Indemnity Clauses and Liability Protection Runs in More Than One Direction

One of the unique aspects of community living, whether that community is a co-op, condo, or HOA, is the collective responsibility shareholders or association members take upon themselves when they offer to serve on their community’s board of directors.  With the assumption of board duties and responsibilities comes a measure of liability that might not otherwise be of concern to a resident. To protect board members and residents alike, there are contractual points of law and insurances available to mitigate these liabilities.

What Is Indemnity?

Indemnity is defined by the Merriam-Webster dictionary as “security against hurt, loss or damage,” as well as “exemption from incurred penalties or liabilities.”  Webster’s New World Law Dictionary goes a little farther. It defines indemnity as, “protection from damage, injury, financial loss or legal liability.” The word ‘indemnity’ itself stems from the Latin root indemnis, meaning unhurt. Legal aspects of indemnity and liability also extend to the term ‘hold harmless,’ which “protects against losses and liability, while ‘indemnify’ protects against losses alone,” according to It should be noted that Black’s Law Dictionary treats the two as near synonyms. If we haven’t lost you yet, please continue reading – it does get less technical!

In the Real World

What does all this mean for the daily life of condo, HOA and co-op owners?  A lot. Indemnity and liability run in more than one direction in the world of community living. Owners indemnify board members against possible liabilities, boards indemnify managing agents against the same, and managing agents indemnify boards. It’s more like a five-corner intersection than a two-way street.

From a Massachusetts board’s perspective, the primary indemnity protection for acting as a board comes from the declaration bylaws.  Ellen Shapiro, a principal at the law firm of Goodman, Shapiro & Lombardi, which has offices in Massachusetts, Rhode Island, and New Hampshire,  represents many condominium associations and HOAs. “Indemnity is in the governing documents to the extent the governing documents are held to be a contract,” she says.  Typically, an indemnification clause in the classic sense relates to a claim. The way it works is, if the board has to pay somebody as a result of a third-party claim, the unit owners collectively as an association agree that the board can ‘dip’ into common funds to settle the claim, rather than be held individually responsible. The provision may be called liability, indemnification, or exculpation. These clauses essentially state that the board is not liable to the unit owners for a mistake in judgment or any acts or omissions they’ve made as directors—as long as those acts or omissions are made in good faith. Usually that excludes acts of gross negligence or fraud, or criminal acts.  

An example of typical indemnity clause language in condominium documents might read as follows: “Neither the board nor any person exercising the powers of the board nor the association, shall be liable to the unit owners for any mistake of judgment or any acts of omissions made in good faith. The unit owners shall indemnify and hold harmless each of the persons described above against all contractual liability to others arising out of contracts made by them on behalf of the unit owners or the association unless the contract is made in bad faith or contrary to the prohibitions of the declaration.” The intent is to protect the board members from unit owners’ claims while board members are acting (in good faith!) on behalf of the corporation or association. Shapiro notes that in the state of Massachusetts, indemnification is not statutory but rather contractual in legal terms.


Related Articles

Directors and Officers Insurance

Must-Have, Or Luxury?

Insurance Coverage vs. COVID-19

Co-ops & HOAs May Be Left Holding the Bag

Insurance Basics

Is Your Association Adequately Covered?