Pronounced: In DEM' ni fy

HOW IT COMES UP
Sometimes when two companies make a contract one side agrees to indemnify the other against losses.

WHAT IT MEANS
The company that promises to indemnify (Company A) must repay the other company (Company B) for any losses Company B suffers because of things Company A does or omits to do.

EXAMPLE
A subcontractor indemnifies a contractor for losses resulting from the subcontractor’s negligence. The subcontractor doesn’t use proper lockout procedures and the contractor gets fined $80,000. Because of the indemnification clause, he subcontractor must pay back the $80,000 to the contractor.

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