something the client did, the developer should be protected.