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Indemnification Provisions and Additional Insured Endorsements: We Owe You What?
POSTED FEBRUARY 1, 2016
Written by E. Holland “Holly” Howanitz and Job W. Fickett of Wicker, Smith, O’Hara, McCoy & Ford, P.A. for the 2015 Fall/Winter issue of USLAW Magazine.
The stark complexity of modern risk-allocation practices tends to be a source of great confusion – for contracting companies, for insurance carriers, and sometimes even for the attorneys asked to litigate the results. This is especially the case in instances where many parties (or potential parties) to a deal or lawsuit are involved, such as in construction defect cases. Often, reams of paper are dedicated to the musical chairs of allocating risk in a single deal. The reason is a singular focus for each party to avoid being the last one standing when the music stops – holding responsibility for indemnification, attorneys’ fees, or contribution to the other party or parties to the deal. We sometimes encounter situations in our practice when a client is close to a resolution, only to find out that poor contract drafting or unwitting negotiation regarding additional insureds will leave it with significantly more liability than the client originally anticipated. This leads to roadblocks in the settlement process, and by extension, more attorneys’ fees for the client.
What can be done to avoid these pitfalls? With some skillful contract drafting, effective negotiating chops, and understanding where and when to press on the enforceability (or lack thereof) of these provisions, fewer companies will be left wondering just how their liability got so disproportionately large in comparison to their scope of work, and how it happened so fast.
ADDITIONAL INSUREDS VS. CONTRACTUAL INDEMNITY…READ MORE.