Designed to shift responsibility from one potentially liable party to another, indemnity agreements are commonplace in many corporate contracts. These risk-transfer provisions appear routinely in agreements with vendors, suppliers, contractors, service providers, and other third parties, playing a central role in corporate risk management.   

When appropriately tailored to the parties’ relationship and the associated risks, indemnity and insurance terms can provide substantial protection to the company by transferring specified exposures to a third party and its insurers. As a practical matter, however, disproportionate reliance on existing form contracts and inconsistencies between the contract provisions and the parties’ insurance policies can spawn significant challenges, which often wind up in the legal department when the intended risk transfer does not function as planned.

I spoke at the spring 2019 UT Law CLE’s 41st Annual Corporate Counsel Institute on the interplay between indemnity agreements and insurance provisions in third-party contracts as a mechanism for transferring risk and the impact these provisions have on the insurance policies maintained by the contracting parties. A downloadable pdf of the paper accompanying my presentation can be found here.

Here are the highlights: