The One-Sided Indemnity Clause: How You End Up Paying for Their Mistakes
Contracts are supposed to allocate risk fairly. But buried deep in many agreements is a clause that flips responsibility upside down: the indemnity clause. And when it’s one-sided, it can destroy your leverage—and your finances.
What Is an Indemnity Clause?
An indemnity clause says that if something goes wrong—injury, damage, a lawsuit—you agree to cover the costs for the other party. In theory, indemnity clauses protect against specific risks. In practice, one-sided indemnities often force you to pay for problems you didn’t cause.
A Real Case Example: My Client’s $190,000 “Win”
Several years ago, I represented a business owner who was subleasing space in a commercial property. He was paying a contractor to build out the premises when someone was injured on site. Here’s the catch: as a subtenant, he normally would have had no liability for the accident.
But before any lawsuit was filed, the landlord and tenant convinced him to sign an indemnity agreement. In exchange for three months’ free rent (worth about $45,000), he agreed to indemnify them for “anything related to the accident.”
When the lawsuit came, that agreement meant he had to step in and pay the defense costs and settlement for everyone else involved. Ultimately, he paid $190,000 out of pocket. That was considered a “win” because a trial might have cost him double or triple. But without the one-sided indemnity clause, he likely would have owed nothing at all.
The Hidden Risks of One-Sided Indemnity
- Taking on liability you don’t own: You could pay for the other party’s negligence.
- Pre-lawsuit pressure: Clauses are often signed hastily in exchange for small concessions.
- Unlimited exposure: A single incident can spiral into six- or seven-figure costs.
How to Protect Yourself
- Balance the clause: Make indemnity mutual or limit it to what you actually control.
- Cap liability: Tie indemnity to insurance coverage or reasonable limits.
- Never sign under pressure: Get legal review before trading indemnity for small concessions like rent credits.
Don’t Pay for Someone Else’s Mistakes
At JDE Law Firm, PLLC, we negotiate and litigate indemnity disputes for business owners, tenants, contractors, and professionals. If you’ve been asked to indemnify another party—or you’re stuck with an unfair clause—we’ll fight to protect your business and your bottom line.
📞 NY: 718-966-0877 | NJ: 732-490-7120
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