What an indemnification clause means: indemnify, defend, hold harmless#
Most client clauses open with “defend, indemnify and hold harmless.” Each of the three words carries its own duty.
- Indemnify: pay for the other side’s loss covered by the clause, such as a judgment or a settlement.1
- Defend: pay for, or run, the other side’s defense of a claim. California’s Civil Code says an indemnity against claims includes “the costs of defense against such claims” and binds the indemnifying party to defend on request.2 In 2008 the California Supreme Court held, in Crawford v. Weather Shield, that a contractual duty to defend arises when the claim is made, even if a jury later finds the indemnifying party was not negligent.3
- Hold harmless: a promise not to hold the other party liable for the covered losses.4 Many courts read it as part of “indemnify”; some give it a meaning of its own. Leave it out of your own promise and you lose nothing.
Third-party claims and direct claims. An indemnity is built for claims someone else brings: a user hurt by a defect, a rights holder suing over code. If the clause does not say “third-party,” a client can argue that its own claim against you for breach is covered too, and then ask you to pay its lawyers for suing you. Two words close that door.
The other side’s own negligence. A client may want you to cover claims it partly caused. Some U.S. states will not read an indemnity that way unless the words say so in clear terms. Texas calls this the express negligence doctrine, from Ethyl Corp. v. Daniel Construction (1987).5 Your state may have no such rule, so write “to the extent caused by” and the question never comes up.
UK note: English courts read wide indemnity wording for its meaning and do not always need the word “negligence” for an indemnity to cover it,6 so the “to the extent caused by” wording matters even more there.
An indemnification clause example, in the words of a client's MSA#
Provider shall defend, indemnify and hold harmless Client and its affiliates, officers, directors, employees and agents from and against any and all claims, losses, damages, liabilities, costs and expenses, including reasonable attorneys' fees, arising out of or relating to this Agreement, the Services or the Deliverables. The foregoing obligations shall not be subject to any limitation of liability set forth in this Agreement.
Four things are wrong with it for a services firm:
- One way. The client covers nothing, not even claims caused by the materials it gave you.
- “Arising out of or relating to.” No fault is needed. If the client misuses your deliverable and a third party sues, the claim still “relates to” the Services.
- “Any and all claims.” No “third-party,” so the client’s own claims can ride on it.
- Outside the cap. The last sentence removes the ceiling you negotiated in the liability section.
Who covers what in a mutual indemnity#
Third-party claims caused by:
| What | Provider covers | Client covers |
|---|---|---|
| Its own negligence or willful misconduct | Yes | Yes |
| A deliverable infringing someone's IP | Yes, with the exclusions below | No |
| Materials, data or instructions the client supplied | No | Yes |
| The client changing a deliverable, or combining it with things the provider did not supply | No | Yes |
| The client's use of a deliverable in breach of law or the agreement | No | Yes |
| A party's violation of law in its own work | Yes, for its own | Yes, for its own |
The client’s column protects you where the risk starts on its side. A dev shop that loads the client’s customer data into a test, or an agency that runs the client’s claims in an ad, is exposed to claims that start on the client’s side. Mutual cover puts each risk on the party that controls it.
Mutual indemnification clause language to paste#
Provider Indemnity. Provider shall defend Client against any claim brought by a third party, and pay the amounts finally awarded or agreed in settlement, to the extent the claim arises from (a) Provider's negligence or willful misconduct in performing the Services, or (b) an allegation that a Deliverable, as delivered by Provider, infringes or misappropriates that third party's U.S. patent, copyright, trademark or trade secret.
Client Indemnity. Client shall defend Provider against any claim brought by a third party, and pay the amounts finally awarded or agreed in settlement, to the extent the claim arises from (a) Client's negligence or willful misconduct, (b) materials, data or instructions supplied by Client, (c) any modification of a Deliverable not made by Provider, or its combination with items not supplied by Provider, or (d) Client's use of a Deliverable in breach of this Agreement or applicable law.
