Hold Harmless Agreements

A hold harmless is an agreement between two parties stating that one party will assume the risk of legal liability associated with an event for the other party. It is a risk transfer mechanism.  Usually a landlord will include hold harmless language in a lease to protect him or her from being sued as a result of the event occurring on his or her property.  Funders, such as governmental agencies, may also require a hold harmless agreement so that they will not be held responsible simply because they fund an event.  The requirement that a hold harmless be signed by the Special event holder is increasingly common.  But you can protect your nonprofit by reading the language and verifying that you have not unwittingly accepted more risk than is appropriate under the circumstances.  The following accident took place at a special event, but it is an excellent example of the problems associated with a broad hold harmless agreement:

A Special event holder signed lease agreement for a week long event.  The lease contained a broad hold harmless agreement wherein the Special event holder agreed to assume all risk for any injury which occurred on the premises. There had been an extensive amount of rain and the landlord had neglected to clean the gutters. During the week the roof on the building partially collapsed due to the buildup of water in the gutters.  A woman was injured trying to escape the collapse, and she filed a suit against the Special event holder and property owner.  The owner wanted the Special event holder to defend him and pay the injured woman based on the hold harmless agreement.  In the end the property owner took over the defense of the lawsuit for the Special event holder.  Unfortunately, a significant amount of money had already been spent defending the Special event holder.  A properly worded hold harmless agreement could have resolved the liability issue much more efficiently.

The lesson learned here is:  If you must assume risk, assume risk for those things over which you have control.  If the Special event holder had been responsible for the maintenance of the building, including the roof, then this type of broad hold harmless would have been understandable.  But in this case the nonprofit was not responsible for maintenance, so its agreement to hold the landlord harmless for any injury occurring on the premises was too broad. On the other side of the hold harmless issue are the agreements you should require from vendors and subcontractors. In these documents the signer agrees to hold the nonprofit harmless in the event of an accident arising from their operations.  Here is the story of one nonprofit’s experience when they forgot to have a vendor sign a hold harmless agreement:

This Special event holder puts on an outdoor fair with vendors.  One vendor, a hammock maker, displayed his hammocks in front of his booth.  A woman decided to try out the merchandise, and attempted to climb into a hammock.  She leaned too far to one side, the hammock flipped, and she landed on her side on the ground with an alleged injury to her neck.  She filed a suit naming the vendor and the Special event holder.  The hammock vendor did not have insurance and had not signed a hold harmless, agreeing to defend and indemnify the Special event holder, so the Special event holder’s insurer was left paying the settlement and attorney fees.  Keep in mind that a hold harmless agreement signed by someone without means to pay for damages is largely worthless.  Proof of insurance or other financial resources backs up the promise to hold the Special event holder harmless.  We discuss this issue further in the next article regarding certificate of insurance and endorsements for additionally insureds.

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