Indemnity clauses are ubiquitous in contracts. However, people who draft or negotiate indemnities frequently fail to appreciate their numerous pitfalls.
So, what is an indemnity?
An indemnity is simply a contractual promise to pay for a loss if it occurs as a result of a specified event. In that way, an indemnity is not dissimilar to insurance, except the indemnifying party does not have the benefit of the many conditions protective of the insurer one finds in an insurance policy, nor does the indemnifying party get paid a premium for giving an indemnity.