Indemnity is a legal term of art, but the basic principle of indemnity is that one party (the has contractually agreed to take responsibility for the “indemnitor”) liability of another party (the “indemnitee”). Common Indemnity Risk Allocation Schemes Each has its own merits, and the best scheme is often determined by a company’s contracting philosophy, market leverage, and the applicable law. reciprocal indemnity is a condition where each party accepts responsibility for loss to its own people and property and for the people and property of its contractors and subcontractors. Narrow reciprocal indemnity is a condition where each party accepts responsibility for loss to its own people and property. The protection is extended to the indemnitee and closely-related entities. Modified reciprocal indemnity is a hybrid. Indemnity for One’s Own Negligence To be successful, risk allocation requires that indemnity obligations be enforceable. Indemnity for one’s own negligence or strict liability is a common contractual provision, but it must be clearly expressed in terms.” “unequivocal arising in any way directly or indirectly” is not “howsoever “unequivocal.” A good example is the model terms of the IADC Daywork Contract: [I]t is the intent of parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties ... be without limit and without regard to the cause or causes thereof including, but not limited to, pre-existing conditions, defect or ruin of premises or equipment, strict liability, regulatory or statutory liability, products liability, breach of representation or warranty (express or implied), breach of duty (whether statutory, contractual or otherwise) any theory of tort, breach of contract, fault, the negligence of any degree or character (regardless of whether such negligence is sole, joint or concurrent, active, passive or gross) of any party or parties, including the party seeking the benefit of the release, indemnity or assumption of liability, or any other theory of legal liability. through” Indemnity “Pass Contractual liability to a third party flows through indemnity agreements. Ensure that all relevant contracts contain complementary terms. Consider anti-indemnity acts applicable to subcontracts.
Indemnity is a legal term of art, but the basic principle of indemnity is that one party (the “indemnitor”) has contractually agreed to take responsibility for the liability of another party (the “indemnitee”). Common Indemnity Risk Allocation Schemes Each has its own merits, and the best scheme is often determined by a company’s contracting philosophy, market leverage, and the applicable law. reciprocal indemnity is a condition where each party accepts responsibility for loss to its own people and property and for the people and property of its contractors and subcontractors. Narrow reciprocal indemnity is a condition where each party accepts responsibility for loss to its own people and property. The protection is extended to the indemnitee and closely-related entities. Modified reciprocal indemnity is a hybrid. Indemnity for One’s Own Negligence To be successful, risk allocation requires that indemnity obligations be enforceable. Indemnity for one’s own negligence or strict liability is a common contractual provision, but it must be clearly expressed in “unequivocal terms.” “howsoever arising in any way directly or indirectly” is not “unequivocal.” A good example is the model terms of the IADC Daywork Contract: [I]t is the intent of parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties ... be without limit and without regard to the cause or causes thereof including, but not limited to, pre-existing conditions, defect or ruin of premises or equipment, strict liability, regulatory or statutory liability, products liability, breach of representation or warranty (express or implied), breach of duty (whether statutory, contractual or otherwise) any theory of tort, breach of contract, fault, the negligence of any degree or character (regardless of whether such negligence is sole, joint or concurrent, active, passive or gross) of any party or parties, including the party seeking the benefit of the release, indemnity or assumption of liability, or any other theory of legal liability. “Pass through” Indemnity Contractual liability to a third party flows through indemnity agreements. Ensure that all relevant contracts contain complementary terms. Consider anti-indemnity acts applicable to subcontracts.
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