What is a hold-harmless agreement?

Hold-harmless agreements — also called indemnity clauses or indemnification agreements — are foundational risk transfer tools in the tree service industry. Nearly every commercial contract your tree service signs will contain some form of hold-harmless language, and understanding the different types is essential for managing your liability exposure.

There are three forms of hold-harmless agreements, each shifting different levels of risk. A broad-form hold-harmless requires the indemnitor (typically the tree service) to assume liability for all claims, including those caused by the indemnitee's (client's) own negligence. An intermediate-form holds the tree service responsible for claims caused by the tree service's negligence or the joint negligence of both parties, but not for claims caused solely by the client's negligence. A limited-form (or comparative fault) holds the tree service responsible only for claims caused by its own negligence. The broader the form, the more risk shifts to your tree service company.

Many states have enacted anti-indemnity statutes that void broad-form and sometimes intermediate-form hold-harmless agreements in construction contracts. Texas, for example, under Chapter 151 of the Texas Insurance Code, voids any indemnification provision in a construction contract that requires a party to indemnify against claims caused by the other party's negligence. Similar statutes exist in California, New York, Florida, Illinois, and many other states. Because tree service work is generally classified as construction, these statutes apply. A hold-harmless clause that is void under state law provides no risk transfer, even if both parties signed the contract.

From an insurance perspective, your general liability policy's contractual liability coverage responds when you are required to pay damages because of liability you assumed in a hold-harmless agreement. However, this coverage has limits: it applies only to tort liability (negligence claims, not breach of contract), and it is subject to your policy's per-occurrence and aggregate limits. If you sign a broad-form hold-harmless and your state does not prohibit it, you could be assuming liability far beyond what your insurance is designed to cover.

Best practices for tree service companies include having an attorney review your standard contract template to ensure hold-harmless language is appropriate and enforceable in your state, negotiating mutual hold-harmless clauses (each party indemnifies the other for their own negligence), refusing to sign broad-form hold-harmless agreements when your state's anti-indemnity statute does not apply, and ensuring your GL limits and umbrella coverage are adequate to support the indemnification obligations you assume. When a client presents a contract with aggressive hold-harmless language, discuss it with both your attorney and your insurance broker before signing.