What are Hold Harmless Agreements?
Hold harmless agreements are liability waivers. They are protection against damages. And, if worded correctly, they shift liability from one party to another. They are an essential part of risk management. They allocate the risk from prospective mitigated consequences (negative outcomes) to a party that can plan for those risks and/or absorb the consequences . It is vital to keep in mind that such an agreement is not an indemnity agreement. Indemnity agreements hold harmless as well, but, unlike an indemnity agreement, a hold harmless agreement must also explicitly state that one party is "held harmless." Indemnity agreements do not have to include the words "held harmless." In Louisiana, hold harmless agreements are generally enforceable and are generally favored.
Applicable Law in Louisiana
In Louisiana, the legal framework regarding hold harmless agreements is not as well-defined as it may be in other states. While Louisiana law does acknowledge the existence of such agreements, the concept is relatively foreign to Louisiana jurisprudence. In Louisiana, hold harmless agreements are commonly known as indemnity agreements. Some general principles have been established, and the concept has been recognized and used to some extent when there is a transfer of risk from one party to another with respect to liability for damages or loss.
From a legal standpoint, a hold harmless agreement may take various forms, although it is generally a contract between a purchaser and a seller that allocates the risk of loss from potential liabilities arising out of the sale, such as tax liabilities, fortuitous losses, and general indemnification. However, case law tells us that the defining feature of the indemnity contract is not the manner in which the indemnity is expressed (words, phrase, or language used), but the true intent of the parties. Specifically, in the absence of a specific statutory prohibition against the indemnity clause, Louisiana courts will enforce indemnification agreements if the intent of the parties is clear.
The Louisiana Civil Code states: "Legal obligations may be conventional (by contract) or legal (by operation of law). Duties of protection, control, and administration of the property are purely legal obligations; whereas obligations of repair, return, and payment arise from the contract." La. C.C. Art. 1766. However, Louisiana courts have acknowledged that Louisiana law recognizes the same distinctions with respect to obligations that arise specifically from contractual agreements and not by operation of law. La. C.C. Art. 1730. In fact, in Simon v. Centinaire, Inc., the Louisiana Supreme Court solidified that ordinary liability insurance coverage clauses that indemnify an indemnified party against its own legal fault are enforced pursuant to the general rules of private law (civil law), thus making Louisiana law consistent with the law of other states.
Varieties of the Hold Harmless Agreement
In the State of Louisiana, parties commonly enter into a variety of hold harmless agreements. These agreements can vary between a unilateral hold harmless agreement which is an agreement in which one party will defend, hold harmless and indemnify another party, such as a construction hold harmless agreement by a contractor and a property owner; a reciprocal or mutual hold harmless agreement whereby the parties to the agreement agree to hold each other harmless; and an intermediate or so-called intermediate form of a hold harmless agreement. The intermediate form of a hold harmless agreement is one whereby each party agrees to indemnify the other without regard to fault or negligence. This form of indemnity obligation is evaluated in accordance with the Louisiana Civil Code Articles 2003 and 2320 and is, in practical effect, a type of liability insurance agreement between the parties.
Crafting a Sound Hold Harmless Agreement
In Louisiana, as with all contracts, there are key provisions that both contracting parties should include to ensure their agreement is clear and legally enforceable. Prior to entering into a contractual relationship that includes an indemnity provision or some other form of hold harmless agreement, it is important that the provisions are drafted clearly and unambiguously.
The first principle in drafting an enforceable agreement is to use clear language. A poorly drafted provision is not only open to interpretation but often courts will find the questionable provision unenforceable. It is especially important to include definitions within the provision that explain terms that are not commonly understood or are ambiguous. Courts are not to look at the intent of the parties, but as stated above, the intention of the parties could be argued in the interpretation of a term.
