Hold harmless agreement: what it is and how it interacts with a COI

The plain-English version

When two parties enter a contract — a general contractor and a subcontractor, a property manager and a vendor, a buyer and a supplier — losses can flow in unpredictable directions. A worker gets hurt. A piece of equipment fails. A delay causes downstream damage. Without a hold harmless clause, the legal default is that each party can sue the other for whatever they think is covered.

A hold harmless agreement pre-decides the answer. The indemnitor (typically the vendor or subcontractor) agrees, in writing, that they won't hold the indemnitee (typically the buyer or general contractor) responsible for certain losses — and often agrees to defend and pay if those losses come from a third party.

The three forms

Not all hold harmless clauses are equal. The three types differ in how much risk the indemnitor is taking on:

Broad form (also called Type I)

The indemnitor takes responsibility for alllosses, including those caused entirely by the indemnitee's own negligence. Example: a sub agrees to defend the GC even if the loss was 100% caused by the GC. This form is the most aggressive and is banned or limited in many states (especially in construction, under anti-indemnity statutes). Trying to enforce a broad-form clause in a state where it's void can void the entire indemnification provision.

Intermediate form (also called Type II) — the most common

The indemnitor is responsible for everything except losses caused by the indemnitee's solenegligence. So if the loss was caused by the indemnitor, by both parties, or by a third party, the indemnitor pays. If the loss was caused entirely and exclusively by the indemnitee, the indemnitor doesn't. This is the workhorse form in commercial contracts because it's aggressive enough to shift most risk while still being enforceable in most states.

Limited form (also called Type III, comparative fault)

The indemnitor is responsible only for the portion of loss caused by the indemnitor's own conduct. If both parties contributed to the loss, the cost is split proportionally. California and several other states essentially require this form for construction contracts.

How it interacts with the COI

A hold harmless clause says who pays. The COI proves the indemnitor can actually pay. They're two halves of the same risk-transfer mechanism:

1. The contractincludes a hold harmless clause: the vendor agrees to indemnify and hold harmless the buyer for losses arising out of the vendor's work.
2. The contract requires the vendor to add the buyer as an additional insured on their policy and to provide a COI proving it.
3. The contract requires the policy to be primary and non-contributory and includes waiver of subrogation.
4. The COI arrives, and you verify all of the above.

When the system works: a loss happens, the vendor (via their insurer) defends and pays. Your policy and your loss history stay clean.

When the system breaks: the COI is missing additional-insured language, or the primary and non-contributory endorsement isn't there, or the policy expired and nobody noticed. The hold harmless clause is still in the contract — but now you're chasing the vendor for payment instead of relying on their insurer. If the vendor went out of business, you're paying.

What to look for in the clause

A well-drafted hold harmless clause includes:

• Defend, indemnify, and hold harmless language (covers both the act of defending and the act of paying).
• Scope of covered losses — bodily injury, property damage, third-party claims, etc.
• Form (broad / intermediate / limited)made explicit in the wording, calibrated to what's enforceable in the governing state.
• An insurance backup requirement — the vendor must carry insurance with limits sufficient to cover the indemnification obligation.
• Survival language — the clause survives termination of the contract for losses that occurred during the contract term.

If you have a contract template that does all of this and a COI verification process that catches the insurance side, you've built real risk transfer. If either piece is weak, the system leaks.

Frequently asked questions