Indemnity Clauses in Ontario: What Is Actually Being Covered
Indemnity clauses shift risk.
They determine who bears the cost of specific events.
Beyond Direct Loss
Indemnities often extend beyond direct damages.
They may cover third-party claims, legal fees, and losses that arise indirectly from the relationship.
This can expand exposure significantly.
One-Sided Allocation
In many agreements, indemnities are not reciprocal.
One party assumes broader responsibility than the other.
This reflects negotiation leverage, not necessarily balance.
Interaction With Limitations
Indemnities may sit outside limitation of liability clauses.
This means that the largest risks are not subject to the cap.
The Practical Takeaway
An indemnity clause defines exposure in situations where ordinary damages would not apply.
Its scope determines how much risk has actually been transferred.