Florida Hold- Harmless Agreements: A Legal Primer

What is the Hold-Harmless Agreement?

The heart of a hold harmless agreement is a promise by one party (the indemnitor) to protect another party (the indemnitee) against certain types of identified losses or damages caused either by that party or a third party. In its most basic form, a hold harmless agreement is a promise to take responsibility for the financial consequences of certain risks. "Hold harmless" agreements/clauses are generally contained within a contract that includes obligations on both sides, but one party often decides to delete the indemnification language anyway.
In part because of their name, hold harmless agreements are often mistaken as releasing liability for the future acts of a party. As a general rule, releases do not cover liability for harm incurred from the future acts of the releasing party. In fact, oftentimes courts refuse to enforce hold harmless clauses on the grounds that they violate public policy, and particularly where the party that stands to benefit from the hold harmless agreement occupies the position of an insurer or has superior bargaining power .
An insurance policy is not a hold harmless agreement. While an insurance policy will require the policyholder to agree to hold the insurer harmless, an indemnity contract requires nothing of the kind. Instead, the policyholder agrees to exculpate the insurer from any responsibility for indemnifying the policyholder if the agreement was breached.
As discussed above, the determination of fault is not a common defense to a hold harmless agreement. An indemnification agreement does not need a finding of negligence in order to permit a defendant to recover the judge’s award for damages. The intent of the parties is a crucial element as to whether a specific agreement is an indemnity. A few courts have drawn distinctions between hold harmless agreements that are designed to protect the indemnitor alone and those that protect the indemnitee alone or both.

Importance in Florida

The legal importance of "hold harmless" agreements in Florida is twofold. First, they define the scope of responsibility between parties, allowing each to determine its own exposure to risk and price it accordingly. Second, they may provide the basis for recovery in the event of a negligent act – a scenario often contemplated within a master services agreement. Therefore, it is necessary to balance the scope of each party’s indemnification obligations with the available liability caps.
Section 725.08 of Florida Statutes governs indemnification provisions within Florida contracts. Therefore, it is important to consider its impact on third-party liability limitations within hold harmless agreements. Subsection (1) provides:
A covenant, promise, agreement, or understanding in, and a provision in, any instrument relating to or meriting any construction, alteration, repair, or maintenance of a building, structure, or other improvement to real property, purporting to relieve any person from liability for damages arising out of injury to that person, his or her agents, employees, servants, or subcontractors, by reason of personal injury, death, or property damages occasioned by the negligence or wrong of that person, is against public policy and is void and unenforceable in this state.
Florida’s statute is written broadly, preventing avoidance through clever wording, and encompasses all legal relationships, "whether expressed or implied, arising out of the contact between the contracting parties." Chapman v. Rohm & Haas Co., 570 F.3d 116, 122 (5th Cir. 2009). While an indemnity waiver for "negligence" is generally considered void, the same courts permit a waiver of "gross negligence," reasoning that gross negligence falls outside of the scope of the statute. Id.
Further, indemnity clauses are deemed void in cases of "commercial construction contracts," as specifically defined in § 725.06. This term describes the agreement between:
[i]ndependent contractors; commercial general contractors; developers; any general contractor; subcontractors of any tier; or anyone providing architectural or engineering services to the property owner, architect, or general contractor . . . if the contract is for the construction or improvement or repair of a building or structure.
These clauses are not automatically void if limited to liability between general contractors and subcontractors within that chain. Id. at 122-23. However, any limitation must be clear and unambiguous within the contractual language, rather than implied.
Importantly, Chapter 725 contains several exceptions that are deemed to violate Florida’s public policy only when the work is performed on the structures or real property of another person. A risk allocation agreement is not void if it exists between a general contractor and a subcontractor when that general contractor performs work on its own property. Subsection (2) defines the exception as follows:
This section shall not affect any covenant, promise, agreement, or understanding undertaking in, and a provision contained in, any agreement, instrument, or other device relating to, the construction, alteration, repair, or maintenance of any such building, structure, or other improvement on which the person performing such construction, alteration, repair, or maintenance work is the sole owner.
However, Florida courts have found that Chapter 725 is not limited to construction disputes, and the statute’s language dictates that voiding clauses prohibits enforcing the contract in any stage of litigation. Pratt & Whitney v. Gen. Elec. Co., 238 F.3d 829, 834-35 (7th Cir. 2001).

