California “Hold Harmless” Agreements – Are They Enforceable?

Generally, hold harmless agreements are enforceable in California if they are specific. Hold harmless provisions are strictly construed against the party they protect.

What is a hold harmless agreement?

A hold harmless agreement is a contract provision. By signing it, one party (the indemnitor) agrees to hold the other party (the indemnitee) harmless for certain risks of the contract.

Hold harmless agreements are frequently used in liability waivers. The goal of the provision is to protect the indemnitee from foreseeable risks of the contract, even if they result from that party’s negligence.

For example: Tracy goes to a rock climbing gym. Before she can start, she has to sign a contract that states that she agrees to hold the gym harmless for injuries commonly associated with rock climbing. So even if one of the climbing wall’s holds breaks off and Tracy falls, she would face big obstacles suing the gym due to the contract.

Other Types of Liability Agreements

Hold harmless agreements are similar to:

• waivers of liability,
• release of liability contracts,
• assumption of the risk agreements,
• indemnification clauses, and
• assumption of liability contracts.

All of these agreements shift the risk of harm from one party to another. However, these types of agreement accomplish this goal in different ways.

Hold harmless agreements work by restricting the victim: When a covered risk hurts them, the victim has agreed to hold the other party harmless for it.

Some other types of clauses – like an indemnity agreement – work by entitling the defendant to pass losses on to another party. When a covered risk occurs, they have a right to draw in the other party and make them pay for it. 1

When is it enforceable in California?

In California, hold harmless agreements are enforceable if they use express contractual language that shifts the risks of certain specified circumstances. Doing so creates an express contractual obligation to indemnify. 2

If the language is sufficiently specific, the indemnitor or victim can even hold the indemnitee harmless for its active negligence in addition to its passive negligence (discussed below). 3

Active Negligence v. Passive Negligence

Active negligence is affirmative misconduct: This means someone has to actually perform an action negligently. 4

Even if the hold harmless agreement is not sufficiently specific to account for active negligence, it can still cover the indemnitee’s passive negligence. 5 Passive negligence is a failure to act to fulfill a duty of care towards someone else. 6

The more specific the limitations are in the hold harmless agreement, the more likely it will be enforced if injuries fall within those limitations. The limitations of the hold harmless agreement are strictly construed against the indemnitee. 7

Suing Third Parties

If you signed a hold harmless agreement and suffered property damage or a bodily injury, you still may be able to sue an entirely different party not covered under the agreement.

For example: Tracy wants to sue the rock climbing gym but the hold harmless agreement prevents her. She learns that an independent contractor installed the holds on the rock climbing wall. She sues them, instead, claiming that they negligently installed the holds.

Common Types of Hold Harmless Agreements

Hold harmless agreements are occasionally categorized into three different types of agreements (“covenants”):

1. Broad form. Broad form hold harmless agreements use sweeping and generalized language to cover as many potential risks as possible. The lack of specificity makes it the least likely to be enforced in California. The breadth of the waiver means that it can include risks that were not foreseen by the party waiving his or her rights.
2. Limited form. Limited form hold harmless agreements set out the particular risks that are covered. They list the particular situations in which one party agrees to hold the other harmless. These are the most likely to be enforced in California. Each party knows when they bear the risks of the contract.
3. Intermediate form. Intermediate form hold harmless agreements fall between these extremes. They use broad language to describe the risks covered, but limit them in important ways.

When Hold Harmless Agreements Are Used

Hold harmless agreements can be used in a variety of circumstances. Some of the most common are:

• construction contracts between general contractors and subcontractors,
• property management contracts,
• renter’s agreements and other real estate contracts,
• waivers for dangerous activities, and
• contracts for the provision of goods or services.

Generally, they protect business owners and service providers from the costs of:

• personal injury claims and other causes of action,
• reasonable attorney’s fees and other legal fees, and
• high liability insurance policy premiums.

How is it different from an indemnification agreement?

Whereas hold harmless agreements prevent the victim from asserting their rights against the other party, indemnification agreements allow one party to the contract to shift liability to the other party to the contract if a third party gets hurt.

For example: Supermart A hires Door Installer Inc. to install automatic sliding doors in its store. In the installation agreement is an indemnification provision where Door Installer Inc. agrees to indemnify Supermart A for injuries caused by its doors.

Soon the doors break and trap Claire in between them. She sues Supermart A, which then invokes its indemnification rights against Door Installer Inc. This makes the door company contractually liable for Claire’s injuries.

Additional Reading

For more in-depth information, refer to the following scholarly articles:

• Judicial Interpretation of Indemnity Clauses – Louisiana Law Review.
• Shifting Risks through Insurance and Hold-Harmless Agreements – Insurance Counsel Journal.
• Contractural Liability Coverage – Some Practical Aspects of Hold Harmless Agreements and Contracts of Indemnity – Insurance Counsel Journal.
• Architects, Engineers and Hold Harmless Clauses – Insurance Law Journal.
• Indemnification Against Tort Liability–The Hold Harmless Clause–Its Interpretation and Effect Upon Insurance – University of Pennsylvania Law Review.

Legal References

1. Queen Villas Homeowners Association v. TCB Property Management, 149 Cal.App.4th 1 (2007).
2. Bay Development, Ltd., v. Superior Court, 50 Cal.3d 1012 (1990).
3. Goldman v. Ecco-Phoenix Electric Corp., 62 Cal.2d 40 (1964). Other common terms in liability agreements include the duration, governing law and jurisdiction, and subrogation.
4. Same.
5. E.L. White, Inc., v. City of Huntington Beach, 21 Cal.3d 497 (1978).
6. Goldman v. Ecco-Phoenix Electric Corp., supra note 3.
7. Prince v. Pacific Gas & Electric Co., 45 Cal.4th 1151 (2009).