Hold Harmless Clause

A hold harmless clause is a contractual agreement where one party agrees not to hold the other party legally responsible for certain risks, losses, or damages that may arise during the contract.

You’ll often see these in construction contracts, subcontractor agreements, and commercial leases across Australia. They shift risk from one party to another, and that shift can have big insurance implications.

Why It Matters

• Signing a hold harmless clause means you’re taking on extra risk that might not be covered by your standard policy.
• Your insurer needs to know about these clauses because they can affect your public liability or professional indemnity cover.
• Some policies exclude liability assumed under contract unless the insurer has agreed to it via an endorsement.
• Getting the clause reviewed before you sign can save you from an uninsured loss down the track.

How It Works

• Party A (often a head contractor) includes a hold harmless clause in the contract with Party B (a subcontractor).
• Party B agrees to indemnify and hold Party A harmless from claims arising from Party B’s work.
• If something goes wrong due to Party B’s work, Party B takes on the liability instead of Party A.
• In some cases, the clause is broader and shifts liability even for things that aren’t entirely Party B’s fault.

Simple Examples

• A head contractor’s contract requires a subcontractor to hold them harmless for any injury claims arising on site from the subcontractor’s work.
• A commercial lease includes a clause where the tenant agrees to hold the landlord harmless for any damage to the tenant’s property caused by building defects.
• A transport company’s terms require the client to hold them harmless for any delay-related losses during shipping.

Common Mistakes or Misunderstandings

• Signing without reading. Hold harmless clauses are often buried in long contracts. If you miss them, you could be taking on risk you didn’t expect.
• Assuming your insurance covers it automatically. Many policies limit or exclude liability assumed under contract. You may need an endorsement.
• Not understanding the scope. Some clauses are mutual (both parties hold each other harmless), while others are one-sided and only protect the other party.
• Confusing it with a waiver of subrogation. A hold harmless clause shifts liability. A waiver of subrogation stops your insurer from recovering costs from the other party. They’re related but different.

When to Speak to a Broker

If you’re asked to sign a contract with a hold harmless or indemnity clause, talk to your broker first. They can check whether your current insurance covers the extra risk and arrange any endorsements needed.

Need help?

If you’ve been handed a contract with a hold harmless clause and aren’t sure what it means for your cover, reach out to Tank Insurance and we’ll review it with you.

Related Terms

• Endorsement - You may need a policy endorsement to ensure contractual liability from a hold harmless clause is covered.
• Subrogation - A hold harmless clause can affect your insurer’s ability to recover costs from the other party.