Hey, hold my beer…. All the best stories seem to be started with this phrase. It’s this phrase that make for cringe worthy YouTube videos that leave people shaking their heads in disbelief and often times amazement that something ‘worse’ didn’t happen at the end.
In virtually every contract or agreement that you are asked to sign, and are asking others to sign, there is some version of hold harmless and indemnification language involved. In true fashion, most times we sign off on these forms without taking a second to really digest what that means… hold harmless and indemnify.
Remember that “hold my beer” moment? In the world of facilities use agreements, that hold harmless and indemnification language helps to transfer the risk of what happens AFTER the comment to the host of the event. When you are renting out the local community center or parks, the hold harmless language allows you to require the host of the event to protect your entity from defending those claims which may arise from the “hold my beer” moment, as well as those from those moments that aren’t as flagrantly risky. In most cases, the hold harmless language serves to ensure that the user of the property (the host) is going to make sure that the owner (your entity) is protected from any and all claims which may arise out of their use of the property, regardless of whether the host did anything wrong to contribute to the incident.
The second part of the contracts that we have recommended our Members include is the indemnification language. The indemnification language serves to ensure that the host is not only affording protection to your entity in the form of a defense against claims, but also is agreeing to indemnify, or pay back any judgments which may be awarded against your entity as a result of a third party claim.
A properly prepared and executed facilities use agreement will contain language which outlines that a renter will hold harmless (defend against all claims) and indemnify (pay back or take care of any damage awards) arising from the event. Because the host is receiving the most benefit from the use of the property, and further has the most control over the activities which occur during the use of the property, it is appropriate for them to agree to be responsible for claims which may arise from the use of the facility.
Another aspect of the facilities use agreements that we consider is when we are asking for proof of insurance coverage from our host. The purpose of this is two-fold. One is to help ensure that those people are properly protecting themselves from claims which may arise out of their event. The second part is to ensure that they, to the extent their insurance coverage allows, are able to fulfill the obligations to hold harmless and indemnify your entity for claims arising out of their event. Taking the insurance aspect a step further, requiring that your entity be listed as an additional insured further strengthens your ability to receive benefits under the host’s liability coverage.
When reviewing contracts that you are being asked to sign, it is important to remember these terms. Further, you will want to look for language which narrows the scope of the liability you will be accepting. You want to be sure that you are only agreeing to be responsible for claims or issues which may arise out of your involvement with the subject of the contract. Consider the hold harmless and indemnification situations from above. The entire purpose of the agreement is to ensure that you are not being held responsible for activities or incidents that you have no control over. The same should be true when considering contracts that you enter into. You should not agree to be responsible for claims or situations which may result in claims that you have no control over. Review the hold harmless and indemnification language of all your contracts to ensure that you are only accepting claims that arise out of your involvement with the subject of the contract that will limit your exposure. The key phrase to look for is “any and all claims”; when you see this phrase, you should look for in very close vicinity a statement restricting those claims to the confines of the document subject matter, whether its equipment rental or performance of a duty.
Contracts are legally binding. They are not to be taken lightly when considering them. The City Attorney should be asked to review all contracts, even those facilities use agreements we talked about earlier, before executing or utilizing them. If you’re curious about whether your facilities use agreement is up to par, give us a call. For those SDPAA Members who don’t have one yet, we have some sample language we’d love to share with you. For those who aren’t SDPAA Members and don’t have one… give us a call, we’d love to provide you with a quote for coverage and services with the SDPAA! Visit our website at www.sdpaaonline.org or email us at sdpaa@sdmunicipalleague.org for additional information or an application.
Lynn Bren, AIC SCLA
Deputy Director