Key Elements of a Florida Hold Harmless Agreement

To be enforceable, the following must be contained in a Florida hold harmless agreement:

Identify the Parties. The parties to the agreement must be clearly identified. In construction contracts, language such as "owner, general contractor, subcontractor, and supplier" is usually sufficient.
Indemnification Language. There must be a clear intent to indemnify and defend. "Indemnify," "defend," and "hold harmless" must all be expressly stated either by using one of those words or its legal equivalent such as "to protect, save and hold harmless".
Scope of the Indemnity. The clause should not extend to situations where the indemnitee’s own negligence caused the losses. In order to condition a tender of defense on the indemnity clause of a contract, the indemnitor must have disclaimed liability for that which would legitimately be charged to it by the principles of tort law. Id. at 1240 (citing Wightman v. Superior Insurance Co., 391 S.W.2d 40 (Tex. 199), overruled on other grounds, 424 S.W.2d 600 (Tex. 1967)).
Causation. The indemnification agreement must set forth at least one potential area where an act will trigger the resulting loss that requires indemnification. For example, in the case of Mattatall v International Insurance Company, hold harmless language stating as follows was not breached as there was no evidence as to the cause of the fire "except that oil lamps were used." Mattatall v. International Ins. Co., 624 So.2d 792, 797 (Fla. 1st DCA 1993). When there is failure of proof of causation in a claim against an indemnitor, the indemnity agreement’s language will not be construed to hold the indemnitor liable. Claimant bears the burden of proving the negligent performance of the work, the proximate cause of the loss, and a breach of contract by the promisor.

Types of Hold-Harmless Agreements

In Florida, hold harmless agreements are usually categorized as either a unilateral or a reciprocal agreement. We will discuss both types of agreements below.
Unilateral Agreements
A unilateral agreement is a one-way indemnity agreement that holds the indemnitee harmless for any liability, loss, damage, or expense that arises from the other party’s performance of the contract. This type of hold harmless provision ensures that the indemnitee will not be held liable in the event of an action against it that results from the acts or omissions of the other contracting party. In effect, the other party agrees to assume liability for its negligent performance of the contract.
Reciprocal Agreements
A reciprocal agreement is a two-way hold harmless agreement where both parties agree to indemnify one another under certain circumstances. The language used in these agreements is critical to the enforceability of the agreement. The parties must clearly express that the loss or damage sought to be recovered arose from the other party’s performance of the contract. In Miami Dade County v. Bisson Moving and Storage Co., 350 So.2d 1089 (Fla. 3rd DCA 1977), Bisson moved some construction equipment belonging to the County of Miami-Dade. After leaving, the equipment was damaged, and the County sued Bisson for the damage. Bisson asserted that the County should be liable because of a reciprocal hold harmless agreement in the contract between Bisson and the County. The court offered that while there is no statutory provision regarding reciprocal hold harmless agreements, they are valid. However, in this case, because the damages were caused by the negligence of a third party – not Bisson – and Bisson was not at fault for the damages, the indemnity provision did not apply. See also Lazard freres & Co. v. Estate of Rorem, 970 So.2d 396 (Fla. 3rd DCA 2007)(a reciprocal indemnification provision may be limited to the extent caused by the indemnifying party’s negligence).
Florida courts will not enforce these hold harmless provisions where they are deemed unreasonable. In Duval Plumbing, Inc. v. Maeda Pacific Corporation, 363 So.2d 115 (Fla. 1988), the Florida Supreme Court upheld the Third District Court of Appeal’s decision that voided a hold harmless provision that attempted to indemnify the indemnitee for liability arising from its own negligence. As a general matter, the courts will only enforce those indemnification provisions if the indemnifying party is negligent in the performance of the work being performed under the contract. Id.; see also Attardi Bros. Corp. v. L & G Painting Corp., 731 So.2d 795 (Fla. 4th DCA 1999). In the construction context, Florida courts have routinely upheld indemnification provisions that required indemnification in any circumstance. See Orlando Precast Concrete, Inc. v. Naples Marine Enterprises, Inc., 230 So.2d 535, 536 (Fla. 2nd DCA 1970).
Florida courts will not enforce a hold harmless provision that attempts to indemnify a party for his or her negligence. Shafers, Inc. v. Royal Pastry Shoppe & Restaurant, Inc., 315 So.2d 219 (Fla. 2nd DCA 1975) (which concerned a reciprocal agreement between the plaintiff and the defendant in connection with a lease agreement).

