Michael,
The company's clause is not the gospel.  I would suggest a change deleting
employed by the sponsor (since it is not applicable) and insert ....of the
investigator.  Almost all indemnification agreements between pharm. companies
and institutions state that costs of liability (as defined) are covered
by the pharm. compnay providing certain criteria is met.  The usual criteria
is 1) notification as soon as a claim is aired; 2) PI has complied with applicab
 le FDA/other governmental requirements; 3) PI doesn't settle a claim without
prior approval of pharm. company; 4) indemnity is excluded if PI/other employees
 are negligent.

Hope that answers your question.
Rebecca Bacon
eastern Virginia Medical School
xxxxxx@PICARD.EVMS.EDU