Indemnity: What You Need to Know to Protect Yourself in Los Angeles
Indemnity Agreements: Complex Language for Savvy Business Minds4 min read
Indemnity agreements are some of the most common legal agreements you’ll encounter, yet their lengthy and complex language can usually put off even the savviest business minds. But indemnity clauses shouldn't be dismissed as mere legal jargon — they exist for a very important purpose, and understanding the principles of indemnity can be the difference between liability and security. If you’re conducting business in Los Angeles, understanding local indemnity laws can help protect you against possible losses.
Indemnification occurs when one person or entity provides a guarantee that another person or entity will be protected against certain losses. While indemnification agreements vary widely depending on the geographic area and circumstances, they generally encompass similar elements and serve the same purpose.
Here’s what you need to know about indemnity clauses, regulations, and standards in Los Angeles, and how the experienced attorneys in UpCounsel's marketplace can assist you in protecting yourself and your business.
What is Indemnity?
In legal terms, indemnity is an agreement between two parties that protects one side against damages that might otherwise be incurred. An indemnity agreement exhibits the endowing of protection of one party from any losses they may encounter in a business-related matter. This arrangement is beneficial for both parties, but it is especially important to protect those acting in good faith in a contractual situation.
Typically, an indemnification agreement can be found in contracts between a contractor and its client, or as part of an insurance policy. In either case, indemnification protects both parties from claims and from external liabilities that arise, or may arise, from the agreement.
Background and History of Indemnity in Los Angeles
Indemnity claims have long been recognized in Los Angeles and its area courts. In the eyes of the courts, contracts are a mutual agreement between two or more parties. Thus, when one party breaches a contract, a claim for indemnification arises. The breach of agreement, whether through negligence, willful misconduct, or even innocent error, can place one parties' property and/or funds at risk of loss. An indemnity agreement can help one party to avoid any potential financial hardship.
In Los Angeles, indemnity claims are relatively recent, with indemnity decision precedent typically dating back to 1996 or 1997. In a 1997 case (Jeff Maltby v. Chavez-Salido), the California Court of Appeals recognized that an indemnification agreement could be enforced in a Los Angeles court.
Los Angeles Indemnity Laws
Los Angeles has several specific laws that dictate the standards for indemnity claims. A significant portion of the city’s code is for anti-indemnification legislation. California law prohibits certain indemnity agreements, primarily in the areas of workers’ compensation and construction contracts.
In Los Angeles, written contracts are required for nearly all forms of indemnity. Most indemnity agreements are enforced in the same manner as other contract terms as long as they are legally executed. Absent a written contract, or clause included in a contract, indemnify agreements generally may not be enforced. If an oral agreement is found to be binding by the court, however, it might be enforced; however, the burden of proof falls on the party wearing the agreement.
In all cases, a written indemnity agreement provides the strongest legal protection.
Common Indemnity Issues in Los Angeles
Though it depends on the individual contract, the most common indemnity disputes in Los Angeles are associated with construction and renovation projects. Construction contracts typically include indemnification clauses that protect the contracting parties against claims or losses, even (and especially) against losses due to negligence. In construction claims for indemnity made in Los Angeles courts, negligence is usually split into two categories: gross and ordinary. Gross negligence is a “reckless” or “willful” action resulting in tremendous liability, while ordinary negligence is more of a mistake or carelessness with a lesser degree of liability.
When employees are involved in a dispute, employers should also take advantage of the workplace indemnity against employee liability. The employer should still pursue best practices in avoiding employee-based liability; however, if such disputes arise, the employer is still generally protected under an indemnity clause.
It is also important to understand the exact language of the indemnification clause. If the language is found to be ambiguous or unclear, the clause should be evaluated and scrutinized — particularly if it is found to be unclear or ambiguous in favor of the indemnitor. When employers draft indemnification agreements, they often forget to expressly identify what it is that they are indemnifying against, leading to various interpretations of the clause and problems down the line.
How to Secure Your Agreements with an Experienced Indemnity Attorney
When you are contractually obligated to an indemnity claim, you need to make sure your agreements are structured properly, and that you are adequately covered. In California and Los Angeles, indemnity agreements are strictly enforced, so taking the initiative to gain experienced legal advice can help you in the long run. Working with a strategic attorney in UpCounsel's community of experienced attorneys gives you access to comprehensive legal assistance. UpCounsel can provide you with in-depth and highly professional representation — without the long-term commitment of a full-time law firm associate.
Negotiation of contracts can be a difficult task, and you should never go through contract negotiations alone. An attorney experienced in indemnification agreements can help you protect your rights, reduce the risk of a dispute, and increase all possible solutions for your agreement. Relying on experienced advice and counsel can help you both feel confident in your contractual agreement.
The attorneys in UpCounsel’s extensive network have a wide range of experience with indemnity agreements, making them a great resource for any business in the Los Angeles area. From contract review to litigation, UpCounsel’s attorneys have the expertise to ensure that you get the superior representation needed to protect your business from losses.
No matter the size of your business, having indemnification agreements in place is essential. While setting up indemnification agreements for your business, you should consider working with a knowledgeable attorney from UpCounsel. You can get custom, high-level advice from an experienced lawyer that understands the particularities of Los Angeles law — all without the cost of a traditional legal firm.