Another of the speakers at last week’s CLE session in Boise organized by the Idaho State Bar (see this post) was Brian Buckham, of IDACORP, Inc. and Idaho Power Company.
Brian told me about a basic issue relating to indemnification language that I hadn’t thought of previously, and he was kind enough to follow up with a couple of citations. So here goes:
Here was the language at issue in a case before the Supreme Court of Oregon, Jacobson v. Crown Zellerbach Corp., 273 Or. 15, 539 P.2d 641 (1975) (copy here):
INDEMNITY: Each party hereto, agrees to hold and save harmless and indemnify the other party From any claim or cause of action arising from injury, damage, death arising or growing out of this occupancy hereunder, or use and occupancy of same by an employee, contractor, guest or invitee of either party during the term of this agreement.
And here’s what the court had to say about it:
This indemnity clause is similar to the usual one inserted in contracts to protect the parties from claims of third parties. If the parties had intended the clause to apply to damages suffered by one party directly from the activity of the other, the provision would have read ‘* * * For any claim * * *,’ rather than ‘* * * From any claim * * *.’ Also, the agreement purports to protect plaintiffs not from damage but from claims or causes of action which necessarily must be asserted by others.
I agree with the third sentence (the one beginning “Also”). But I don’t share the Jacobson court’s confidence that if Acme indemnifies WidgetCo for any claim as opposed to from any claim, it’s clear that Acme is indemnifying WidgetCo with respect to claims brought by WidgetCo against Acme (presumably in addition to indemnifying WidgetCo with respect to claims brought by nonparties). A lot is riding on a frail distinction, particularly as use of prepositions in indemnification language is rather erratic. (For more about that, see this post.)
Now let’s consider the indemnification language at issue in a case before the Court of Appeals of Arizona, Cecil Lawter Real Estate Sch., Inc. v. Town & Country Shopping Ctr. Co., Ltd., 143 Ariz. 527, 694 P.2d 815 (Ct. App. 1984) (copy here) (added emphasis omitted):
With respect to said subleases, Assignor shall indemnify and hold Assignee harmless from and against all loss or damage, including reasonable attorneys’ fees, resulting from claims or causes of action arising prior to the date of recordation of this Assignment; …
Here’s what the court had to say about it:
As we read the above indemnity provision, it is designed to protect Town & Country from claims of third parties arising prior to their acquisition of the Town & Country shopping center. See Jacobson v. Crown Zellerbach Corporation, 273 Or. 15, 539 P.2d 641 (1975). It is not designed to permit Town & Country to seek damages for Transamerica’s failure to inform it of an “amendment” to the lease.
The court then went on to quote the Jacobson court’s analysis quoted above.
But the Cecil Lawter language is crucially different from that in Jacobson: whereas the Jacobson language refers to “any claim,” the Cecil Lawter language refers to “loss or damage.” If I protect you from any claim, necessarily that claim has to be brought by someone else. But if I protect you from loss or damage, that could include loss or damage that I caused. The Cecil Lawter court was oblivious to that nuance.
What should the drafter take from these cases? Well, despite the apparent endorsement by the Jacobson court, simply saying shall indemnify for any claim is nowhere near clear enough to express that claims brought by one party against the other fall within the scope of the indemnification provision.
And given Cecil Lawter, you shouldn’t assume that by itself, shall indemnify from any loss conveys that meaning.
Instead of playing games with prepositions, be explicit whether indemnification covers just nonparty claims or also claims between the parties. That’s something discussed in this 2012 post. So I find it a little alarming that, according to Brian, Jacobson and Cecil Lawter have worked their way into Arizona legal opinion practice
Whatever language you use, you still need a preposition. Which should you use? Given that usage is all over the place, I think it’s safe to say that there’s no right or wrong. After all, indemnification connotes both protection (which uses from and against) and reimbursement (which uses for).
I’ve tended to use against, but I can’t say that it’s superior to the alternatives. For now, I’m undecided; let’s see what the peanut gallery has to say.
