What is Indemnification?
The word indemnification means to protect against loss or liabilities. It is a protection act that protects one/ both parties against a financial obligation that arises through breach of contract. It is a precaution that is commonly and frequently and necessary to use these precautions when negotiating any agreement.
This clause is used in the form of a contractual agreement made between the participating parties in which one party agrees to pay for the losses or damages suffered by the other party. In the domain of corporate law, an indemnity agreement negates the board of directors and company executives from personal liability. The corporation/firm is solely responsible if the company is being sued or suffers any damages.
Indemnification is defined by Black’s Law Dictionary as “a duty to make good on any loss, damage, or liability incurred by another.” It might be compensated by the parties in the form of cash or by transfer of ownership.
The indemnification clause is vital in any form of agreement to transfer risk between the contracted parties. Under these clauses, parties ensure that other parties will compensate for any potential loss under the agreement.
What is the difference between Express and Implied Indemnity?
This is a written agreement to indemnify and protect both participating parties. It states the T&C’s by which the concerned parties must abide, as is indicated in the contractual agreement. These include insurance indemnity contracts, construction contracts, merger & acquisitions contracts, investment contracts, employment contracts, agency contracts, and so on any service provider should have this clause in place.
This clause is more for circumstances or the behavior of the parties involved. One practical way to make one better understand this type of agreement is an agency business relationship or buyer and seller relationship, services relationship like Uber, Grab, etc. It is an obligation to indemnify that suggests the need to take this form of insurance, not a formal written agreement,
What is Indemnity Insurance?
It is a form of full coverage insurance that compensates for damages or loss of a party. In the legal sense, it may also refer to a reduction from liability for or damages costs incurred.
Indemnity insurance may be also be referred to as professional liability insurance. It is also is a form of liability insurance specific to professionals or any service providers such as lawyers, doctors or consultants operating under has a high-risk factor. These professionals and indemnity insurance firms provide counselors or specialized services. Indemnity insurance is unlike a general liability or other any of the different forms of commercial liability insurance.