Hold harmless and indemnity provisions are used to shift risk from one party to another. They can be beneficial or harmful to an association depending on how they are used. They are commonly found in:

• Governing Documents. CC&Rs and bylaws commonly contain language shifting liability for negligent acts from volunteers to the association. Without such provisions, it would be difficult or impossible to find volunteers.
• Contracts. When used in contracts, they can be harmful to associations if improperly drafted.
• Covenants. Recorded maintenance covenants between the association and a homeowner who modifies common area elements often hold harmless and indemnity provisions from injury or damage caused by the alterations.
• Facility Rental Agreements. Common area rental agreements by members to use the clubhouse, pool, open space area, etc. for private events normally hold harmless and indemnity provisions protecting the association from liability in the event someone is injured.

A hold harmless or liability waiver provision is an agreement between the parties whereby one or both parties agree not to hold the other party responsible for any loss, damage, or legal liability that may, arise under the agreement. In other words, the two parties cannot sue each other for any damage they may suffer due to the negligence of the other party. Hold harmless provisions are often combined with indemnity language.

To indemnify is to protect against or reimburse for damage, injury or loss. Usually, an association's governing documents will indemnify officers and directors against expenses, judgments, fines, settlements and attorneys' fees reasonably incurred in connection with any threatened or actual civil or criminal proceedings. In civil proceedings, officers and directors may be indemnified if the acted in good faith and in a manner reasonably believed to be in the best interests of the association. In the case of criminal proceedings, they may be indemnified if they had no reasonable cause to believe their conduct was unlawful.

The words "indemnify" and "hold harmless" are not synonymous. One is offensive and the other is defensive, even though both anticipate third-party liability situations.

By reducing an association's risk of liability, the condominium owners have reduced their own risk.

Generally, a clause exempting a party from liability for that party's own negligence is enforceable absent a specific public interest or statutory exception. These types of exculpatory clauses have been upheld in numerous contexts but are not guaranteed. Even though the law is unsettled, associations should include reasonable exculpatory language in their CC&Rs when they amend or restate their documents.