Summary: The purchase of insurance is just one of many ways that an entity can transfer all or portions of its risk. Insurance policies have often been referred to as policies of indemnity, or indemnification contracts, as well as contracts of adhesion. An insurance policy meets the description of both an indemnity contract and a contract of adhesion. A contract of indemnity is a legal agreement between two parties in which one party agrees to pay another party for a loss or damage that meets certain criteria and conditions, barring certain specified circumstances. An insurance contract is just one type of a contract of indemnity. A contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording is a contract of adhesion. Insurance policies are contracts of adhesion and, as such, are construed strictly against the party writing them (i.e., the insurer).
Both indemnity provisions and insurance agreements require one party to stand good for the loss of another. But there are some significant differences. Here, we will discuss the different types of indemnity, anti-indemnity statutes, insurance coverage for liability coverage, and additional insured endorsements.
Indemnity provisions, also known as hold harmless agreements, are found in just about every construction or service provider agreement. Indemnity provisions contain a promise by one party to protect another party from claims for damages by a third-party. The intent of an indemnity provision is to transfer the risk of third-party claims to the party best-suited to bear the risk.
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