What is a Hold Harmless Agreement?
A less common term than other types of agreements, hold harmless agreements are still an important vehicle for businesses to protect themselves in Connecticut. A hold harmless agreement is essentially an agreement to not hold a party responsible for some act. In today world, they are often named something like "release of liability" or "waiver of liability" but they all typically cover that same basic concept: you can’t hold my organization responsible if you suffer any kind of injury or loss.
As discussed below, the actual scope and applicability of one of these agreements is much more fluid and open to interpretation from court to court. But in general, a "hold harmless" agreement then is a contract where one party agrees to assume the financial liability-type risk of another party.
In the legal context, a hold harmless agreement has become a flexible device used to transfer responsibility (and accompanying liability) between two parties across a wide variety of relationships . These range from employer and employee to business partnerships to patient/doctor contexts to tenant/landlord relationships to sports teams and organizations and many others.
For example, a hold harmless agreement might be used if an employee would be participating in an event that exposes the employer to potential lawsuits. The agreement would result in the employee agreeing to absolve the employer of any liability.
Connecticut courts have provided some guidance on the permissibility of hold harmless agreements in Connecticut, in general:
"[P]arties may agree, in advance, that one will indemnify the other for losses or damages caused by the negligence of the other, even when that plan disregards the sanctioning objectives of a statute."
The Connecticut Supreme Court has held that such agreements are contrary to public policy and are unenforceable if they concern a right which is "an indivisible whole" such that it cannot be placed within the category of rights which parties may bargain over.
What Comprises a Hold Harmless Agreement?
A "hold harmless" agreement, sometimes also called an indemnification agreement or release agreement, generally refers to a written contract between two or more parties where one agrees to be financially responsible for losses that arise under the agreement. In the construction law context, these contracts often fall within a longer construction contract, such as a subcontract. The following are key pieces of information that are generally included in a hold harmless agreement:
a. Language that Informs the Parties that Important Legal Rights Are Being Waived by the Agreement. Waiving legal rights is a significant decision. The individual or entity giving up the right often should have separate counsel. However, under Connecticut law, all that is required to perfect a hold harmless agreement is that it be in writing, signed by the party providing the indemnification (like the defendant in a civil action) and provides sufficient notice of the extent of the indemnification if requested.
b. The Broadest Possible Language when Covering Third Party Liability. Language should be included to clarify the intention to include both first-party and third-party liability. Generally, the broader the better because a court will not enforce as indemnity provision it deems "absurd" or inconsistent with parties’ intent.
c. Specific Reference to Negligence. Many hold harmless provisions provide that the indemnification applies regardless of whether negligence of the indemnified party contributed to the damages. However, a common exception to this rule is when the hold harmless provision covers the negligence of the indemnitor itself. This is because a statute will prevent the parties from contracting to indemnify a party for its own negligence.
Categories of Hold Harmless Agreements
There are several different types of hold harmless agreements that are commonly used. Some are unilateral, where one party takes on the risk of liabilities associated with an activity. Others are mutual, where two parties agree to assume liability together. Highly trafficked sectors in Connecticut may see these agreements used frequently, particularly in manufacturing or construction contexts.
For example, a manufacturing company might enter into a business agreement with a supplier. With their hold harmless agreement, the supplier agrees to take on liability for any injuries that arise from faulty products manufactured by the supplier. The supplier agrees to be solely responsible for the costs of all litigation as well as any settlements or judgments awarded against the company. If a supplier fails to honor this agreement, the company has recourse in court.
A mutual hold harmless agreement may be appropriate in a construction context. For instance, General Contractors and painters might agree to a mutual hold harmless agreement. If a painter were to cause an unfortunate incident while painting a home, both the painter and the general contractor take on liability for the injuries that arise from the mistake. A hold harmless agreement is a good idea in toxic chemical situations. Computer programmers in Connecticut might even use mutual agreements when working on the same product or platform. Simply put, there are many contexts in which a hold harmless agreement is useful.
Making a Hold Harmless Agreement in CT
When drafting a hold harmless agreement for use in Connecticut, there are specific state laws and considerations that must be taken into account. First and foremost, the agreement should be in writing and signed by all parties involved in order to be enforceable. Connecticut courts will typically only uphold a hold harmless agreement if it is clear and unambiguous in its language, meaning parties should avoid using broad or vague language when specifying what parties the agreement will apply to and what potential liabilities or losses it covers.
Another important consideration is the allocation of liability. Connecticut law provides that all joint tort-feasors (i.e. anyone who contributed to someone being liable) are jointly and severally liable for any damages they are ordered to pay, meaning they can be forced to pay the entire sum regardless of their share of fault. To address this, many hold harmless agreements in Connecticut contain provisions stating that, while parties agree to bear their own proportion of liability, they will not seek contribution from other parties for anything they may owe.
Moreover, Connecticut law generally prohibits indemnification provisions in residential leases, which means if a hold harmless agreement is part of an indemnification provision in a lease, it may be voidable at the option of the tenant.
Finally, it is always advisable to have a Connecticut attorney review a hold harmless agreement before finalizing it, as failure to comply with state law could result in disputes or render the document unenforceable.
