What is required under the duty to indemnify?

The duty to indemnify primarily encompasses the obligation of the principal to compensate the agent for losses and expenses that the agent incurs while acting on behalf of the principal, provided those liabilities were incurred in a manner that is reasonable and within the scope of the agent's authority.

In a typical agency relationship, agents are expected to act in the best interests of the principal, which often involves taking on certain risks or obligations. When the agent acts within their authority and in a reasonable manner, if they face legal liabilities or expenses as a result of their actions on behalf of the principal, the principal has a legal and ethical obligation to indemnify, or reimburse, the agent for those costs. This principle serves to protect agents from the financial consequences of carrying out their duties effectively and in good faith.

The other options do not accurately encapsulate the legal concept of indemnification as it relates to agency relationships, because they either mischaracterize the scope of indemnification or impose obligations on the agent rather than the principal. Indemnification specifically pertains to the responsibilities of the principal towards the agent, rather than any kind of financial compensation arrangement like a salary or an obligation for agents to cover losses incurred by the principal.