1/ Peanut gallery? Does that make you Buffalo Bob or Howdy Doody?
2/ Would you rule out using “for and from”? Why must it be one or the other if they have different shades of meaning?
3/ Does the preposition question go away if you use the “losses and liabilities” formulation?
“Peanut gallery” wasn’t intended to suggest any sort of disrespect. *cringes* And I was unaware of the Howdy Doody connection!
I don’t do shades of meaning–it’s electronic circuitry here! Stating explicitly what the coverage is would eliminate those nuances.
And no, you still need a preposition.
Ken:
I think I prefer “indemnify against” when I mean protect from third-party claims and “indemnify for” when referring to claims between the parties. But I generally would not indemnify for claims between the parties outside of an M&A context, where it is apparently traditional. If I wanted to say that one party will reimburse the other party for some expense, I would say that instead.
But as long as we are adding ridiculous numbers of preopositions, I would like to nominate “with.” With connotes such friendliness that I think it would be a welcome addition to the otherwise confrontational context of indemnities. Yes, your counter-party will be much happier when you indemnify them for, from, against, and with third-party claims.
(Just you wait. Within three years, you will see this formation in some contract, just because it appeared in this blog.)
Chris
The idea of juggling prepositions makes me very sad. :-(
Unless, that is, you really pile them on, as you suggest. Perhaps adding “over” and “under” along with “with” would add a funhouse vibe.
Anyone for “in, with, and under”?
Or, “over, under, arooooound and through”? (That was a jingle for Pall-Mall cigarettes in the 1960s.)
Count me as another vote for “indemnify against” and then being very specific as to against what, e.g., “third-party claims,” etc.
Does anyone happen to know what plain-English insurance policies typically say? Insurance policies are in essence indemnity contracts. I might favor replacing “Alice will indemnify Bob against third-party claims” with something along the lines of, off the top of my head, “Alice will reimburse Bob for any loss or expense incurred by Bob as a result of any third party claim.”
DC, my firm’s professional indemnity policy includes the following text:
Insurers will indemnify the Insured up to the Limit of Indemnity against:
(a) any civil liability;
…
Provided that a Claim in respect of such liability:
(i) is first made against an Insured during the Period of Insurance; or
(ii) is made against an Insured during or after the Period of Insurance and arising from Circumstances first notified to Insurers during the Period of Insurance.
2.2 Defence Costs
In addition Insurers will indemnify the Insured against Defence Costs in relation to:
(a) any Claim under clause 2.1; or
(b) any Circumstances first notified to Insurers during the Period of Insurance; or
…
Here is the insuring clause from a claims-made professional errors and omissions policy that is not for a law firm:
The Company shall pay Loss on behalf of the Insureds resulting from any Claim made against such Insureds and reported to the Company in writing during the Policy Period, or any Extended Reporting Period, for any Wrongful Acts committed by the Insureds solely in the performance of or failure to perform Insured Services on or after the Prior Acts Date set forth in the Declarations and before the Policy Terminates.
All the capitalized terms are defined, in three pages. “Loss” includes defense costs. There are two pages of exclusions (before riders). Then a bunch of other stuff on notices, territorial restricitons, caps on liability. Then, waaaay down in the policy comes a page on control of the defense.
The fact that this insurance policies uses about eight pages to say what my company’s customers expect to be expressed in a sentence gives me pause.
Chris
If these cases are to be taken seriously, they seem to point away from using “for”. I would agree that if you want an indemnity to apply to damages caused by the indemnifier’s action, you shouldn’t rely on using “for”, or any preposition. That being the case, for the sake of consistency the standard word in the main part of your clause shouldn’t be “for”, so that you can add and remove the language covering the indemnifier’s action without having to think about the preposition in the main part.
More generally, I think that you usually indemnify someone “against” something, rather than “from” (or “for”) something.
Having said that, “indemnify for” is the most common phrase on the web, according to Mr. Google, followed by “against”, with “from” in a distant third. (Actually “indemnify under” is the most common, but hopefully only because the intransitive is being used…)