Open Bar: Indemnification Clauses and Liability Insurance Coverage

Question: What is an indemnification clause, and does my professional liability policy provide coverage for contractual indemnification?

Response: Over the past decade, the practice of medicine has continued to evolve into a model of hospitals and health systems entering contracts with practice groups or individual physicians to deliver patient care. With this transition, we have also seen an increase in the use and complexity of indemnification clauses in physician services agreements. Indemnification clauses allow one party (the indemnitee) to shift risks arising from the agreement to the other party (the indemnitor).  A typical indemnification clause in a physician services agreement may provide: “the physician agrees to defend, indemnify and hold harmless the hospital against any third-party action, claim, suit or liability arising out of the acts or omissions of the physician.”  Thus, if a patient commences a medical malpractice lawsuit against the physician and the hospital, such an indemnification clause may require the physician to pay for the hospital’s legal defense costs as well as any settlement or judgment paid.

As the use of service agreements continues to expand, it is important to be mindful that not all indemnification clauses are the same, and the extent of their impact on liability exposure and professional liability insurance coverage could be wide-ranging. Here are some questions that physicians should consider before entering into an agreement that contains an indemnification clause:  

Are indemnification clauses enforceable in New York?

Yes. However, the right to contractual indemnification depends upon the specific language of the contract and will be strictly construed by courts to avoid reading into the clause a duty which the parties did not intend to assume. See, Selis v. Town of North Hempstead, 213 A.D.3d 878 (2d Dep’t 2023).Nevertheless, disputes often arise between parties regarding the interpretation of the clause and to what extent an indemnification clause applies.  For example, the phrase “arising out of,” which is frequently used in indemnification clauses, has been interpreted by New York courts to mean “originating from, incident to, or having connection with.” See, Worth Construction Co., Inc. v. Admiral Insurance Company, 10 N.Y.3d 411, 888 N.E.2d 1043, 859 N.Y.S.2d 101 (2008). Therefore, we could envision a scenario where a hospital would seek complete indemnification where a lawsuit involving a lengthy hospital admission “arises out of” an initial misdiagnosis made by a contracted physician at the time of the patient’s admission.      

Can a party agree to indemnify another party for its own negligence in New York?

Generally, yes. While there are statutory exceptions that prohibit such clauses (e.g., construction-related contracts, real property leases, etc.), New York courts will allow a party to agree to indemnify another party for its own acts of negligence. See, Collado v. Port Authority of New York and New Jersey, 239 A.D.3d 823, __ N.Y.S.3d __ (1^st Dep’t 2025). Again, such a clause would be strictly construed but will be deemed enforceable so long as the intention to indemnify the other party for its own negligence is expressed in the contract in unequivocal terms. See, Cortes v. Town of Brookhaven, 78 A.D.3d 642, 910 N.Y.S.2d 171 (2d Dep’t 2010) citing Kurek v. Port Chester Housing Auth., 18 N.Y.2d, 450, 223 N.E.2d. 25, 276 N.Y.S.2d 612 (1966). That said, in most instances, parties are not seeking indemnity for their own conduct and their goal in using an indemnification clause is to protect against claims stemming from the other party’s acts and omissions. Therefore, to avoid any misconception, parties should consider expressing clearly in an agreement that nothing contained in the indemnification clause is intended to require a party to indemnify the other for its own acts, omissions, malpractice or negligence.   

Does my professional liability policy provide coverage for contractual indemnification?

Not necessarily. Most professional liability policies include a contractual liability exclusion that bars coverage for the liability of others assumed under an agreement. However, some policies will provide an exception to the exclusion and extend coverage for indemnification assumed under an agreement based solely on the conduct of the insured. Other exceptions to contractual liability exclusions will provide coverage for liability the insured would still have even in the absence of the contract or agreement. For example, a policy may provide indemnification coverage where the claim against the other party is based only on its vicarious liability for the conduct of the insured without any allegations of direct liability based on the other party’s own acts or omissions. 

A physician should always consult with their attorney before entering into an agreement relating to professional services. However, a policyholder should also consult with MLMIC’s underwriting department any time they are entering into an agreement that contains an indemnification clause to prevent a liability exposure that may not be covered by their professional liability insurance policy.  MLMIC policyholders can also reach out to our healthcare attorneys for questions about indemnification issues associated with professional liability claims. 

MLMIC policyholders can reach out to our healthcare attorneys for questions about indemnification clauses or any other healthcare law inquiries by calling (877) 426-9555 Monday-Friday, 8 a.m.-6 p.m. or by email here.

Our 24/7 hotline is also available for urgent matters after hours at (877) 426-9555 or by emailing hotline@tmglawny.com.

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This document is for general purposes only and should not be construed as medical, dental or legal advice. This document is not comprehensive and does not cover all possible factual circumstances. Because the facts applicable to your situation may vary, or the laws applicable in your jurisdiction may differ, please contact your attorney or other professional advisors for any questions related to legal, medical, dental or professional obligations, the applicable state or federal laws or other professional questions.