Can a South Carolina state agency or public university agree to indemnify or 'hold harmless' another party in a contract?

Plain-English summary

The Citadel's general counsel asked whether the State or its subdivisions may sign so-called "indemnification agreements," where the government agrees to "hold harmless" another party. The Attorney General said the answer has been no for a long time. As the office put it, "[i]t is our longstanding opinion that a state agency possesses no authority to enter into indemnification agreements," a position the AG traced back at least to 1966.

The reasoning, quoted from a 1972 opinion by former Attorney General McLeod, is rooted in sovereign immunity. A "hold harmless" clause is, in substance, the government agreeing to take on tort liability. Because the State enjoys sovereign immunity (with only limited statutory exceptions), an agency cannot voluntarily expose the State to that liability by contract. Only the legislature, "through legislative enactment," can subject the State to such liability.

The AG added that the General Assembly has since reinforced this rule by statute. Section 11-35-2050 provides that any contract term requiring the State to "defend, indemnify, or hold harmless another person" is "void ab initio, unless such term is expressly authorized by law." In other words, the rule is now codified: absent specific legal authorization, an indemnification or hold-harmless clause in a state contract has no effect from the outset.

What this means for you

State agency officials and public university counsel

Based on this opinion and § 11-35-2050, do not agree to indemnify or hold harmless a contracting partner unless a statute expressly authorizes that specific indemnity. The AG treats such clauses as beyond an agency's authority and the statute treats them as void from the start. If a vendor's standard contract includes a hold-harmless or indemnification clause running against the State, the opinion's framework says that clause is unenforceable against the State absent express statutory authority.

Procurement officers

When reviewing contracts, flag any "defend, indemnify, or hold harmless" language that runs against the State. Under § 11-35-2050, such a term is void ab initio unless a law authorizes it, though the statute provides that the rest of the contract remains enforceable as if it did not contain that term.

Government contractors and their attorneys

Expect South Carolina state entities to strike or refuse indemnification and hold-harmless clauses that run in your favor against the State. Per this opinion, a state agency lacks authority to agree to them, and the statute voids them absent express authorization. Plan your risk allocation accordingly.

Common questions

Is there any way a state agency can validly agree to indemnify someone?
Only if a law expressly authorizes that indemnity. Section 11-35-2050 voids the term "unless such term is expressly authorized by law."

If a contract already contains a hold-harmless clause against the State, what happens?
Under § 11-35-2050, that term is void ab initio (treated as never effective). The statute provides that the remainder of the contract is otherwise enforceable as if it did not contain the term.

Why can't the State just agree to this like a private company would?
Because of sovereign immunity. The AG explained that a hold-harmless clause amounts to subjecting the State to tort liability, and only the legislature can do that.

Background and statutory framework

South Carolina recognizes sovereign immunity, subject to limited statutory exceptions. The Attorney General has consistently opined, since at least 1966, that absent specific statutory authority a governmental agency cannot execute "hold harmless" clauses, because doing so would subject the State to tort liability that only the General Assembly can impose by legislative enactment (Op. S.C. Att'y Gen., 1972 WL 25432 (Aug. 15, 1972); Op. S.C. Att'y Gen., 2004 WL 2247469 (Sept. 29, 2004)).

The General Assembly later codified this rule in the Consolidated Procurement Code at § 11-35-2050, which renders void ab initio any contract term requiring the State to defend, indemnify, or hold harmless another person unless expressly authorized by law, requires contracts to be governed by South Carolina law, and sets South Carolina as the exclusive venue for contract disputes (referencing § 11-35-4230).

Citations

• S.C. Code Ann. § 11-35-2050 (indemnification/hold-harmless terms void ab initio unless authorized by law)
• S.C. Code Ann. § 11-35-4230 (contract dispute provisions, referenced)
• Op. S.C. Att'y Gen., 1972 WL 25432 (Aug. 15, 1972); Op. S.C. Att'y Gen., 2004 WL 2247469 (Sept. 29, 2004) (longstanding no-authority position)

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-regarding-the-legality-of-the-state-or-its-subdivisions-entering-into-so-called-indemnification-agreements-whereby-the-state-agrees-to-hold-harmless-another-entity/
• Original PDF: https://www.scag.gov/media/4plbkudq/brandenburg-m-os-10984-final-opin-w-no-enclosures.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ALAN WILSON
ATTORNEY GENERAL

January 21, 2025

Mark Brandenburg, Esquire
General Counsel
The Citadel
171 Moultrie Street, Bond Hall 182
Charleston, SC 29409

Dear Mr. Brandenburg:

You have asked our opinion concerning the legality of the State or its subdivisions entering into so-called "indemnification agreements" whereby the State agrees to "hold harmless" another entity. As we stated in Op. S.C. Att'y Gen., 2004 WL 2247469 (September 29, 2004), "[i]t is our longstanding opinion that a state agency possesses no authority to enter into indemnification agreements." We noted in the 2004 opinion that these opinions "date back at least to 1966." As we stated in a 1972 opinion, authored by former Attorney General McLeod,

[t]his problem has continually appeared in this Office, particularly in connection with the construction of Highway projects. It appears in other forms also, one of which will be referred to herein. It has been the consistent opinion of this Office that governmental agencies, in the absence of specific authority therefor, do not have the authority to execute 'hold harmless' clauses. The basis for this conclusion is that this State possesses sovereign immunity, with certain deviations therefrom in limited circumstances. These relate primarily to subjection of the State for claims for damages resulting from the operation of State-owned motor vehicles. The execution of a 'hold harmless' clause is nothing more nor less than subjection of the State or one of its political subdivisions to tort liability and, in the opinion of this Office, can only be done by the State itself through legislative enactment.

Op. S.C. Att'y Gen., 1972 WL 25432 (August 15, 1972).

As noted, this reasoning has consistently remained the opinion of this Office. I am enclosing for your review a number of opinions of this Office which so conclude.

Since our last opinion regarding indemnification clauses was written, the General Assembly has enacted § 11-35-2050, which ratifies and reinforces these opinions. This section provides:

[a]ny term or condition in any contract entered into by the State that requires the State to defend, indemnify, or hold harmless another person, must be void ab initio, unless such term is expressly authorized by law. All contracts must be governed by South Carolina law. Without limiting the applicability of Section 11-35-4230, the exclusive venue for any dispute arising out of or related to any contract is in South Carolina. Any contract containing any terms or conditions inconsistent with any of the foregoing are otherwise enforceable as if it did not contain such term or condition.

I trust this assists you and responds to your question.

Sincerely,

Robert D. Cook
Solicitor General

Enclosures