indemnitee

An indemnitee is a person or entity that is protected against losses, liabilities, or expenses by an indemnification provision. In corporate governance and related fields, indemnitees are commonly directors, officers, and employees who may face claims arising from their service to the organization.

Indemnification may arise from statutory law, contractual agreements, or common law. Statutory indemnification is provided by corporate statutes or professional-organization laws; contractual indemnification is set in bylaws, charters, or separate indemnification agreements; common-law rights may complement or limit statutory rights. Indemnification typically covers defense costs and, in some cases, damages or settlements, and may include advancement of expenses before a final disposition.

Limitations commonly apply: indemnification is typically available only for claims arising from actions taken in good faith and in the reasonable belief that such conduct was in the organization’s best interests; liability for willful misconduct, bad faith, gross negligence, or violations subject to penalties may be excluded. Fines and penalties paid to a government are often excluded. In many cases, indemnification rights can be subject to approval by disinterested directors or courts, and may require that settlements be approved to preserve the indemnity.

Practical considerations include the use of directors and officers liability insurance to fund or supplement indemnification obligations. The exact scope and availability of indemnification depends on governing documents and applicable law, and disputes can involve courts interpreting the reach and limits of indemnity. An indemnitee’s rights may be enhanced by provisions for advancement of expenses and by agreements governing defense and settlements.