Legality in the State of Connecticut
In Connecticut, hold harmless agreements are generally enforceable so long as they are clear and unambiguous. Parties to an agreement are therefore strongly advised to avoid vague or ambiguous language in hold harmless agreements. Courts in Connecticut will not override the language of a hold harmless agreement unless there is evidence that it is contrary to public policy. In situations where the intended purpose and scope of the agreement is clear, Connecticut courts are likely to enforce them. The above rule was established in Palmer v. Seldon, 126 Conn. 255 (1939) (parties have power and right to contract; courts will only intervene where contract is contrary to public policy); see also Salvatore v. Montano , 269 Conn. 414 (2004); Wexler v. Rogers, 2 Conn. App. 541 (1984). Connecticut courts will generally enforce express hold harmless agreements. Courts will, however, look at the facts in the particular case and balance public policy against private agreement. See Donahue v. Verdi, 151 Conn. 372 (1963); Levin v. Thomas, 144 Conn. 65 (1956). The exception to the above rule exists where the party seeking release from liability engages in some sort of intentional misconduct or claims there was fraud in the inducement. Conway v. Wilton, 238 Conn. 655 (1996); Donovan v. Davis, 138 Conn. 1 (1951).
Widespread Applications and Industries
Hold harmless agreements are more commonly used in certain states like Texas and California, but they are also frequently used on the east coast (including Connecticut) for many purposes. Connecticut is no exception. Here are some ways hold harmless agreements are commonly used in the Constitution State:
Construction. Hold harmless contracts are a common part of the construction industry. By their very nature, construction projects require extensive coordination and collaboration between multiple parties. The owner of a project will want to term the general contractor "the master of the job site," and the GC will want to term the subcontractors "masters of their respective disciplines." No one wants to be blamed for an injury or damage that occurs at the job site or as part of a work product when the injured or damaged party lacks the ability to obtain any type of compensation from the responsible tortfeasor.
Real Estate Transactions. Purchasers of real estate frequently ask the seller to hold them harmless from various types of environmental contamination. This allows the purchaser to avoid the cost of cleaning up environmental contamination that was present on the property prior to purchase, but that might not have been deposited on the property by the purchaser. For example, when a company purchases a gas station, its first order of business is usually to perform a "Phase I" environmental site assessment to determine any issues with the property. If contamination is identified on the Phase I or the more costly Phase II process, then the seller is usually forced to conduct remedial activities to remediate the property prior to the sale, or to hold the purchaser harmless from the costs of remediation if the buyer agrees to perform remediation.
Events. Similarly, if a company wants to host a special event and anticipates that food might be served (which could result in food-borne illness), then it will often be required to indemnify and hold harmless the event site owner for any claims resulting from its activities.
Lease Agreements. Particularly in college towns, landlords often lease apartments within multi-family communities to students. Students are notorious for breaking things and being rather sloppy with their alcohol consumption at parties. As such, landlords commonly include in their lease agreements a clause that tenants will hold the landlord harmless for ANY type of loss, claiming or damage including claims that result from the negligence or other wrongdoing by the tenant.
Common Pitfalls and Cautions
Hold harmless language in a contract should not be viewed in isolation. Such language should be considered in the context of the entire contract and its liability shifting provisions. Such provisions may include indemnity, insurance, assumption of liability and waiver of subrogation and may work in concert with the hold harmless provision or create ambiguity.
Potential pitfalls associated with a hold harmless agreement include:
1. Attempts to shift responsibility from one party to another in a manner that is contrary to public policy or statutory authority.
2. Failure to consider the interplay between the hold harmless provisions and other liability shifting provisions in the contract.
To the extent it can be avoided, hold harmless provisions should be clear, contain no ambiguities and relate only to contractual relationships or expressly state when the hold harmless provision also applies to a claim grounded in tort.
Contractual considerations precluding the enforceability of hold harmless agreements:
Claimant was an employee of Subcontract, which was retained by Contractor to construct a car wash. On his way to work claimant slipped and fell on an unpaved portion of the access road into the car wash. Claimant’s employment contract had a provision stating that the employee agreed to indemnify and hold harmless Subcontract, the prime contractor, and the entity that retained Subcontract. In response to a motion for summary judgment filed by the contractor, the trial court stated that it was not convinced the contract and the particular indemnification language therein, extended to a negligence action within the realm of tort law, and that public policy prohibits indemnity agreements relative to negligent acts. The Appellate Court upheld the decision of the trial court.
Co-employee defense: Pursuant to Section 38a-327 of the Connecticut General Statutes, an employer or principal may hire a subcontractor without incurring liability for the damages caused by the subcontractor’s failure to perform or perform in a workmanlike manner. Section 38a-327 governs contractual limitation of liability provisions and should be reviewed carefully for purposes of reviewing a hold harmless or indemnification agreement.
When To Consult Legal Professionals in CT
When it comes to drafting or signing a hold harmless agreement in Connecticut, seeking the guidance of a legal expert can save a considerable amount of time, money, and stress. A hold harmless agreement is typically a significant document that outlines the responsibilities of various parties in any business arrangement, and should be carefully reviewed to make sure there are no unintended consequences. Issues such as indemnification, liability caps, future risk, insurance requirements, and scope of services should all be properly reviewed in a comprehensive hold harmless agreement. Guidance from an experienced business and commercial law attorney familiar with business acquisitions, asset purchase agreements, and mergers in Connecticut can help business owners, independent contractors, and professionals better understand how a hold harmless agreement applies to their situation . To find a qualified business and commercial law attorney in Connecticut, business owners should search the website of the Connecticut Bar Association (CBA). The CBA website has a "Find a Lawyer" link where you can search for a qualified business and commercial law attorney based on your specific needs. In addition, the CBA website contains a wealth of information for businesses to consult. You may also ask acquaintances for recommendations to find a business and commercial law attorney in Connecticut, or consult websites like Martindale-Hubbell, where you can search for attorneys based on their area of practice. Many law firm websites also contain blogs and other articles related to business law, so familiarity with the work of an attorney you are considering for a new or existing business venture is a good idea.