Indemnification

Obligation of one party to compensate the other party for loss or liability. Most commonly, this is used in association with debts assigned to each spouse in a divorce decree. The assignment of debts is only effective as between the parties themselves. It does not alter the contract the parties had with any third-party. In other words, a third party has the right to come after either spouse for the debt, regardless of how it is assigned in the Decree. If that happens, the spouse who was assigned the debt must “indemnify” (i.e., reimburse) the other spouse. For example, let’s say Husband and Wife financed a truck during the marriage. At divorce, the truck and its debt are assigned to Husband, who, in turn, is required indemnify Wife for any payment regarding the truck. Husband defaults on the loan. The financing company comes after Wife for payment. Must she pay? Yes. Does she have recourse? Yes, she can be reimbursed by Husband. Must he reimburse her? Yes, because the Decree requires he indemnify her for the debt related to the truck.