I stared at the contract the Fortune 500 client sent me. Paragraph 14, the “Indemnification” clause, demanded I cover “any and all losses, claims, and legal fees” regardless of fault. Essentially, if their server melted down and they could somehow blame my CSS code, I was agreeing to pay their multi-million dollar legal bill out of my own pocket, bypassing the court system entirely.
Key Takeaways
- “Contractually Assumed Liability” is Excluded: Most standard insurance policies explicitly exclude liability you accept voluntarily in a contract that you wouldn’t have under standard law.
- The “Sole Negligence” Trap: Never indemnify a client for their mistakes. Only indemnify for your negligence.
- Blanket Indemnification voids coverage: If you sign a clause saying you pay “regardless of fault,” your insurer will likely deny the claim, leaving you bankrupt.
- Insured Contracts: You need a policy that grants “Contractual Liability” coverage for “Insured Contracts,” but the definition is narrow.
The “Why”: The Contractual Liability Exclusion
The Trap: Insurance covers you for Tort Liability (negligence defined by law). It generally does not cover Contract Liability (promises you make in a document).
If you sign a contract saying, “I will pay your legal fees if you get sued,” you have voluntarily assumed a liability.
Your insurance policy has an exclusion labeled “Contractual Liability.” It says: “We do not pay for liability assumed in a contract or agreement.”
The Exception: They will pay if you would have been liable anyway (negligence). But if the contract expands your liability beyond negligence, you are on your own.
The Investigation: I Quoted 3 Major Carriers
I asked underwriters how they handle “Broad Form Indemnification” clauses.
1. The Hartford
- My Analysis: They are strict. Their standard policy covers contractual liability only if the liability arises from your negligence. If you sign a contract indemnifying the client for their negligence, Hartford will deny that portion of the claim.
2. CNA
- My Analysis: CNA is better for agencies. They have specific endorsements for “Media Liability” that broaden the definition of an “Insured Contract.” They understand that big clients bully freelancers into these clauses, and they try to find coverage where possible.
3. Hiscox
- My Analysis: Hiscox is clear: they cover your errors. They do not cover “Hold Harmless” agreements where you agree to pay for things that aren’t your fault. If the contract says “Indemnify for any reason,” Hiscox will only pay for the “Negligence” reason.
[IMAGE: Screenshot of a “Redline” document showing how to cross out “Any and All” and replace with “To the extent caused by my negligence”]
Comparison Table: Indemnification Risk
| Carrier | Covers “Broad Form”? | Cost Impact | Best For… |
| CNA | Conditional | | Agencies signing big contracts |
| Hartford | No (Negligence Only) | | Consultants |
| Hiscox | No | $ | Solos (Must edit contracts) |
Step-by-Step Action Plan
- CTRL+F “Indemnify”: Find the clause.
- Redline the Text: Change “arising out of or related to…” to “arising out of my negligent acts or omissions.”
- Remove “Defend”: Try to remove the duty to “defend” the client. You want to “reimburse defense costs” after a court finds you at fault, not pay their lawyer upfront.
- Send to Agent: Before signing, email the clause to your broker: “Does my policy cover this specific wording?”
FAQ
Can I sign it if I have no assets?
No. They can garnish your future wages for 20 years.
What is “Mutual Indemnification”?
It means they indemnify you if they mess up, and you indemnify them if you mess up. This is fair and standard.
Does General Liability cover this?
GL has slightly broader “Insured Contract” coverage, but only for bodily injury/property damage, not for bad code or design errors.