If you have ever read and signed a contract or agreement such as a rental agreement, a construction contract, or most business contracts, you’ve probably skimmed over an indemnification clause in a contract. But do you know what an Indemnification clause is and why one is needed? If the answer is no, or “kinda”, then keep reading!
A well drafted indemnification clause which includes a duty to defend, and appropriately allocates responsibility for damage caused by another party IS a commercially reasonable term in business contracts.
Have you read something like this before?
Person “A” shall indemnify, defend and hold harmless Person “B” from all claims for bodily injury and property damage, including reasonable attorneys’ fees, costs and expenses, that may arise from the performance of Party “A”’s work, but only to the extent caused by the negligent or intentionally wrongful acts or omissions of Person “A”.
If your eyes glazed over when reading this clause, then you are probably a normal person who finds indemnification clauses boring and confusing. You would be mistaken to believe that such clauses are merely standard boilerplate that can safely be overlooked. If indemnity clauses are not carefully considered and used with care, then unintended and sometimes costly consequences may result.
Indemnification clauses are used by contracting parties to shift and allocate risk among them. By signing a contract that contains such a clause, a party may agree to cover and pay for damages that they did not cause. It is not unusual for a contract to contain a clause in which a party promises to pay for the other party’s negligent acts. Before signing a contract containing this type of clause, you should think carefully about what you are agreeing to pay for and determine if the other party is agreeing to provide you with the same protection.
Properly drafted Indemnity clauses can be useful to better manage risks and clarify which party should plan on mitigating and reducing such risks because they have signed a contract promising to be liable for such risks if they show up. Indemnity clauses, often buried in the fine print of a contract, may cause you problems that arise much later down the road after you’ve signed the contract and require you to pay for someone else’s problem.
Skufca Law recovers $2.1 Million on clients’ claims for breach of an indemnification & duty to defend agreement.
The Honorable Judge Susan C. Rodriguez Ordered that Skufca Law clients Front Row Motorsports & Owner Bob Jenkins (Plaintiffs) recover $2.1 Million on their claim for breach of an indemnification agreement.
Skufca Law stayed the course despite every attempt by the Defendants since 2017 to be released from their obligations both in NC and VA courts before the final trial here in the United States District Court for the Western District of North Carolina.
The Court sided with Skufca Law’s position for their long-time time clients and rejected all of the Defendants’ purported defenses and arguments that sought to render the indemnification contract unenforceable. The Court held that the contract did not violate public policy, was supported by adequate consideration, and dismissed the Defendants’ Counterclaim for Declaratory Judgment.
In the Order, the Court held the Defendants breached their contractual indemnification and defense obligations owed to the Plaintiffs. The Court further held that Defendants had adequate notice of the third-party claims that were brought against Plaintiffs, that Plaintiffs demanded that Defendants defend and indemnify Plaintiffs, that Defendants had an opportunity to be heard, that Plaintiffs faced potential liability to the third-party claims, and that Plaintiffs entered into a reasonable good-faith settlement to resolve the third-party claims. As a result, the Court Ordered the Defendants to pay Plaintiffs back for the full $2.1 million that Plaintiffs paid to settle the third-party claims.
Plaintiffs Front Row Motorsports, Inc. and Robert A. Jenkins are represented by Ron Skufca, Daniel Trimmer, and Alexia Martin of Skufca Law, PLLC. The case is Front Row Motorsports, Inc. et. al. v. Michael DiSeveria et. al., no. 3:22-cv-138-SCR (W.D.N.C. 2023).
As experienced counsel who has reviewed, drafted, revised, and litigated numerous contracts containing indemnification clauses, the attorneys at Skufca Law are here to help you in analyzing indemnification clause issues. Contact the business law attorneys at Skufca Law at (704) 376-3030.