Indemnification

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Indemnification

Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgments resulting from lawsuits pertaining to their conduct.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Indemnification

The collection of money for damages. For example, indemnification occurs in insurance when the policyholder receives money to compensate for an insured event. Likewise, a company may receive indemnification from an employee, especially a major executive, if the company suffers damages in a lawsuit as a result of the employee's illegal or unethical actions.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

indemnification

The process of shifting a loss from one party to another either because of an express agreement by the parties or because the law requires it under the circumstances.

Example: A purchaser of real estate discovers the property is subject to a lien that was placed against it prior to sale and pays the lien in order to avoid foreclosure; then the purchaser is entitled to indemnification, or reimbursement, from the prior owner who breached the warranties in the deed.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
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Payment of an indemnification liability will often result in a tax benefit.
The indemnified party must determine the amount to recognize for the indemnification asset.
ASC 805, Business Combinations (ASC 805), provides guidance on the recognition and measurement of an indemnification asset in a business combination.
8, 2010, contains FHA's proposed rule for "lender indemnification to HUD of insurance claims in the case of fraud, misrepresentation or noncompliance with applicable loan origination requirements."
Requests for indemnification can be particularly expensive during a depressed housing market such as the one we are now in.
In such cases, HUD will then "bill" the originating lender in accordance with the terms of the indemnification agreement.
An appropriately drafted indemnification provision isn't enough.
Owners argue that it's fine to use a no-fault approach in the indemnification provision as long as the insurance company is paying the claim, but they don't want to pay the deductible when the agent's acts caused the claim.
Full disclosure and indemnification promises from the principal or principals of the sale will help reduce that risk.
Each party should attempt to negotiate contractual provisions which will allocate the risk of toxic liability to the one or more parties who are primarily responsible for the existence of the toxics, bearing in mind that such indemnification provisions will have little or no value if the indemnitor becomes insolvent.
At the end of the day, a mutual indemnification clause will simply mean that each party is accepting risk for its own conduct a principal both parties can typically support.
General indemnification provisions do not have to be deal killers in subcontracts.