We are taught early on that we are each responsible for our own actions. If we make a mistake that results in damages to someone else, we have to pay for those damages. That is the basic concept of indemnification, and the law enforces it.
In many circumstances, a party to a contract wants to make sure that the other party agrees to indemnify them in the event of a claim or suit. Often, a service provider is required to supply insurance for the benefit of the service purchaser by adding the buyer to its policy. It has become more and more common for form contracts required by appraisal management companies (AMCs) to contain an indemnification or “hold harmless” clause. A professional service provider must take care in reviewing these contracts, understand them and be prepared to reject the business opportunity if it cannot negotiate the terms.