In 2022, a DMC in Arizona contracted a local ATV provider for a corporate incentive group. A participant was injured on the trail. The ATV provider's insurance denied the DMC's claim because the contract contained no hold harmless clause and the DMC was not listed as an additional insured. The DMC's own policy covered the defense, but the $340,000 settlement came out of pocket.
The problem
Hold harmless clauses, also called indemnification clauses, are the contractual mechanism that assigns financial responsibility when a third-party claim arises. In the travel supply chain, these clauses sit between operators, DMCs, suppliers, and their respective insurers. When drafted correctly, they ensure that the party best positioned to control a risk also bears the financial exposure for that risk.
The problem is that most supplier contracts in the travel industry either omit indemnification language entirely or include one-directional clauses that protect only the supplier. A 2021 survey by the International Association of Defense Counsel found that 62% of small and mid-size businesses did not fully understand the indemnification terms in their vendor contracts.
Reciprocal indemnification, where each party agrees to hold the other harmless for claims arising from their own negligence, is the standard in industries with mature contract practices like construction and energy. In travel and tourism, it remains the exception. The result is that when a guest is injured during a supplier-operated activity, the DMC or operator who booked that supplier often discovers that the contract offers no mechanism to recover costs from the party that caused the harm.
One-way vs. reciprocal indemnification
A one-way hold harmless clause protects only the party that drafted it. If a supplier's contract says the DMC agrees to indemnify and hold harmless the supplier, the DMC is absorbing liability for claims that may arise from the supplier's own operations. Reciprocal indemnification balances this: each party indemnifies the other for claims caused by that party's negligence or breach. The American Bar Association's Forum on Construction Law has published model indemnification language that reflects this mutual structure. In travel, adopting reciprocal terms means that if a supplier's guide causes an injury, the supplier's indemnification obligation protects the DMC from bearing that cost alone.
The additional insured requirement
A hold harmless clause without an insurance backstop is only as strong as the indemnifying party's ability to pay. This is why additional insured requirements matter. When your contract requires the supplier to add you as an additional insured on their general liability policy, you gain direct access to their insurance coverage if a claim arises from their operations. The ISO CG 20 10 form is the standard endorsement used to add additional insureds in the United States. Without this endorsement, you are relying entirely on the supplier's willingness and financial capacity to honor their indemnification obligation. Many small suppliers cannot produce this endorsement because their policies do not allow it or because they carry insufficient coverage limits.
What happens when both are missing
When a supplier contract lacks both a hold harmless clause and an additional insured requirement, liability defaults to whatever the court determines based on negligence law and the facts of the incident. The DMC or operator becomes a defendant with no contractual mechanism to shift costs to the party that controlled the activity. Defense costs alone in personal injury cases average $50,000 to $100,000 according to the Insurance Information Institute. Without contractual protections, the DMC absorbs these costs regardless of fault.
What to do now
Review every active supplier contract for indemnification language. If the clause is one-directional, negotiate for reciprocal terms. If there is no hold harmless clause at all, that contract represents an uncapped liability exposure. Require every supplier to provide an additional insured endorsement naming your company, and verify the endorsement is in place before the first guest arrives. These are not legal formalities. They are the financial architecture that determines who pays when something goes wrong.