Limits. Provider has no obligation under (b) of the Provider Indemnity for claims arising from any item listed in (b), (c) or (d) of the Client Indemnity. Each party's obligations under this Section are subject to the limitation of liability in Section [number].
Procedure. The party seeking defense shall notify the other party in writing promptly after learning of the claim (a delay relieves the defending party only to the extent it is prejudiced), give it sole control of the defense and settlement, and provide reasonable cooperation at its expense. The defending party shall not settle any claim that admits fault by, or imposes an obligation other than payment on, the other party without its written consent.
IP Remedies. If a Deliverable is, or in Provider's opinion is likely to be, held to infringe, Provider may at its option and expense (a) obtain the right for Client to continue using it, (b) modify or replace it so it does not infringe without loss of material function, or (c) if neither is commercially reasonable, accept its return and refund the fees paid for it. This Section states Provider's entire liability for infringement claims.
Why it holds up in a negotiation: it gives the client real cover for the two risks its legal team worries about, your mistakes and your IP, and asks only that each side answer for what it controls. The IP remedies clause gives you a way to fix a problem before it becomes a judgment.
How the indemnity redline reads in the client's file#
Your tracked changes in the client’s own document, one by one:
- Struck: “Provider shall defend, indemnify and hold harmless Client and its affiliates, officers, directors, employees and agents from and against any and all claims.” Inserted: the Provider Indemnity paragraph of the counter.
- Struck: “arising out of or relating to this Agreement, the Services or the Deliverables.” Inserted: “to the extent the claim arises from,” followed by the two Provider items.
- Struck: “The foregoing obligations shall not be subject to any limitation of liability set forth in this Agreement.” Inserted: the Limits paragraph.
- Inserted after it: the Client Indemnity, Procedure and IP Remedies paragraphs, as new text.
- Comment beside the first change: “Mutual, third-party claims only, each side covering what it controls.”
- Comment beside the cap: “Indemnities sit under the cap. If your team needs more room here, we can discuss a higher cap for indemnities, rather than none.”
The email that sends it#
The email that sends your mutual indemnity
Send it to your contact and copy their legal team. The attachment is their own Word file, your changes tracked in it.
Hi [Name],
We have marked up the MSA, tracked in your file. Most of it stands as written; the main change is the indemnity in section [number].
As drafted, we would cover any claim connected to the work, including claims caused by materials your side provides or by later changes to what we deliver, with no cap.
Our version is mutual. We cover third-party claims caused by our negligence and IP claims against what we deliver; you cover claims caused by your materials, your changes and your own negligence. Both sit under the liability cap in section [number].
We added a short procedure (notice, control of the defense, no settlement that admits fault without consent) and the usual IP remedies, so we can fix an IP issue before it becomes a dispute.
Happy to walk [their counsel's name or "your legal team"] through it on a 15-minute call: [day, time] or [day, time].
[Your name]
How Tommo Legal handles an indemnity on your deals#
Tommos (tommos.ai) is a CRM whose AI agents, the tommos, take a B2B inquiry to a signed contract. Tommo Legal comes with the Sign plan, at $899 a month for the firm.
Say your position is “indemnities mutual, third-party claims only, under the cap.” A client’s MSA with the clause above arrives on the deal; Tommo Closer passes it to Tommo Legal. Its clause memo shows the clause in the client’s words, the position it departs from, what it would mean for you, the counter-wording to paste, its confidence, and whether this one is worth a lawyer. Because their MSA is a Word file, Tommo Legal also tracks those changes in the client’s own document, in the client’s folder in your Google Drive, beside their original.
The card is yours: accept, change or drop each point. Tommo Legal writes to no one outside the firm; Tommo Closer sends the client the points you accepted with a link to the redline. Tommo Legal drafts your SOW and NDA from your own templates too. When the paper is final, the person you allow to sign signs on the card itself with one press of Sign; the copy signed by both sides goes into the client’s folder. After the win, Tommo Closer reads the signed paper, proposes when each invoice is due, and a person approves every invoice. The memo is research, not legal advice.
