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Drafting an indemnity agreement that works the way the indemnitee expects it to work.

Drafting an indemnity agreement that works the way the indemnitee expects it to work

Countless indemnity agreements run along these lines:

A hereby promises to defend, indemnify, and hold B harmless against all claims [etc.] caused by A’s negligence [etc.]

And when Polly Plaintiff v. B is filed, and B politely asks A to defend, etc., what does A say? For every time I’ve heard “Yes, of course. Right away,” I’ve heard ten times “I’ll defend and indemnify you if and when a jury says I was negligent, and that’s affirmed by the U.S. Supreme Court.”

If B had plenty of money for defense lawyers, and if there were no such things as settlements — and if B could count on A’s solvency five years from now — this would not be a big problem. The jury would eventually find for B, and A would be forced to reimburse B for all that she spent on Polly Plaintiff v. B. But what happens in real life is the case gets settled (the fate of the vast majority of civil cases), with A contributing some but not nearly all, leaving B to pony up the rest, and pay her defense lawyers.

May I suggest that next time around, B’s attorney might be well served by borrowing from an indemnity contract that has been carefully drawn, is familiar to the Courts, and gives B an enforceable right to an immediate defense?

I speak, of course, of the CGL. Insuring Agreement “A” of the CGL obliges the insurance company to “defend” any “suit” “seeking” the sort of damages against which the insurance company has promised to indemnify. The obvious difference is that the right to a defense does not depend on proof of something – that A was negligent, for example. It depends, instead, merely on the allegations contained in the injured party’s Complaint—what it is that Polly Plaintiff is “seeking.”


Why not have A agree to something along these lines:

A hereby promises (1) to indemnify B, and hold her harmless, from all      damages, [etc.] incurred by B as a result of A’s negligence [etc.]; and (2)         to defend any “suit” seeking such damages from B.

I’m not a draftsman, so the specifics are beyond me. Terms would have to be defined. The agreement might even expressly incorporate the “duty to defend” law that governs the CGL. The main point is that the CGL very often works the way the indemnitee expects it to work, by delivering a defense now, when she needs it. Ordinary indemnity contracts ought to be able to perform at least as well.

Robert ("Bob") M. Frey

certificate of insurance