We are seeing questions about indemnification clauses or similar “hold harmless” wording come up with increasing frequency on our physician communities. Traditionally, these have been rare in physician contracts, but as workplaces become more corporate, physician contracts are becoming increasingly complex and in favor of the employer. Clauses asking for physicians to indemnify there employers can potentially place a doctor at significant risk, and therefore most physician contract attorneys and malpractice insurance companies will recommend not signing them if at all possible. These clauses often contain vague and broad wording that can be hard to understand the implications of, but they are significant. Below, we’ll introduce you to some of the issues with signing a contract with indemnity provisions. We highly recommend speaking with a physician employment contract attorney for further clarification and how it applies in your situation so you can decide whether or not to sign one.
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What is the indemnification clause in a physician employment agreement?
An indemnification clause is a provision in a physician contract that states that one party (the indemnifying party) is responsible for compensating the other party (the indemnified party) for any losses or damages that can arise as a result of their actions (or lack thereof).
Most times in physician contracts, these clauses are one sided, where the physician is identified as the indemnifying party, and the employer is identified as the indemnified party.
An example may include wording that the physician “indemnify, hold harmless, and defend” the employer from “any and all loss, damage, and/or expense” that the employer may incur that is related in any way to the physician’s “performance or failure to perform the duties, services, and responsibilities” that a physician has been assigned in the contract.
What is the issue with indemnification clauses and ‘hold harmless’ wording?
Indemnification clauses are intentionally vague and broad
You may be thinking that you still don’t understand what the indemnification clause translates to in reality, and that’s part of the issue. The wording is kept intentionally vague and broad and opens you up to situations where the employer could come after you for lots of money for circumstances which may be beyond your control, or are part of the practice of medicine and your job. In the broadest, worst case scenario, the blanket wording here means that the employer could come after you for a limitless amount of money for anything that you do that they feel harms them in any way.
Shifts all of the liability and economic harm onto the physician
By putting these clauses in a contract, the employer is trying to protect themselves from situations that aren’t covered by your standard malpractice policies, situations which would only be covered by additional expensive add on liability coverage, or situations which no matter what wouldn’t be covered with the insurer that they use. There are specific things that malpractice insurance companies won’t cover because they can’t underwrite the risk.
Essentially, these clauses actually are geared towards shifting responsibility for liability or economic harm onto the physician. The employer wants to divest itself of anything it can’t insure against. In doing so, it places you as the physician in risk of a financially devastating situation.
While it may be reasonable to hold a physician responsible for willful misconduct or gross negligence or related to issues like assault or sexual harassment, other risks are risks that both clinicians and their employers routinely take on simply by being in the healthcare business.
To many in our communities, it feels like the employer is trying to have their cake and eat it too, getting to reap the benefits of having physicians do this work which they as the employer generate profit from, but not have any of the risks associated with engaging in the practice of medicine.
Employer indemnification clauses in physician contracts are not usually mutual
As we stated above, more often than not, the employer does not similarly extend you the courtesy of protecting you against things that may happen as a result of their actions with a mutual indemnification clause. Again, as a physician, you could probably name off several circumstances where medical errors that you are involved in may actually link back to systemic issues such as understaffing, improper equipment, and other issues.
You could have to pay defense costs for the employer even with frivolous claims or where you are not at fault
We all know frivolous lawsuits and malpractice cases are brought against physicians and hospital systems all the time. Even if you did nothing wrong and the proceedings show that, defense costs are expensive. If the hospital can hold you responsible for paying for the cost of the defense, including litigation costs, expert witnesses, attorneys fees, and more, this could still be a huge expense that is allowed to be assigned to you by an overly broad indemnification clause.
Indemnification clauses can impact liability coverage through your malpractice policy or make it more expensive
Depending on how indemnification clauses are worded, malpractice insurers warn that a vaguely worded indemnification clause may result in denial of coverage on a malpractice claim. If they interpret the indemnification clause to say the physician has contractually agreed to pay defense costs or other damages, they could say these things are not covered. Many medical malpractice insurance applications actually have a question that you have to answer about whether you’ve signed a clause that involves indemnity. This could be a reason they choose to deny coverage, put exclusions on your policy, or charge you higher premiums.
Give me some concrete examples of how an indemnification clause can be used against a physician
With patient care comes unpredictable scenarios, and healthcare is a highly regulated industry where violations happen. Medical errors happen, situations arise where patients act unpredictably or have incidents, disagreements happen with other employees, a conversation may be misinterpreted or overheard, and rules and regulations are constantly changing, requiring compliance measures that physicians may not be aware of. Generally speaking, as physicians, we jump in where we’re needed when we’re needed, regardless of whether it’s actually part of our job description, but this can backfire as well. This is all a part of healthcare.
However, things can go wrong. We could get named in complaints, grievances, or lawsuits that an unhappy patient files. You could unintentionally violate HIPAA. You could be examining a patient’s gait or doing a stress test and they could fall and get injured. You may be in a room when a combative or incapacitated patient tries to attack another patient or staff member, and in trying to contain the situation somebody may get hurt. You could be a surgeon in an operating room where someone gets a needlestick after you hand off an instrument. You could make the decision to transfer a patient and it turns out it’s an EMTALA violation. Maybe the staff or the employer’s billers incorrectly interpret your note or instructions and code inappropriately, resulting in action from the insurance company.
Additionally, many times the plaintiff’s lawyers will try to involve the employer as a named party in malpractice suits because they have deeper pockets. Institutional legal costs and/or damages can rack up quickly.
We could go on, but you get it. Regardless of what is right or wrong, there is nothing to stop people from bringing lawsuits or alleging violations, and there’s no way to know for sure how these situations will play out. You never know when something will result in large damages or settlements, the costs of which could ultimately be passed on to you if an indemnity clause is in place.
Should I sign an indemnification clause?
Hopefully what you’ve read above has made you incredibly wary and averse to signing an indemnification clause. Many physicians in our communities feel it’s not fair for an employer to get all the benefits of profits of the business of healthcare while shifting all the liability onto the physicians and other clinicians, and therefore advise each other to say no if they can.
However if this is not an option, and you don’t want to walk away, it’s advisable to work very closely with a physician contract attorney that is experienced in these matters to negotiate this clause to something more reasonable and limited in scope, or to incentivize them to drop the clause. Some ideas include
Insisting that the indemnification clause is mutual, which will either cause them to drop the clause or give you leverage to equally hold them accountable for things on their side that contributed to the problem
Limiting the clause to only include acts of gross negligence and willful malfeasance
Conclusion
Indemnification clauses are very risky for a physician to sign and should be avoided or limited in scope. Work closely with your physician contract attorney to address these, as they can help you navigate this issue and any others that occur during the contract negotiations process.
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