Hazardous Indemnification Clauses in Physician Contracts

Physicians who sign a contract containing an indemnification clause could be responsible for hundreds of thousands of dollars in legal costs and damages—even for issues they did not directly cause. These clauses are often buried in physician employment contracts and can expose doctors to serious financial risk.

At Gardner Employment Law, we have dealt with all manner of clauses in a physician’s employment contract. If you signed or plan to sign your own physician employment contract, reach out to us before you sign.

How do Indemnification Clauses Impact Physicians?

If a physician signs a contract with an indemnification clause, they could be required to pay for all legal costs associated with claims tied to their medical care—even if the claim is caused by hospital staff or administration.

Consider this scenario:

• You briefly see a patient before a nurse later makes a critical medication error.
• The patient’s family sues you, the nurse, and the hospital.
• Since the lawsuit is “associated with” your provision of care, your indemnification clause triggers.
• The hospital’s legal fees amount to $50,000, and they settle the case for $100,000.
• You are now responsible for paying the hospital $150,000—out of pocket.

This is not a rare occurrence. Broad indemnification clauses pose a severe risk, and most malpractice insurance policies do not cover these costs. Moreover, failure to disclose such a clause to your insurer could lead to coverage issues. If you unknowingly sign one, you may find yourself in a bind.

What Can Physicians Do About Indemnification Clauses?

If you have already signed a contract containing an indemnification clause, your options are limited. Here’s what you can do:

1. Consult an Experienced Attorney – A lawyer can help you understand your specific risks and determine whether renegotiation is possible.
2. Seek Additional Insurance – Some umbrella policies may cover indemnification, but these can be expensive.
3. Renegotiate Your Contract – While difficult, you may be able to remove or modify the indemnification clause. Some alternatives include reciprocal indemnification, but these rarely provide meaningful protection.

If you have not yet signed a contract, your best course of action is to negotiate before committing. The American College of Emergency Physicians advises that “the best indemnification clause is a deleted indemnification clause.” If an employer insists on including one, consider looking for a different position.

However, if you must sign a contract with an indemnification clause, try to negotiate limiting language. Ideally, you should only be liable for your own gross negligence or willful misconduct, not for hospital-wide failures.

What is an Indemnification Clause?

An indemnification clause requires one party to cover costs incurred by another for certain liabilities. In the medical field, this often means a physician must pay for damages, legal fees, or other costs associated with a claim against their employer—even if the physician was not directly at fault.

Indemnification clauses, indemnity clauses, and hold harmless clauses are generally interchangeable terms, all designed to shift financial responsibility. While hospitals and employers use these clauses to protect themselves, they can leave physicians financially exposed.

Example Indemnification Clauses in Physician Contracts

These clauses can be worded in ways that make the physician responsible for extensive costs. Here are two examples:

1. The contracting physician agrees to defend, indemnify, and hold harmless [the hospital] and its affiliates from any and all damages, liability, and expense (including legal costs, other expenses, and attorney’s fees) in any way related to physician’s provision of medical care, even if caused in whole or part by the negligence, gross negligence, or other fault of [the hospital] or its affiliates.
2. Physician shall indemnify and hold us harmless from any and all liability, loss, damage, claim, or expenses of any kind and of whatever nature, including all costs and attorney fees, arising out of the performance of this Contract and for which Physician is solely responsible.

The bolded language establishes the indemnification obligation, while the underlined portions show how risk is shifted to the physician, sometimes even when the hospital is at fault. These clauses are rarely included for the physician’s benefit and can lead to financial costs that you were never aware of.

What This Means For You

Indemnification clauses can pose an existential threat to a physician’s career and financial stability. These clauses benefit employers, not doctors, and may be hidden in complex employment contracts. Hospitals and other employers know that physicians are focused on patient care, not legal loopholes, which is why they attempt to slip these clauses into agreements.

Before signing any physician employment contract, consult an experienced attorney to ensure you are protected. If you need guidance on indemnification clauses or other contract provisions, reach out to Gardner Employment Law today.