indemnification claims
Definition
An indemnification claim is when one party demands that another party pay for losses, damages, or legal costs that arose from a situation covered by their contract. Most business contracts include an indemnification clause that spells out who is responsible for covering these costs if something goes wrong. Think of it as a contractual promise where one party says to another, 'If I get sued or lose money because of something you did, you have to cover my losses.'
Example
You hire a contractor to renovate your shop, and a customer trips over their equipment and sues you for $50,000, so you file an indemnification claim against the contractor demanding they cover your legal fees and any judgment against you. The contractor's indemnification agreement with you is what gives you the right to make that demand.
Watch Out
Always read indemnification clauses carefully before signing any contract, because some are written so broadly that you could end up responsible for paying the other party's losses even when the situation was not entirely your fault.
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.