indemnification carve-out
Definition
An indemnification carve-out is an exception to a promise you made to protect someone else from financial losses. It defines specific situations where you are no longer on the hook to cover the other party's losses, even though your contract generally requires you to do so. Think of it as a fence around certain scenarios where your financial protection obligation simply does not apply.
Example
You sign a contract agreeing to cover a client's legal costs if they get sued over your work, but a carve-out states you owe nothing if the lawsuit arises from the client's own negligence. This protects you from paying for problems the client caused themselves.
Watch Out
Carve-outs are often buried in dense contract language, so you need to read them carefully because a poorly worded one could leave you exposed to costs you thought you were protected from.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.