What Tommo Legal does · Every plan · Up: the full MSA review
Indemnities are one of ten clauses worth a second read. Get the one-page MSA checklist before the next client’s paper arrives.
Questions about indemnification clauses#
- What does an indemnification clause mean?
- It is a promise by one party to pay for certain losses of the other, usually the cost of claims brought by third parties, such as judgments, settlements and legal fees. When it includes "defend," the indemnifying party also pays for, or runs, the defense of the claim.
- What is the difference between indemnify and hold harmless?
- To indemnify is to pay for the other party's covered losses. To hold harmless is to promise not to hold the other party liable for them. Many U.S. courts treat the two as the same; some do not, so a services firm gains little by agreeing to both.
- What is a mutual indemnification clause in a services agreement?
- A clause in which each party covers third-party claims caused by its own conduct. The provider usually covers its negligence and IP claims against its deliverables; the client covers its negligence, the materials it supplies, and its changes to or misuse of the deliverables.
- Does the duty to defend start before fault is decided?
- It can. Under California law, a contractual duty to defend arises when the claim is made, and the California Supreme Court held in Crawford v. Weather Shield (2008) that it applied even though the indemnifying party was later found not negligent.
- Should indemnities be outside the limitation of liability cap?
- Clients often ask for that. A services firm should keep indemnities under a cap, and offer a separate, higher cap for them if the client needs more room. An uncapped indemnity can cost more than the whole contract was worth.
- What should an IP indemnity exclude?
- Claims caused by materials the client supplied, changes the provider did not make, combinations with items the provider did not supply, and use against the agreement. Add the IP remedies: obtain a license, modify the deliverable, or take it back and refund its fees.
- Can a client make me indemnify it for its own negligence?
- Only if the wording reaches that far, and some states, such as Texas, require it to say so expressly. Write each indemnity "to the extent caused by" the indemnifying party, so each side pays only for its own share of fault.
Key takeaways#
- “Defend, indemnify and hold harmless” holds three duties; “defend” can cost money before fault is known.
- Replace “arising out of or relating to” with “to the extent caused by.”
- Limit indemnities to third-party claims.
- Make it mutual: you cover your negligence and IP; the client covers its materials, changes and negligence.
- Keep indemnities under the cap, with a higher cap if needed, and add a procedure and IP remedies.
This is not legal advice. Indemnity law differs from state to state and in the UK; before a large or unusual deal, have a lawyer in the governing jurisdiction read the clause.
Sources#
- Cornell Law School, Legal Information Institute, Wex, “indemnity”, read Oct 13, 2026
- California Civil Code § 2778, read Oct 13, 2026
- Crawford v. Weather Shield Mfg., Inc., 44 Cal. 4th 541 (2008); reported in “California Court Upholds Contractual Duty to Defend,” Insurance Journal, July 22, 2008, read Oct 13, 2026
- Cornell LII, Wex, “hold harmless”, read Oct 13, 2026
- Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705 (Tex. 1987); FindLaw, “The Contract You Thought You Made: The Express Negligence Doctrine”, read Oct 13, 2026
- PA(GI) Ltd v Cigna Insurance Services (Europe) Ltd [2023] EWHC 1360 (Comm); Herbert Smith Freehills Kramer, “Commercial Court finds indemnities covered negligence where no express reference,” June 2023, read Oct 13, 2026
Read next
- How to review a client's MSA before you signTen clauses, the wording to send back, and the email that sends it.
- Limitation of liability clause: an example for services firmsWhat the cap and the carve-outs mean, the client's usual version, and the counter to send.
- MSA vs SOW: what each paper doesThe side-by-side table, where an SLA fits, and the clause that decides which paper wins.