Common Applications and Examples

While legal in many different contexts, the hold harmless provision is typically used in Florida in these three key areas:
Construction
Construction projects are the most common area in which to see hold harmless provisions in play. In order to incentivize contractors to take on potentially dangerous jobs and as a guarantee to keep subcontractors in line, contractors will typically require each subcontractor involved in the project to sign a participation agreement that includes a hold harmless provision. The construction project itself will then be held harmless from liability for injury or loss that occurs on the project site because of one or more of the listed subcontractors. This can lead to lower overall insurance costs as well since this type of waiver promises the insurance company that any losses that occur as a result of one of the subcontractors’ negligence will not impact the cost of the project’s insurance policy.
Events
Another environment in which to see Florida hold harmless provisions is at events and happenings ranging from festivals to concerts to office parties. If an event organizer has contacts with incoming performers, entertainers or service providers — including anything from face painters to sound technicians or sanitizing service providers — the event organizer would typically require each of these entities to sign a hold harmless event participation agreement . So prior to any services being delivered, the event organizer will execute the hold harmless waiver, essentially preventing these participants from making any direct claims against them in the future in the event that an accident occurs during the event. The event organization is thus protected from lawsuits, while the service providers understand and accept that they will have no recourse if something goes wrong at the event and they are blamed.
Real estate transactions
Just about every commercial or residential real estate transaction involves the inclusion of a hold harmless provision. Because passersby are the first victims in any real estate neglect scenario, home and building owners often use hold harmless provisions to fend off liability in these cases. The real estate hold harmless provision typically works in one of two ways: Under the first scenario, the home or building owner will put the hold harmless clause directly in the title company contract, meaning that if an accident occurs on the property prior to the closing of a sale, the buyer will agree to absolve the seller of any liability as a result of the accident. Under the second scenario, the ripe for a slip and fall buy is a public building, so the property owner simply includes a hold harmless provision with any visiting buyers, waiving their rights to sue in the event that an accident occurs on the property while they’re there.

