You may have come across the term to “hold harmless” (also called “save harmless”) while reviewing a contract regarding a service or product being provided. Holding harmless usually comes part and parcel with an agreement to indemnify, that is, to compensate a party for possible losses. But the contractual obligation to hold harmless is broader—and often more expensive—than that to indemnify.
A hold harmless provision means that the beneficiary does not have to dip into their own pocket money to cover the costs in defending the action, right from the very first dollar.
The seminal case for this clause is Stewart Title Guarantee Company v. Zeppieri. The Stewart Title Guarantee Company had an agreement with the Law Society of Upper Canada (LSUC) to “indemnify and save harmless” LSUC members from any claims regarding the title insurance policy, except in cases of the member’s gross negligence or wilful misconduct. When Zeppieri, a real estate lawyer and member of the LSUC, was being sued for negligence by his client, he requested that the LSUC’s insurer honour the agreement and pay the ongoing expenses of his defence. Stewart Title Guarantee Company argued that it was only required to indemnify a LSUC member after the final adjudication of the claim—they did not have to pay up while the matter was still before the court. The judge found that the court’s decision regarding Zeppieri’s alleged negligence was neither here nor there. “Saving harmless” means that the company has agreed to protect LSUC members from any claims falling under their title insurance policy, regardless of whether those claims turn out to be true or not.
In the 2021 case Ruetz v. Metro Canada Inc. et al., a woman sought damages after she was injured by ice falling from a grocery store awning. The defendant property owner and the defendant winter maintenance contractor both aimed to avoid trial with summary judgment motions: the contractor brought the motion to dismiss all claims against them, while the property owner brought summary judgment against the contractor because of the hold harmless clause in their winter maintenance agreement. The owner of the maintenance company argued that the awning is beyond company purview, explaining that “employees are trained to look down, not up.”
In his decision, Justice Nicholson pointed out that the hold harmless provision means that independent of whether the contractor is guilty of breaching the contract, the company has agreed to take care of any financial consequences related to the maintenance of the building. This means the contractor was obligated to cover the plaintiff’s damages and reimburse the property owner for its defence costs.
An even more extreme explanation of the duty to hold harmless is in Crosslinx Transit Solutions Constructors v. Capital Sewer Serving Inc. In this case, two residents of Avenue Road in Toronto made claims after their homes were damaged by sewage from the construction of the Eglinton Crosstown Light Rail. In deciding which party was financially liable for the damage, Justice Koehnen noted the conflict between Capital Sewer’s indemnity contract with Crosslinx, and Crosslinx’s “wrap up” insurance policy meant to protect all of its subcontractors, including Capital Sewer. Justice Koehnen found that the holding harmless clause trumped the other agreements and the indemnified party Crosslinx was entitled to be repaid the full cost of the proceeding.
Cases:
Crosslinx Transit Solutions Constructors v. Capital Sewer Serving Inc., 2021 ONSC 1091
Ruetz v. Metro Canada Inc. et al., 2021 ONSC 20
Stewart Title Guarantee Company v. Zeppieri, 2009 CanLII 2329.
A hold harmless provision means that the beneficiary does not have to dip into their own pocket money to cover the costs in defending the action, right from the very first dollar.