In contracts you will often see an INDEMNITY clause where one party agrees to INDEMNIFY the other party. Indemnity is a legal term which many people struggle with. A short story will illustrate. Recently I reviewed an employment contract for a doctor friend of mine, Mark, who had a job offer in Montana. It was a great contract except that it had an indemnity clause where Mark was agreeing to indemnify his new employer for anything, he does which causes them harm. So, what does that mean? Mark did not know. Do you? Here is a mental image to help explain. Visualize an emergency space blanket. If you enjoy the outdoors, you may keep one in your hiking pack or in your car.

Indemnify means to shield, protect, and make whole. So just like your space blanket can protect you from the rain and cold, someone who agrees to indemnify another agrees to protect the other party from some or all the financial storms of life. Those financial storms commonly appear as claims, demands, lawsuits costs, attorney fees, expenses, and any other kind of damages you can think of.

So, if Mark signed the employment agreement and later got sued for Malpractice, he would have had to personally reimburse his employer for all the costs of the malpractice suit, whether Mark was negligent or not, notwithstanding the fact that his employer had already purchased malpractice insurance. It would not have been a good idea for Mark to sign that agreement.

In conclusion, indemnity clauses can change your life for better or for worse. They can be tricky and should be read closely and clearly understood.