HN Explorer

Tell HN: Are you sure you understand 'indemnity'

14 points by Guid_NewGuid ↗ HN
Just wanted to give the kind souls of HN a heads-up since remote work is becoming more popular. It's worth checking your contract for clauses about "hold liable" and "indemnify".

I had foolishly assumed I understood "indemnify" to mean "you can't seek money from us if we damage you" whereas it actually means "we will sue you into the ground if we feel like it".

Since international remote work often involves operating as a contractor for the company in question they might give you a generic contractor contract where you are assumed to have Liability/Errors & Omissions insurance but if you're working for a single company you may not.

12 comments

[ 3.2 ms ] story [ 21.8 ms ] thread
ayende
What this means is that you agree to protect the client and come in their shoes in some cases

The most typical scenarios are about IP ownership and patents

This is distinct from errors and ommissions

Guid_NewGuid
Thanks, this is a useful distinction. As I clarified elsewhere it would maybe be more accurate as:

"If we are subject to a lawsuit due to something you did while working for us then you have to pay an unlimited amount of costs we incur due to that suit".

Anyone doing proper contracting should definitely find the appropriate insurance for their case. I think the terms for the insurance types are different in the US.

macksd
"indemnify" does not actually mean "we will sue you" so I feel you need to add some more context to what you're saying - it sounds like you've been caught in a bad situation, and while I'm very sympathetic I suspect the real lesson to share with others isn't what indemnify means.

When I hear "indemnify" in a Silicon Valley-esque context, it usually means to insure a client against lawsuits from third parties. For example, I've worked for a company the indemnified our clients against lawsuits claiming that our open source project infringed on any trademarks or patents or other intellectual property issues. Meaning that if someone went after our clients for such an issue with our software, we would deal with the financial consequences.

Guid_NewGuid
That's a fair point, I was simplifying/exaggerating for effect.

What I wanted to flag was that if you transition from a FTE in your country's legal framework to a contractor in order to work remotely one might not be familiar with the term.

The way I interpreted it is as follows:

"If you mess up and our users or other parties begin a lawsuit against us then you're fully liable for all our costs and there is no limit on how much we may sue you/charge you for".

Which is more technically exact but coming from a FTE background effectively the same. Since bugs are unavoidable in software it's a terrifying clause to have in a contract.

Edit: I luckily wasn't caught by this but realised after a bug related to payment processing I had the clause in my contract and was able to get it removed. I was just horrified that my brain filled in "yeah from context that kind of sounds like a liability waiver" when it meant the opposite.

macksd
Oh that's interesting. I'm very curious if you're able to share the actual wording of the clause?
Guid_NewGuid
I don't want to post anything too identifiable on my throwaway but I'll post a modified excerpt:

"[you will] indemnify the company from [...] all claims, damages, liability, settlement, attorneys’ fees and expenses [from] any breach of [the contract] or any other action or inaction [you did]"

[deleted]
(comment deleted)
chrisa
From a business perspective: One of the scary things about indemnity is that it is uncapped - but if a client insists on indemnity even after push back, you can often get a clause to have it capped to whatever your business insurance would pay in that situation.

It would still mean a terrible situation to go through - but at least it wouldn't (necessarily) risk your entire business.

Disclosure: I'm not a lawyer, etc.

marcosdumay
Wait, are people working on a regular job condition with contracts that not only deny employment, but indemnify the hiring company from the person acts?

That is completely fucked up.

Guid_NewGuid
It's sort of the only way to do remote working internationally as far as I know, other than having a company open a legal entity/business in every location they employ developers. The risk is for companies without a dedicated legal/HR department they might just re-use contractor 'boilerplate' that assumes idemnity insurance and that doesn't adapt to the quirks of being a pseudo-FTE contractor.
marcosdumay
It's understandable to contract people as companies. Probably not legal, but I can't see it working any other way either.

What is not ok at all is that the response for such a process is not simply the judge dismissing any claim for indemnity and the professional countersuing for some damages. Of course the details will depend on what country the professional is, but the overall system is kinda standard on the democracies.

TYPE_FASTER
I have been given SOWs/contracts to sign as an individual that included indemnification clauses that explicitly stated I would be held liable for damages and legal costs. I've returned the documents (unsigned) with those sections removed, and provided the feedback that it doesn't make any sense for me to take on that risk for a small, short-term contract. I know insurance exists, but the cost of it makes it a nonstarter for me. I've been able to get indemnification clauses dropped, YMMV.