Another Benefit of Indemnification?

This post includes a list of ways in which indemnification can benefit a party bringing a claim. Here, in a spirit of completeness, is another one, suggested by a reader:

Ensure Losses Aren’t Covered by a Provision Excluding Certain Types of Damages. Asking to be indemnified for losses incurred due to nonparty claims constitutes a claim under the contract. That would make it difficult for the indemnifying party to argue that those losses constitute consequential damages or some other kind of damages falling within the scope of a provision excluding certain types of damages.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

2 thoughts on “Another Benefit of Indemnification?”

  1. It’s incredibly difficult to pin liability on anyone once you mix indemnification clauses with subrogation and additional insured requirements and add consequential damages provisions then have the contract signed by operating entities without any assets and require guarantees from other entities. In my experience these clauses don’t provide a nice flow chart, instead they’re like a ball of yarn.

  2. I believe the common understanding among most lawyers is that
    indemnification obligations should not be subject to exclusions and caps
    unless the contract explicitly states that they are. In most of the contracts I see, the parties’ indemnification obligations are explicitly “carved out” of the exclusions and limitation of liability. That seems like a good practice to avoid any question about whether the indemnification obligations are limited by other parts of the agreement.

    However, I have seen contracts drafted in a way that could subject indemnification obligations to some limitation contained elsewhere in the agreement, and my sense is that this is often done by a drafter representing the indemnifying party who wants to try to sneak a limitation into the contract that they hope the other side won’t notice. In other words, I think the complexity pointed out by Andrew is often intentional.


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