In order to limit liability to the indemnifying party and effectively create a third-party beneficiary relationship, the following are recommended clauses that can be incorporated into a Lousiana contract:
Indemnification Clause
Insurance Provision
Waiver of Subrogation Clause
Proof of Insurance Clause
Cost and Expenses Provision
Limitation of Liability Provision
Cooperation Clause
Exculpatory Clause
Termination Clause
Governing Law Clause
Safety Clause
Compliance with Laws Clause
Typical Uses and Applications
In Louisiana, hold harmless agreements are commonly used across a wide range of applications, making them an integral part of the state’s business and legal landscape. One of the most prevalent contexts for these agreements is in the realm of construction projects. Louisiana law often requires general contractors to assume responsibility for the work done by their subcontractors and, as part of that obligation, contractors are frequently asked to sign hold harmless and indemnity agreements. These agreements not only protect general contractors in the event of damage caused by their subcontractors but also provide cover in case third-party claims are made as a result of injuries or damages unrelated to the General Contractor’s own work, which may fall within the scope of Louisiana’s statutory indemnity law.
Another area where hold harmless agreements are commonly used in Louisiana is in the event planning industry . Whether for a corporate gathering or a private celebration, event venues frequently require the party renting the space to indemnify them from any claims or damages related to the event, thereby limiting the venue’s liability for injuries or property damage.
Additionally, joint venture agreements between parties who have not formed a corporation may include the indemnification provisions, providing coverage for costs associated with claims arising from the joint venture, such as loss of profits or client complaints.
From real estate lease agreements to manufacturing contracts, many other business relationships in Louisiana routinely utilize hold harmless agreements. In each of these situations, the goal of a hold harmless clause is to protect one party from liability for damages or injury that are, to a large extent, the result of the conduct of the other parties involved.
Possible Limitations and Risks
Even with the strongest of hold harmless language, Louisiana courts may impose liability on a party despite such provisions when justice and equity require it. As previously mentioned, Louisiana does not look favorably upon overreaching between sophisticated commercial parties, including in contracts involving indemnity provisions. One notable example comes from Coffey v. South Louisiana Contractors, Inc., 96-943 (La. 5/20/97); 694 So.2d 344, where party A was the general contractor and party B was a subcontractor who agreed to indemnify party A for "all claims, demands, suits, judgments, damages, costs, attorney fees and expenses" incurred by party A where they arose from "any negligent act, fault or infraction of [party B]"—with certain limited exceptions.
In that case, an employee of party B (the subcontractor) killed someone while operating a vehicle owned by party A. After a wrongful death suit was filed against party A, it sought to have party B’s indemnity obligation applied and to compel it to defend and indemnify. Party B, of course, refused to defend party A in the suit, citing the general nature of the indemnity provision and the fact that its own employee was involved. Party A feared the imprecise language would cause them to be considered the insurer of party B’s employee for purposes of the accident recovery and sued for indemnity. Retroactively, after the recovery award was confirmed, the parties agreed to a 50-50 split. Although party A agreed to indemnify party B in the employee’s settlement, the court found that, notwithstanding the contract language, it would be "unconscionable" to enforce the agreement against an innocent party who was not at fault in causing the accident. The 50-50 split was based on the parties’ relative level of responsibility, which involved a factual determination that was subject to review. This allowed the court to consider facts beyond the scope of the indemnity agreement itself.
In another case, a New Orleans company tried to enforce broad indemnity language against a subcontractor accused of crane-related injuries and wrongful death. The contractual hold harmless clause required the subcontractor to indemnify the general contractor for any "claim, action, suit or proceeding . . . arising out of or relating to bodily injury, illness, or death of any person . . . arising out of or relating to damage to any property" and "for all claims made by or on behalf of any employee of [the subcontractor]". No more specific language was required; however, the hiring party was found to be liable for the subcontractor’s breach of contract that resulted in the addition of workers’ compensation into the scope of indemnity. Adams v. Kansas City Southern Railway Co., No. 14-1974 (La. 4 Cir. 5/21/15). If the indemnification agreement had included capitalization ("Employer’s Compensation Law"), the employer might have been the only party indemnified.
Seeking Expert Legal Help
Working with a legal professional on hold harmless agreements in Louisiana can help ensure that the language used is the best suited for your situation, and that you are being protected under state law. Transportation agreements and contracts can be particularly complex , and hold harmless clauses are just one part of an overall agreement. If you are in the process of drafting or agreeing to the terms of legal contract, visit or call an attorney today to make sure you are being offered the best protection possible in your agreement.
