Hold harmless and indemnity clauses: how they affect your professional indemnity cover
Reviewed by Apex Insurance Brokers · Last reviewed 2026-08-05
What is a hold harmless or indemnity clause?
These clauses appear in almost every commercial contract a professional signs — consultancy agreements, construction sub-contracts, framework agreements, and supplier terms. They shift the risk of loss from one party to another.
An indemnity clause is a promise to compensate another party for defined losses, often on a pound-for-pound basis. A hold harmless clause is a promise not to hold the other party responsible for certain losses, and frequently to defend or reimburse them if a claim arises. In practice the two are often combined into a single “indemnify, defend and hold harmless” provision.
The important point for professionals is that these are contractual obligations. They can create liability that would not exist under the ordinary law of negligence — and that gap is exactly where professional indemnity (PI) cover can fall away.
Why this matters for your PI insurance
Most UK PI policies are written to cover your civil liability arising from your professional services — broadly, the liability you would have at common law for negligence, breach of duty, or breach of contract. What they typically do not cover is liability you have voluntarily taken on that goes beyond that baseline.
This is usually dealt with through an “assumed liability” or “contractual liability” exclusion. It removes cover for liability you accepted under a contract that you would not otherwise have had. So if a hold harmless clause makes you responsible for a client’s losses regardless of fault, or for losses caused by a third party, your insurer may decline that part of the claim.
The result can be a nasty surprise: you assume you are insured because you have a PI policy, then discover that the specific obligation you signed up to sits outside it.
Clauses that commonly cause PI problems
- Uncapped or open-ended indemnities — where your liability has no financial limit. Your PI cover has a fixed limit; an uncapped clause exposes you above it.
- “Fit for purpose” or absolute-standard obligations — promising a result rather than reasonable skill and care. Common law negligence turns on reasonable care; a fitness-for-purpose duty is stricter and often falls outside standard PI wording.
- Liability for third-party losses — agreeing to indemnify a client for losses actually caused by someone else.
- Liquidated damages and penalty provisions — fixed sums payable on breach that may not reflect actual loss.
- Waivers of your own defences — clauses stripping out limitation periods or contribution rights that an insurer would normally rely on.
- Indemnifying a party against their own negligence — agreeing to carry losses that were the other side’s fault.
Covered vs. potentially excluded: a quick comparison
| Contract position | Typical PI response |
|---|---|
| Reasonable skill and care duty | Generally covered — mirrors common law liability |
| Indemnity limited to your own negligence | Usually covered, subject to limit and terms |
| Uncapped indemnity | Covered only up to your policy limit; excess is uninsured |
| Fitness-for-purpose / guaranteed outcome | Often excluded as assumed liability |
| Indemnifying another party’s negligence | Typically excluded |
This is a general guide only. Wordings vary between insurers, so the exact position depends on your own policy.
Signing a contract with an indemnity clause? Make sure your PI cover actually backs it up.
Get a PI quote →The Unfair Contract Terms Act and reasonableness
UK law does place some limits on how far indemnity clauses can go. Under the Unfair Contract Terms Act 1977, certain clauses in business-to-business contracts must satisfy a test of reasonableness, and liability for death or personal injury caused by negligence cannot be excluded at all. That can, in some situations, soften an aggressive clause.
But you should never rely on a court striking a clause down. Enforceability is fact-specific and expensive to litigate. The safer route is to negotiate the clause before you sign, and to check that anything you do accept sits within your PI cover.
How to protect yourself before signing
- Read every indemnity and liability clause before signing — not just the fee and scope.
- Push to limit liability to your own breach, capped at a defined figure, and to a reasonable skill-and-care standard.
- Cap the indemnity at a level your PI limit can realistically support.
- Strike out fitness-for-purpose wording where you can, or flag it to your broker.
- Take legal advice on high-value or unusual contracts — a broker is not a substitute for a solicitor on contract drafting.
- Talk to your broker about how a specific clause interacts with your wording before you commit.
If a clause genuinely cannot be watered down — because a large client insists on its standard terms — then at least go in with your eyes open, knowing which part sits outside your cover. In some cases an insurer can be asked to consider the wording, though there is no guarantee they will agree to it. Speak to Apex about your PI cover before you sign anything you are unsure about.
Common questions
Does professional indemnity insurance cover contractual indemnity clauses?
Only to the extent the liability mirrors what you would have had at common law. Most PI policies contain an assumed-liability exclusion that removes cover for obligations you accepted contractually and would not otherwise have owed. Check your specific wording.
Should I refuse to sign a hold harmless clause?
Not necessarily — they are standard in commercial contracts. The aim is to negotiate the clause down to your own negligence, capped at a sensible figure, and to confirm the remaining exposure fits within your PI cover. Take legal advice on significant contracts.
What happens if I sign an uncapped indemnity?
Your PI policy will still only respond up to its limit of indemnity. Anything above that limit, or outside the cover, becomes a personal or business liability you have to fund yourself. That is why capping the clause matters.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for your policy wording.