What is an indemnity clause and what happens if someone refuses to indemnify me under a contract in Ontario?

An indemnity clause requires one party (the indemnifier) to compensate the other (the indemnitee) for specified losses, claims, or costs — including those caused by third parties. Indemnities go beyond ordinary breach of contract damages: they can require one party to cover losses that were not the indemnifier's own fault, as long as they fall within the scope of the clause.

Ontario courts enforce indemnity clauses between commercial parties, but apply a strict approach to interpretation: the clause must clearly and unambiguously cover the claimed loss. Courts are particularly cautious about indemnities that would cover a party's own negligence — those must be expressed in clear language to be enforceable.

If an indemnifier refuses to pay when a valid indemnity obligation has been triggered, the indemnitee can sue for breach of the indemnity contract. This is treated as a contractual claim, and the two-year limitation period applies from the date the obligation arose and was refused.

In practice, if you have incurred a loss covered by an indemnity, document the loss carefully, give the indemnifier formal notice (as the contract may require), and follow any notice procedures set out in the agreement. Failure to give proper notice can sometimes be used to resist the indemnity claim.