duty to defend

Duty to Defend and Indemnification

 

According to the American Bar Association (HERE), defense and indemnity clauses are routine devices used in construction contracts to shift responsibility for potential risks from one project participant to another. The terms defend and indemnify often appear in the same clause, but they are each typically understood to impose different obligations. However, even if the term defend does not appear in the indemnity clause, in some jurisdictions a defense may still be owed. It is therefore critical for construction attorneys to understand: (1) the difference between the duty to indemnify and the duty to defend and (2) that in some jurisdictions, an indemnity obligation automatically carries with it the duty to defend regardless of whether the duty to defend is expressly stated.

 The consequences of failing to appreciate the distinct requirements of the duty to defend or to recognize that a duty to defend exists can be severe and unpleasant. The risks of misunderstanding the distinction between indemnity and the duty to defend and whether a duty to defend may be invoked are compounded by variations in controlling statutes and case law from state to state. The risk is obviously greater when dealing with the law of an unfamiliar jurisdiction.
The term indemnify is generally interpreted as imposing an obligation on one party (the indemnitor) to pay or compensate the other party (the indemnitee) for certain legal liabilities or losses, but that obligation does not typically arise until the end of a case when the indemnitee has had a judgment entered against it for damages or has made payments or suffered actual loss. The term defend, on the other hand, usually imposes an independent duty to either actively defend or fund the defense of any claim brought against the indemnitee that falls within the scope of the indemnification provision. The duty to defend is a promise to render, or fund, the service of providing a defense on the indemnitee’s behalf–a duty that usually arises as soon as a claim is made against the indemnitee and may continue until the claim has been resolved.

 

As part of the ae ProNet video series, David Ericksen, Esq., presents an informative discussion of 2 important parts of a contract, Defense and Indemnity. He discusses the impact of poorly drafted or too broad contracts which can lead to uncovered situations. Covered also is the concept of negligence, the limiting of defense obligation, and to an actual causation event. He ends with providing appropriate contract words that all design professional should use.

To view David’s video please click: Duty to Defend and Indemnification