To indemnify a person or party is to protect them from loss through compensation. The term is most commonly used in insurance claims because insurance providers reimburse the insured client for damages caused by fire, theft, floods, etc. The term is also prevalent in contract law where one party may indemnify the other party or parties. In this sense, it means that the party or parties indemnified will not be subject to any future court costs that might result from actions regarding the contract.
Indemnify Explained
An indemnity clause is a legal way of limiting the risk for one or more parties in a contract. There are six basic forms of indemnities:
- A bare indemnity is used to compensate a person for loss resulting from specific results or circumstances.
- A reflective or reverse indemnity is used to protect a person against another person's acts or omissions.
- A proportionate indemnity is used to shield a person from everything except the other party's acts or omissions.
- Third party indemnities are used to compensate one party in a contract for any charges or liabilities that are incurred by the second party in the contract to any third parties.
- A financing indemnity is used to protect one party in a contract against the financial negligence of the other parties, such as their failure to make required loan payments.
- A party indemnity is used when all parties in a contract wish to shield the others against any breach of the contract by the indemnifier.