Navigating the Risk: Understanding the Insurability of Indemnification Obligations

Strategies to Limit Uninsured Liability

In today’s complex business environment, professional service firms face increasing pressure to accept broad indemnification obligations in client-drafted contracts, often without fully understanding the insurance implications. While indemnification provisions are intended to shift liability, they can inadvertently expose firms to significant uninsured risks if not carefully aligned with the coverage provided by their professional liability insurance policies.

This article dives deep into this critical issue and explores the nuanced relationship between contractual indemnity and professional liability insurance, highlighting how misaligned indemnification clauses can leave firms vulnerable to uncovered claims, defense costs, and damages.

Through detailed analysis and practical examples, EPIC’s Kelly Geary, National Practice Leader, Professional, Executive and Cyber Solutions, outlines strategies to help firms limit uninsured exposure, such as narrowing the scope of indemnity clauses, aligning definitions with policy language, and avoiding defense obligations that fall outside policy coverage. The article also emphasizes the importance of involving legal and insurance professionals in contract negotiations to ensure indemnification provisions are both reasonable and insurable.

Whether you’re a risk manager, legal counsel, or executive at a professional services firm, this article offers essential insights to help you protect your organization from unintended liability. Download the full article today to learn how to make indemnification obligations a manageable part of your risk strategy.