Possible Defenses

Hold harmless agreements can be a source of legal disputes in numerous ways, including challenges to their broad language or enforcement provisions. Spelling out the terms and conditions of hold harmless agreements is therefore essential to avoid some of the challenges that may arise.
Enforceability in the Face of Tort Reform Even in the wake of Florida’s 2007 Tort Reform Act, certain hold harmless agreements can still be held as contradicting public policy, and can be rejected as being contrary to the law when the awarded damages would exceed the amount of the protection they provide. For example, in Collado v. Georgia-Pacific, L.L.C., 19 So.3d 1040 (Fla. 3d DCA 2009) the appellate court overturned a jury’s finding in which it apportioned damages to the defendant that were in excess of the amount that the defendant was required to pay by agreement, despite having found that the defendant was 90 percent at fault. The plaintiff did not plead any facts that would sustain a set-off or judgment reduction based on the defendant’s entitlement to a set-off for its contribution to the verdict. The jury was therefore not given the opportunity to consider the set-off or to apportion liability accordingly. Here, the court explained that the public policy of the state of Florida is that damages should be apportioned on a comparative fault basis. The court further pointed out that while a jury may apportion the damages against all the defendants, in order to make a consistent judgment, the parties’ rights in contribution must be first determined. Here, the defendant could not seek contribution from a non-party, nor did the plaintiff seek to establish a right to contribution or to seek a triple count. In effect, apportioning damages in excess of the defendant’s obligation resulted in an award against the defendant in amounts that it did not contractually agree to pay.
In Great American Assurance Co. v. Liberty Mut. Ins. Co., 810 So.2d 1052 (Fla. 4th DCA 2002), an indemnity provision in a primary insurance policy was held void as against public policy because it allowed more than one insurer to indemnify the nameless, unspecified class of third parties for "any loss," a term defined as "the cost incurred by Liberty Mutual to settle in mediation." Such a provision violated the public policy of the state of Florida supporting the individual rights of innocent injured third parties.
Liability under Hold Harmless Agreements The courts have also denied enforcement of hold harmless agreements in situations involving the duty to indemnify. Typically, a party seeking indemnification from another must have itself suffered injury or liability, but not necessarily have already paid for that injury or liability. In Spanish Riv. Sw. Canal Improvement Dist. v. Florida Power & Light Co., 728 So.2d 295 (Fla. 3d DCA 1999), the court explained that the indemnitor’s liability under a hold harmless agreement "is generally restricted to indemnifying the indemnified party only after its liability has been established." But see U.S. Fidelity and Guar. Co. v. Wiggins Construction Co., 638 So.2d 211 (Fla. 3d DCA 1994) (Indemnitor is likewise excused from liability to indemnify indemnified party for damages that were caused by the indemnified party’s gross negligence). Moreover, the indemnity provision permitted recovery of all losses, attorney’s fees, costs and reasonable expenses. Thus, in Spanish River the court ordered the indemnitor to contribute to the cost of an easement that the other party had already sold. The court also held that the provision allowing substantial attorney’s fees in "seeking to establish or collect upon a claim which the other is obligated to pay" was consistent with the manifest intent of the parties.

Tips for Drafting in Florida

Effective hold harmless agreements are important to businesses, contractors, and subcontractors. Examples of situations in which it is important to have a hold harmless agreement include when (1) one business is providing a service to another business that involves some risk; (2) a contractor is performing work for an owner at a job site that it does not own; or (3) a subcontractor is performing work for a general contractor at a job site that it does not own.
Here are some tips on drafting your contract to avoid claims against you:
The Florida courts have enforced hold harmless agreements strictly according to language. Therefore, it is essential to use specific language that clearly accomplishes each party’s intent. In the clear plane of an otherwise competent, legally binding contract, any ambiguous, unclear, or vague clauses may result in an invalidated provision, which in turn may lead to expensive litigation aimed at protecting the liability of the party that would be uncompensated under the invalidated clause.

Closing Remarks

In conclusion, hold harmless agreements are a critical aspect of legal agreements and contracts in Florida. They serve as a means to allocate risk and limit liability between parties, making them essential tools in many legal and business contexts. Understanding the nuances of these agreements, including the types and drafting considerations, can provide you with a strategic advantage.
As we have explored, there are various types of hold harmless agreements, including general, limited, and indemnification agreements. Each type has its own specific terms and conditions, and the selection of an appropriate agreement is dependent on the particular circumstances of the parties involved. Additionally, drafting a hold harmless agreement requires careful consideration of the scope of the agreement, the obligations of the parties, and any applicable exceptions . This precision helps to ensure that the agreement is enforceable and effectively serves its intended purpose.
Flaunting a Florida hold harmless agreement can have serious consequences. A breach of a hold harmless agreement can result in legal action, including lawsuits for damages, forfeiture of indemnification claims, or even criminal prosecution in certain scenarios. Therefore, it is crucial for contracting parties to understand the implications of entering into such agreements and fully comply with their terms.
We hope this article has provided you with a better appreciation of hold harmless agreements and their significance in Florida. These agreements are not only legally binding, but they also facilitate smoother transactions and can help to prevent future disputes.