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Shearer & Agrella Blog

SUBROGATION, INDEMNIFY AND HOLD HARMLESS

Contracts often contain the terms “Subrogation,” “Indemnify,” and “Hold Harmless.” Read the fine print on the golf cart receipt; or your gym membership contract; or any lease or bailment agreement, and you will find them. However, many people do not understand their meaning. Thus, the topic of this blog.

Black’s Law Dictionary defines “Subrogation” as “The substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.”

This is generally referred to as the right to “step into the shoes” of another.

This is a common provision in insurance policies. For example, if you are in an automobile accident and your car is damaged through the fault of another driver, you should make a claim with your insurance company to repair the damage. Your insurance company has the contractual obligation to pay for the repair. Your insurance company thereafter will “step into your shoes” and will be subrogated to your rights. Your insurance company can then seek the cost of the repair from the other driver or the other driver’s insurance company.

Black’s Law Dictionary defines “Indemnify” as “To restore the victim of a loss, in whole or in part, by payment, repair, or replacement.” Indemnity then is basically what we think of when we have insurance. That is, if my car is damaged the insurance company indemnifies me and pays for the repair or the replacement. With respect to the golf cart, you indemnify the golf course for any damage to the cart. That is, you are promising to the golf course that you will pay for the repair or replacement of the golf cart if it is damaged.

In many contracts, indemnity provisions are used to prohibit the parties from suing each other for any damage they may suffer due to the negligence of the other party.

The definition for “Hold Harmless” is in every important respect synonymous with the definition of indemnity. We have never come across any definition or use by any court which indicated any true distinction between the terms. Then why do both terms often appear together? Typical lawyer redundancy.

We hope you found this helpful.