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What is an Indemnification Carve-Out?

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Used in a sentence

Except in cases of gross negligence, the vendor’s liability is subject to the standard indemnification carve-outs.

The reader highlighted one clause — on the page or in a PDF. Clicked explained the legal term “indemnification carve-outs” in plain language:

Explained in three depths

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Overview

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An indemnification carve-out is an exception written into a promise to cover losses. The contract sets rules for who pays when things go wrong, and the carve-out lists where those rules don't apply: fraud, gross negligence, or willful misconduct.

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Detail

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Indemnification means one party promises to pay for certain losses the other party suffers. Carve-outs cut exceptions into that arrangement, in two directions. Some carve out of the duty, so the vendor won't cover losses the customer caused itself. Others, the ones lawyers fight over, carve out of the liability cap: the contract may cap the vendor's total exposure at the fees you paid, but carved-out items such as fraud, IP infringement, or a confidentiality breach sit outside the cap with unlimited exposure. That's why the carve-out list matters more than the cap itself, since a $1M cap means little if data-breach liability escapes it. Find the cap first and then the exceptions to it, because that is the real risk picture.

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Analogy

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Car insurance. The policy promises to cover your crash, but the exclusions page says not if you were street racing. The exclusions page is the carve-out: the promise holds, except for the listed sins.

AI explanations may contain errors · Not professional advice

Same facts, different vibe — Slang mode 😎

Formal definition — The same term, explained the usual way

Indemnification carve-outs are negotiated exceptions to indemnity obligations or to limitations of liability, whereby specified categories of claims — typically fraud, gross negligence, willful misconduct, infringement of intellectual property, or breach of confidentiality — are excluded from the scope of indemnity protections or from applicable liability caps, thereby preserving uncapped exposure for the enumerated conduct.

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