Indemnification Clause

Indemnification clauses and hold harmless agreements are closely related — they often appear together in the same contract paragraph — but they serve slightly different functions. While a hold harmless clause prevents one party from suing the other, an indemnification clause creates an affirmative obligation to pay for losses. In tree service contracts, the indemnification clause typically requires you to reimburse the property owner for any costs, legal fees, or judgments they incur as a result of your operations.

Here is a real-world example: your crew is removing a dead oak and a section of trunk falls through the client's roof, also damaging the neighbor's fence. The neighbor sues the property owner. Your indemnification clause obligates you to cover the property owner's legal defense costs and any settlement or judgment — not just the direct property damage.

The scope of the indemnification clause matters enormously. Pay attention to phrases like "arising out of," "caused by," or "resulting from." "Arising out of" is the broadest trigger and can pull you into claims with only a tangential connection to your work. "Caused by" is narrower and requires a more direct causal link.

Your general liability policy provides contractual liability coverage that is designed to fund your indemnification obligations, but there are limits. If the indemnification clause requires you to cover the other party's sole negligence (and your state allows it), some GL policies will not respond. Additionally, if the indemnification clause includes obligations to pay for punitive damages, fines, or penalties, your insurance likely will not cover those either. Always cross-reference contract language with your actual policy terms.