An indemnity is a contract clause that shifts specific financial losses, legal claims, or response costs from one party to another. In cyber security, it often appears in vendor, cloud, software, and AI agreements to decide who pays if a product causes harm, infringes rights, or contributes to a breach. The clause does not prevent an incident; it allocates the bill after one happens.
Indemnities matter because security failures often involve third-party tools, shared data, and uncertain ownership of outputs. For example, if a supplier’s software, model, or API introduces malicious code, leaks data, or produces content that creates an IP claim, an indemnity may require the supplier to cover defense costs or damages. Defenders use these clauses alongside security reviews, logging, provenance records, and incident response terms, because a strong indemnity is only useful if the organization can prove what happened and who was responsible.