The meaning of all three terms varies on a state-by-state basis. Some states require an indemnitor to defend an indemnitee. The concept of indemnification imposes an obligation on one party, the indemnitor, to pay or reimburse another party, the indemnitee, for losses covered in the indemnification provision. The obligation to reimburse or pay arises when an actual loss or liability has occurred.
Generally, indemnification arises in two ways: implied-in-law or through an express contractual provision. Most states hold that, absent anything to the contrary in contract, a person is entitled to an implied indemnity when the person performing a duty owed by another party, the implied indemnitor, is not at fault and still incurs liability. For example, in Alten v. Importantly, the party seeking recovery cannot be at fault.
However, when there is an express indemnification provision in a contract, courts, including the Superior Court of Delaware, New Castle are reluctant to read in an implied indemnity.
Instead, under these circumstances courts tend to look at the contract itself and honor the intent of the parties. Generally , if there happens to be any ambiguity surrounding an indemnity, it is typically construed by courts against whomever is seeking indemnification.
The duty to defend triggers an obligation to act when a claim, which is covered by the indemnification provision in the contract, is brought by a party against the indemnitee. The independent obligation to defend requires the indemnitor to actually defend, finance a defense or reimburse the indemnitee against any claim brought against it, regardless of the merits of the claim or the outcome.
The differences between the duty to indemnify and to defend, while nuanced, are critically important. The obligation to indemnify arises once a judgment has been entered, whereas the obligation to defend is triggered as soon as a claim is filed against the indemnitee. Sanderson et al. Alie at para Alie v. Monenco Ltd. Ibid at para Nichols v. American Home Assurance Co.
Progressive Homes Ltd. Lombard General Insurance Co. Scalera at para Ibid at Share Linkedin Twitter Email Print. Disclaimer Unsolicited emails and other information sent to Dentons will not be considered confidential, may be disclosed to others, may not receive a response, and do not create a lawyer-client relationship.
Cancel Accept. In Georgia, a judgment fixing legal liability is not a condition precedent to recovery under an indemnity clause. The obligation to defend is usually broader than the obligation to indemnify, because it will apply whether or not the third-party claim has merit. The obligation to defend requires the indemnifying party to reimburse for covered defense costs and expenses actually paid losses , which may include costs and expenses associated with appeals.
Moreover, depending on the terms of the contract, the indemnifying party may have the right to assume and control the defense of the claim. An indemnified party always wants the indemnification provision to expressly include the duty to defend because defense costs can often be substantial, even if the indemnified party prevails on the claim.
Indemnification and defense clauses are often highly negotiated, and it is important to understand the strengths and weaknesses associated with the inclusion or exclusion of either in any contract.
If you are negotiating a contract, please contact the Drew, Eckl, and Farnham Corporate Team for advice on the construction of these and any other contractual terms. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. All Rights Reserved. Password Passwords are Case Sensitive. Forgot your password? Free, unlimited access to more than half a million articles one-article limit removed from the diverse perspectives of 5, leading law, accountancy and advisory firms.
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King, Jr. Your LinkedIn Connections with the authors. To print this article, all you need is to be registered or login on Mondaq. What is indemnification? Implied Indemnity State law indemnity is a remedy implied under common law or statute, and arises out of obligations imposed through a preexisting relationship. As always, Gallagher professionals are available to assist. Horace Mann Ins.
Barbara B. See Buss v. Superior Court, P. See, e. How to Decide? Below are some questions to consider when choosing a policy form: Do you want to retain a particular law firm or counsel in a claim?
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